CONFORMED COPY

                               UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                FORM 10-K

(Mark One)

  X     Annual report pursuant to Section 13 or 15(d) of the Securities 
        Exchange Act of 1934 [No Fee Required]
        For the fiscal year ended January 2, 1999

                                    OR

        Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 [No Fee Required]
        For the transition period from           to       .

Commission file number 33-48862

                       HOMELAND HOLDING CORPORATION
           (Exact name of registrant as specified in its charter)

      Delaware                                             73-1311075
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)
                                
                          2601 N. W. Expressway
                    Oil Center - East, Suite 1100E
                    Oklahoma City, Oklahoma  73112
        (Address of principal executive offices)  (Zip Code)

Registrant's telephone number, including area code:  (405) 879-6600

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par 
value $ .01 per share.

     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 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. [  ]

     Indicate by check mark whether the registrant has filed all documents 
and reports required to be filed by Section 12, 13 or 15 (d) of the Securities 
Exchange Act of 1934 subsequent to the distribution of securities under a 
plan confirmed by a court. Yes    X        No

     State the aggregate market value of the voting stock held by 
non-affiliates of the registrant as of March 24, 1999:

           $13,376,077, based on a closing price of $3.375 of the registrant's 
           common stock on the NASDAQ NMS.

     Indicate the number of shares outstanding of each of the registrant's 
classes of common stock as of March 24, 1999:

                       Homeland Holding Corporation
                      Common Stock: 4,906,910 shares

     Documents incorporated by reference:  None.



                        HOMELAND HOLDING CORPORATION


                                FORM 10-K
                 FOR THE FISCAL YEAR ENDED JANUARY 2, 1999


                            TABLE OF CONTENTS

                                                                     Page 

PART I

ITEM 1.   BUSINESS...................................................  1

          General....................................................  1
          Background.................................................  1
          AWG Transaction............................................  1
          Restructuring..............................................  2
          Business Strategy..........................................  3
          Homeland Supermarkets......................................  4
          Merchandising Strategy and Pricing.........................  6
             
          Customer Services..........................................  6
              
          Advertising and Promotion..................................  6
          Products...................................................  7
          Supply Arrangements........................................  7
          Employees and Labor Relations..............................  8
          Computer and Management Information Systems................  9
          Competition................................................  10
          Trademarks and Service Marks...............................  10
          Regulatory Matters.........................................  10

ITEM 2.   PROPERTIES.................................................  11

ITEM 3.   LEGAL PROCEEDINGS..........................................  11

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE
          OF SECURITY HOLDERS........................................  11


PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY
          AND RELATED STOCKHOLDERS MATTERS...........................  12

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA.......................  12




                                 i

                                                                     Page

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS..............................................  16

          Results of Operations......................................  16
          Liquidity and Capital Resources............................  20
          Year 2000..................................................  24
          Inflation/Deflation........................................  24

ITEM 8.   FINANCIAL STATEMENTS AND
          SUPPLEMENTARY DATA.........................................  25

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH
          ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.......................................  25

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS
          OF THE REGISTRANT..........................................  26
          Section 16(a) Beneficial Ownership Reporting
          Compliance.................................................  29

ITEM 11.  EXECUTIVE COMPENSATION.....................................  30

          Summary of Cash and Certain Other
           Compensation..............................................  30
          Compensation of Directors..................................  32
          Employment Agreements......................................  33
          Management Incentive Plan..................................  36
          Retirement Plan............................................  36
          Management Stock Option Plan...............................  36
          Compensation Committee Report..............................  37
          Performance Graph..........................................  38
          Compensation Committee Interlocks and
           Insider Participation.....................................  38

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN
          BENEFICIAL OWNERS AND MANAGEMENT...........................  39

ITEM 13.  CERTAIN RELATIONSHIPS AND
          RELATED TRANSACTIONS.......................................  41

PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT
          SCHEDULES AND REPORTS ON FORM 8-K..........................  42



                                   ii



                                 

                                                                     Page


SIGNATURES...........................................................  II-1

INDEX TO FINANCIAL STATEMENTS AND EXHIBITS...........................   F-1

EXHIBIT INDEX........................................................   E-1











                                    iii


                        HOMELAND HOLDING CORPORATION

                               FORM 10-K
                 FOR THE FISCAL YEAR ENDED JANUARY 2, 1999



ITEM 1.    BUSINESS

General

          Homeland Holding Corporation ("Holding"), through its wholly-owned 
subsidiary, Homeland Stores, Inc. ("Homeland") and Homeland's wholly-owned
subsidiary, SLB Marketing, Inc., (collectively referred to herin as the
"Company"), is a leading supermarket chain in the Oklahoma, southern 
Kansas and Texas Panhandle region. The Company operates in four distinct 
market places: Oklahoma City, Oklahoma; Tulsa, Oklahoma; Amarillo, Texas; and
certain rural areas of Oklahoma, Kansas and Texas.  As of March 12, 1999, the 
Company operates 69 stores throughout these markets.

          The Company's executive offices are located at 2601 N.W. Expressway, 
Oklahoma City, Oklahoma 73112, and its telephone number is (405) 879-6600.

Background

          Holding and Homeland were organized as Delaware corporations in 1987 
by a group of investors led by Clayton, Dubilier & Rice, Inc. ("CD&R"), a 
private investment firm specializing in leveraged acquisitions with the 
participation of management, for the purpose of acquiring substantially all of 
the assets and assuming specified liabilities of the Oklahoma division of 
Safeway Inc. ("Safeway").  The stores changed their name to "Homeland" in 
order to highlight the Company's regional identity.

AWG Transaction

          On April 21, 1995, the Company sold 29 of its stores and its 
warehouse and distribution center to Associated Wholesale Grocers, Inc. 
("AWG") pursuant to an Asset Purchase Agreement dated as of February 6, 1995 
(the "AWG Purchase Agreement"), for a cash purchase price of approximately 
$72.9 million, including inventory, and the assumption of certain liabilities 
by AWG.  At the closing, the Company and AWG also entered into a seven-year
supply agreement, whereby the Company became a retail member of the AWG 
cooperative and AWG became the Company's primary supplier. The Company has 
purchased 15 shares of AWG Class A Common Stock, representing an equity 
position of 0.3%, in order to be a member of AWG. The transactions between 
the Company and AWG are referred to herein as the "AWG Transaction."

                                      1


          AWG is a buying cooperative which sells groceries on a wholesale 
basis to its retail member stores. AWG has more than 800 member stores 
located in a ten-state region with approximately $3.2 billion in revenues in 
1998.

          The AWG Transaction enabled the Company: (a) to reduce the Company's 
borrowed money indebtedness by approximately $37.2 million in the aggregate; 
(b) to have AWG assume, or provide certain undertakings with respect to, 
certain contracts and leases and certain pension liabilities of the Company; 
(c) to sell the Company's warehouse and distribution center, which eliminated 
the high fixed overhead costs associated with the operation of the warehouse 
and distribution center and thereby permitted the Company to close marginal 
and unprofitable stores; and (d) to obtain the benefits of becoming a member 
of the AWG cooperative, including increased purchases of private label 
products, special product purchases, dedicated support programs and access to 
AWG's store systems and participation in the membership rebate and patronage 
programs.

Restructuring

          On May 13, 1996, Holding and Homeland filed voluntary petitions 
under Chapter 11 of the United States Bankruptcy Code with the United States 
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court").  
Simultaneously with such filings, the Company submitted a "pre-arranged" plan 
of reorganization which set forth the terms of the restructuring of the 
Company (the "Restructuring").  The purpose of the Restructuring was to 
substantially reduce the Company's debt service obligations and labor costs 
and to create a capital and cost structure that would allow the Company to 
maintain and enhance the competitive position of its business and operations.
The Restructuring was negotiated with, and supported by, the lenders under 
the Company's then existing revolving credit facility, an ad hoc committee 
(the "Noteholders Committee") representing approximately 80% of the Company's
outstanding Old Notes (as defined in Note 2 - Reorganization in Notes to 
Consolidated Financial Statements) and the Company's labor unions.  The 
Bankruptcy Court confirmed the Company's First Amended Joint Plan of 
Reorganization, as modified (the "Plan of Reorganization") on July 19, 1996, 
and the Plan of Reorganization became effective on August 2, 1996 (the 
"Effective Date").

          Pursuant to the Restructuring, the $95 million of the Company's 
Old Notes plus accrued interest were cancelled, and the holders of the Old 
Notes received in the aggregate, $60 million face amount of newly-issued 10% 
Senior Subordinated Notes Due 2003 of the Company (the "New Notes") and $1.5 
million in cash. In addition, the Noteholders and the Company's general 
unsecured creditors received approximately 60% and 35%, respectively, of 
the equity of reorganized Holding (assuming total unsecured claims of 
approximately $63 million, including Noteholder unsecured claims). Holding's 
existing equity holders received the remaining 5% of the new equity, 
together with five-year warrants to purchase an additional 5% of such equity.


                                     2


          In connection with the Restructuring, the Company negotiated an 
agreement with its labor unions to modify certain elements of the Company's 
existing collective bargaining agreements.  These modifications include, 
among other things, wage and benefit modifications, the buyout of certain 
employees and the issuance to and purchase of new equity by a trust acting
on behalf of the unionized employees.  The modified collective bargaining 
agreements became effective on the Effective Date. See "Business -- Employees 
and Labor Relations."

   
          On the Effective Date, the Company entered into a loan agreement 
(the "Old Loan Agreement") with National Bank of Canada ("NBC"), as agent and 
lender, and two other lenders, Heller Financial, Inc. and IBJ Schroder Bank 
and Trust Company, under which the lenders provided a working capital and 
letter of credit facility and a term loan. On December 17, 1998, the Company
executed a New Loan Agreement in exchange for the Old Loan Agreement in order
to extend the maturity date, to provide additional borrowing capacity for
acquisitions, lower interest rates, and other technical changes. See 
"Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources" for a description of the
New Loan Agreement. Consistent with the Old Loan Agreement, as amended, the
New Loan Agreement permits the Company to borrow,  under the working capital 
and letter of credit facility, up to the lesser of: (a) $32.0 million and (b)
the applicable borrowing base.  Funds borrowed under such facility are available
for general corporate purposes of the Company. The Old Loan Agreement also 
provided the Company a $10.0 million term loan, which was used to fund certain
obligations of the Company under the Plan of Reorganization, including an 
employee buyout offer and a health and welfare plan required by the modified 
collective bargaining agreements, professional fees and "cure amounts" relating
to executory contracts, secured financing and unexpired leases. 
    

Business Strategy

   
          The Company's general business strategy is to continue to build and 
improve on its current strengths which consist of: (a) high quality perishable 
departments; (b) market position and competitive pricing; (c) customer 
service; (d) excellent locations; and (e) the "Homeland Savings Card," a 
customer loyalty card program. The Company is also able to effectively reach 
a large customer base with its weekly advertising inserts and radio and 
television media advertisement. In addition, the Company is upgrading its 
stores by focusing its capital expenditures on projects that will improve the 
overall appeal of its stores to targeted customers.
    

          Having been in its market for more than 66 years (through its 
predecessor Safeway), the Company enjoys a high recognition with its 
customers. The Company continues to build this rapport with its customers by 


                                     3


participating in local community events and offering the "Apples for Students"
program, whereby schools can obtain computers and other educational products
by collecting Homeland receipts.  The Company is also a major sponsor of the 
Easter Seals program in its markets.

   
          The Company is anticipating growth in home meal replacement business 
through the development of hot and chilled meal solutions for lunch and 
dinner. Capital investment is being made to support the growth of these products
and menus are being developed to match the quick meal and convenience needs
of its customers.
    

          The Company's plan also involves reviewing marginal and unprofitable 
stores for closing and reviewing new sites, independent stores or new markets 
for growth in its market share. The Company closed 14 stores in 1995 and 
closed 2 additional stores in 1996. The Company also sold its store in Ponca 
City, Oklahoma in April 1996. In 1997, the Company acquired 4 stores, two in 
Oklahoma City, Oklahoma, one in Shawnee, Oklahoma and the other in Lawton, 
Oklahoma. The Company closed 1 store in 1998. In the second quarter of 1999,
the Company intends to complete the acquisition of 9 stores located in eastern
Oklahoma.

          For additional information, see also "Management's Discussion and 
Analysis of Financial Condition and Results of Operations -- Liquidity and 
Capital Resources."

Homeland Supermarkets

   
          The Company's current network of stores features three basic store 
formats. Homeland's conventional stores are primarily in the 25,000 total 
square feet range and carry the traditional mix of grocery, meat, produce and 
general merchandise products. These stores contain more than 20,000 stock 
keeping units, including food and general merchandise. Sales volumes of 
conventional stores range from $60,000 to $125,000 per week. Homeland's 
superstores are in the 35,000 total square feet range and offer, in addition to
the traditional departments, two or more specialty departments. Sales volumes of
superstores range from $90,000 to $265,000 per week. Homeland's combo store 
format includes stores of approximately 45,000 total square feet and larger and
was designed to enable the Company to expand shelf space devoted to general 
merchandise. Sales volumes of combo stores range from $150,000 to $280,000 
per week. The Company's new stores and certain remodeled locations have 
incorporated Homeland's new, larger superstore and combo formats.
    

          Of the 69 stores operated by the Company as of March 24, 1999, 10 
are conventional stores, 47 are superstores and 12 are combo stores.


                                     4                 


          The chart below summarizes Homeland's store development over the 
last three fiscal years:


                                                    Fiscal Year Ended
                                              1/2/99    1/3/98 (1)   12/28/96
Average sales per store
 (in millions).............................  $   7.6    $    7.9    $   7.9   

Average total square feet
 per store.................................   37,473      37,232     37,295    

Average sales per
 square foot...............................     $204        $212       $212    

Number of stores:
 Stores at start of period.................       70          66         68    
 Stores remodeled..........................        8           7          4    
 New stores opened.........................        0           4          1    
 Stores sold or closed.....................        1           0          3    
 Stores at end of period...................       69          70         66    

Size of stores:
 Less than 25,000 sq. ft...................        7           7          7    
 25,000 to 35,000 sq. ft...................       25          28         24    
 35,000 sq. ft. or greater.................       37          35         35   

Store formats:
 Conventional..............................       10          10         10 
 SuperStore................................       47          49         45 
 Combo.....................................       12          11         11 

(1) 53 weeks' data.

          The Company's network of stores is managed by district managers on 
a geographical basis through four districts.  Each district manager oversees 
store operations for approximately 17 stores.  Store managers are responsible 
for determining staffing levels, managing store inventories (within the 
confines of certain parameters set by the Company's corporate headquarters)
and purchasing products. Store managers have significant flexibility with 
respect to the quantities of items carried while the Company's corporate 
headquarters is directly responsible for merchandising, advertising, pricing 
and capital expenditure decisions.


                                     5


Merchandising Strategy and Pricing

          The Company's merchandising strategy emphasizes a competitive 
pricing structure, as well as leadership in quality products and service, 
selection, convenient store locations, specialty departments and perishable 
products (i.e., meat, produce, bakery and seafood).  The Company's strategy 
is to price competitively with targeted supermarket operator in each market
area. The Company also offers double coupons, with some limitations, in all
areas in which it operates.

          The in-store merchandising strategy combines a strong presentation
of fresh products along with meaningful values throughout the store on a wide
variety of fresh and shelf stable products each week. The Company's main 
vehicle of value delivery is its "Homeland Savings Card" which allows customers
with the card, the opportunity to purchase over 2,000 items at a reduced cost
each week.  

Customer Services

          The Company's stores provide a variety of customer services 
including, among other things, carry-out services, facsimile services, 
automated teller machines, pharmacies, video rentals, check cashing, utility 
payments, money transfers and money orders. The Company believes it is able 
to attract new customers and retain its existing customers because of its 
level of customer service and convenience.

Advertising and Promotion

   
          All advertising and promotion decisions are made by the Company's 
corporate merchandising and advertising staff. The Company's advertising 
strategy is designed to enhance its value-oriented merchandising concept and 
emphasize its reputation for variety and quality. Accordingly, the Company is 
focused on presenting itself as a competitively-priced, promotions-oriented
operator that offers value to its customers and an extensive selection of 
high quality merchandise in clean, attractive stores. This strategy allows 
the Company to accomplish its marketing goals of attracting new customers and 
building loyalty with existing customers. In addition, signage in the stores 
calls attention to various in-store specials and thereby creating a friendlier
and more stimulating shopping experience.
    

          The Company currently utilizes a broad range of print and 
broadcast advertising in the markets it serves, including newspaper 
advertisements, advertising inserts and circulars, television and radio 
commercials and promotional campaigns that cover substantially all of the 
Company's markets. The Company receives cooperative and performance 
advertising reimbursements from vendors which reduce its advertising costs.


                                     6


          In September 1995, the Company introduced a customer loyalty card 
called the "Homeland Savings Card," in its Amarillo, Texas stores.  The 
Company introduced the "Homeland Savings Card" in its other stores in 
August 1996. The Company has not only used the card as a promotional tool 
but has begun to use the data gained from card users to target product and
service offerings in order to increase the levels of loyalty among targeted
customers.

Products

          The Company provides a wide selection of name-brand and private 
label products to its customers. All stores carry a full line of meat, dairy, 
produce, frozen food, health and beauty care and selected general merchandise.  
As of the close of fiscal year 1998, approximately 83% of the Company's stores 
had service delicatessens and/or bakeries and approximately 63% had in-store
pharmacies. In addition, some stores provide additional specialty departments 
that offer ethnic food, fresh and frozen seafood, floral services and salad 
bars.

          As a result of the Company's supply relationship with AWG, the 
Company's stores also offer AWG private label goods, including Best Choice
and Always Save.

          Private label products generally represent quality and value to 
customers and typically contribute to a higher gross profit margin than 
national brands. The promotion of private label products is an integral part
of the Company's merchandising philosophy of building customer loyalty as 
well as improving the Company's "pricing image." The Company intends to use
Best Choice line of products as the main vehicle to accomplish these goals.

Supply Arrangements

          The Company is a party to the supply agreement with AWG (the 
"Supply Agreement"), pursuant to which the Company became a member of the AWG 
cooperative and AWG became the Company's primary supplier. AWG currently 
supplies approximately 70% of the goods sold in the Company's stores.  See 
"Business -- AWG Transaction."

          Pursuant to the Supply Agreement, AWG is required to supply products 
to the Company at the lowest prices and on the best terms available to AWG's 
retail members.  In addition, the Company is: (a) eligible to participate in 
certain cost-savings programs available to AWG's other retail members; (b) is 
entitled to receive certain member rebates and refunds based on the dollar
amount of the Company's purchases from AWG's distribution center; and (c) is 
to receive periodic cash payments from AWG, up to a maximum of $1.2 million 
per fiscal quarter, based on the dollar amount of the Company's purchases 
from AWG's distribution centers during such fiscal quarter.



                                     7


          The Company purchases goods from AWG on an open account basis.  
AWG requires that each member's account be secured by a letter of credit or 
certain other collateral in an amount based on such member's estimated weekly 
purchases through the AWG distribution center. The Company's open account 
with AWG, as of March 24, 1999, is secured by a $3.3 million letter of credit
(the "AWG Letter of Credit") issued in favor of AWG by NBC. In addition, the 
Company's obligations to AWG are secured by a first lien on all "AWG Equity" 
owned from time to time by the Company, which includes, among other things, 
AWG membership stock, the Company's right to receive monthly payments and 
certain other rebates, refunds and other credits owed to the Company by AWG
(including patronage refund certificates, direct patronage or year-end 
patronage and concentrated purchase allowances).

          The amount of the AWG Letter of Credit may be decreased on a 
biannual basis upon the request of the Company based on the Company's 
then-current average weekly volume of purchases and by an amount equal to the 
face amount of the Company's issued and outstanding AWG patronage refund 
certificates. In the event that the Company's open account with AWG exceeds 
the amount of the AWG Letter of Credit plus any other AWG Equity held as 
collateral for the Company's open account, AWG is not required to accept 
orders from, or deliver goods to, the Company until the amount of the AWG 
Letter of Credit has been increased to make up for any such deficiency.

          The Supply Agreement with AWG contains certain "Volume Protection 
Rights," including: (a) the right of first offer (the "First Offer Rights") 
with respect to any proposed sales of stores supplied under the Supply 
Agreement (the "Supplied Stores") and a sale of more than 50% of the 
outstanding stock of Holding or Homeland to an entity primarily engaged in 
the retail or wholesale grocery business; (b) the Company's agreement not to
compete with AWG as a wholesaler of grocery products during the term of the 
Supply Agreement; and (c) the Company's agreement to dedicate the Supplied 
Stores to the exclusive use of a retail grocery facility owned by a retail 
member of AWG (the "Use Restrictions"). The Company's agreement not to 
compete and the Use Restrictions contained in the Supply Agreement are 
terminable with respect to a Supplied Store upon the occurrence of certain
events, including the Company's compliance with AWG's First Offer Rights with 
respect to any proposed sale of such store. In addition, the Supply Agreement 
provides AWG with certain purchase rights in the event the Company closes 90% 
or more of the Supplied Stores.

Employees and Labor Relations

          At March 12, 1999, the Company had a total of 4,340 employees, of 
whom 3,002, or approximately 69%, were employed on a part-time basis.  The 
Company employs 4,238 in its supermarket operations. The remaining employees 
are corporate and administrative personnel.

          The Company is the only unionized grocery chain in its market areas. 
Approximately 91% of the Company's employees are union members, represented 
primarily by the United Food and Commercial Workers of  North America 
("UFCWNA").


                                     8


          In March and April of 1996, prior to the Restructuring, the 
Company entered into new collective bargaining agreements with the UFCWNA 
and the local union chapter of the Bakery, Confectionery and Tobacco Workers 
International Union (collectively, the "Modified Union Agreements").

          The Modified Union Agreements have a term of five years commencing 
on the Effective Date. The Modified Union Agreements consist of five basic 
elements: (a) wage rate and benefit contribution reductions and work rule 
changes; (b) the Employee Buyout Offer, pursuant to which the Company made up 
to $6.4 million available for the buyout of certain unionized employees;
(c) the establishment of an employee stock option trust (acting on behalf of 
the Company's unionized employees), which will receive, or be entitled to 
purchase, up to 522,222 shares of New Common Stock, or 10% of the New Common 
Stock, pursuant to the terms of the Modified Union Agreements; (d) the UFCWNA's 
right to designate one member of the Boards of Directors of Homeland and 
Holding following the Restructuring; and (e) the elimination of certain "snap 
back" provisions, incentive plans and "maintenance of benefits" provisions.

          Upon the consummation date of the Employee Buyout Offer, 833 of 
the Company's unionized employees accepted the Employee Buyout Offer. The 
Company paid approximately $6.0 million in the aggregate (which excludes the 
Company's portion of payroll taxes) with each employee receiving an amount 
that ranged from $4,500 to $11,000 (depending on job classification, date of
hire and full- or part-time status). The Employee Buyout Offer payment was 
funded through borrowings under the Loan Agreement.

Computer and Management Information Systems

          During 1995, the Company installed new client/server systems in 
order to enhance its information management capabilities, improve its 
competitive position and enable the Company to terminate its outsourcing 
arrangement. The new systems include the following features: time and 
attendance, human resource, accounting and budget tracking, and scan support 
and merchandising systems. In 1997, the Company installed a direct store 
delivery system and a check verification and credit card system. The Company 
installed a centralized scale and pricing system for its meat, deli and bakery
departments in 1998.

          The Company has scanning checkout systems in all of its 69 stores.  
The Company will continue to invest and upgrade its scanning and point-of-sale 
systems to improve efficiency. The Company utilizes the information collected 
through its scanner systems to track sales and to coordinate purchasing.  The 
Company also utilizes the information collected on the purchases made by
its "Homeland Savings Card" holders to target its promotional activities on 
this market segment.  See "Business -- Advertising and Promotion" and
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."



                                     9 


Competition

          The supermarket business in the Company's market area is highly 
competitive, but very fragmented, and includes numerous independent operators.  
The Company estimates that these operators represent a substantial percentage 
of its markets.  The Company also competes with larger store chains such as
Albertson's and Wal-Mart, which operate 25 stores and 17 stores, respectively, 
in the Company's market areas, "price impact" stores such as Crest, large 
independent store groups such as IGA, regional chains such as United and 
discount warehouse stores.

          The Company is a leading supermarket chain in Oklahoma, southern 
Kansas and the Texas Panhandle region. The Company attributes its market 
position to certain advantages it has over certain of its competitors including
its high quality perishable departments, effective advertising, excellent 
long-standing store locations and a strong reputation within the communities 
in which the Company operates.

   
          The Company's business has been adversely affected in recent years 
by the entry of new competition into the Company's key markets, which has 
resulted in a decline in the Company's comparable store sales in 1997 and 
1998. In 1997, there were 8 competitive openings in the Company's market 
areas including 3 new Wal-Mart's and 2 new Albertson's. In 1998, there were 
7 additional competitive openings, including 4 new Wal-Mart's and 3 new 
independent stores. Based on information publicly available, the Company 
expects that, during 1999, Albertson's will open 3 new stores, Wal-Mart will
open 4 new stores, regional chains will open 2 stores and independents will 
open 3 additional stores in the Company's markets.
    

Trademarks and Service Marks

          During the transition from "Safeway" to "Homeland," the Company was 
able to generate a substantial amount of familiarity with the "Homeland" name.  
The Company continues to build and enhance this name recognition through 
promotional advertising campaigns. The "Homeland" name is considered material 
to the Company's business and is registered for use as a service mark and 
trademark. The Company has received federal and certain state registrations 
of the "Homeland" mark as a service mark and a trademark for use on certain 
products. The Company also received a federal registration of the service 
mark "A Good Deal Better" in early 1994.

Regulatory Matters

          Homeland is subject to regulation by a variety of local, state and 
federal governmental agencies, including the United States Department of 



                                    10


Agriculture, state and federal pharmacy regulatory agencies and state and 
local alcoholic beverage and health regulatory agencies. By virtue of this
regulation, Homeland is obligated to observe certain rules and regulations, 
the violation of which could result in suspension or revocation of various 
licenses or permits held by Homeland. In addition, most of Homeland's 
licenses and permits require periodic renewals. To date, Homeland has 
experienced no material difficulties in obtaining or renewing its licenses 
and permits.

ITEM 2.   PROPERTIES

          Of the 69 supermarkets operated by the Company, 13 are owned by 
Homeland and the balance are held under leases which expire at various times 
between 1999 and 2013. Most of the leases are subject up to six (6) five-year 
renewal options. Out of 56 leased stores, only 7 have terms (including 
option periods) of fewer than 10 years remaining. Most of the leases require 
the payment of taxes, insurance and maintenance costs and many of the leases 
provide for additional contingent rentals based on sales in excess of certain 
stipulated amounts. No individual store operated by Homeland is by itself 
material to the financial performance or condition of Homeland as a whole.  

          Substantially all of the Company's properties are subject to 
mortgages securing the borrowings under the Loan Agreement (see "Management's 
Discussion and Analysis of Financial Conditions and Results of Operations -- 
Liquidity and Capital Resources").

ITEM 3.   LEGAL PROCEEDINGS

          The Company is a party to ordinary routine litigation incidental 
to its business.

          Homeland and Holding were debtors in cases styled In re Homeland 
Holding Corporation, Debtor, Case No. 96-748 (PJW), and In re Homeland Stores, 
Inc., Debtor, Case No. 96-747 (PJW), initiated with the Bankruptcy Court on 
May 13, 1996.  While the Plan of Reorganization was confirmed on July 19, 1996, 
and became effective on August 2, 1996, the Company is still involved in the
resolution of claims filed in these proceedings.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No matters were submitted by Holding to a vote of Holding's 
security holders during the quarter ended January 2, 1999.


                                     11


                                  PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDERS MATTERS

   
          The Common Stock of Holding commenced public trading on the Nasdaq 
National Market System ("Nasdaq/NMS") on April 14, 1997. High and low sales 
prices of the Common Stock as reported by Nasdaq/NMS for each fiscal quarter 
of 1997 and 1998 are listed below:
    

                                           High            Low
          June 14, 1997                   $9.000          $6.250
          September 6, 1997               $8.813          $7.500
          January 3, 1998                 $9.000          $6.500
          March 28, 1998                  $8.250          $5.375
          June 20, 1998                   $8.063          $6.250
          September 12, 1998              $7.563          $4.188
          January 2, 1999                 $5.000          $3.000

          On March 12, 1999, there were 708 stockholders of record. As 
additional claims are resolved pursuant to the Plan of Reorganization, the 
Company expects that the number of stockholders will increase, assuming that 
there is no change in the number of current stockholders.

   
          No cash dividends were declared or paid since the Effective Date.  
Holding is restricted from paying dividends by the New Loan Agreement and 
Indenture. See "Management's Discussion and Analysis of Financial Condition 
and Results of Operations -- Liquidity and Capital Resources."
    

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

          The following table sets forth selected consolidated financial data 
of the Company which has been derived from financial statements of the 
Company for the 52 weeks ended January 2, 1999, the 53 weeks ended January 3, 
1998, and the 20 weeks ended December 28, 1996 (Successor Company), the 32 
weeks ended August 10, 1996, and the 52 weeks ended December 30, 1995, 
and December 31, 1994 (Predecessor Company), respectively. See "Notes to 
Selected Consolidated Financial Data" for additional information.

          As discussed in "Business -- Restructuring," the Company emerged 
from Chapter 11 proceedings effective August 2, 1996.  For financial reporting 
purposes, the Company accounted for the consummation of the Restructuring 
effective as of August 10, 1996.  The Company has adopted "fresh-start" 
reporting pursuant to SOP No. 90-7.  The periods prior to the Restructuring
have been designated "Predecessor Company" and the periods subsequent to the 
Restructuring have been designated "Successor Company."

                                    12


          The selected consolidated financial data should be read in 
conjunction with the respective consolidated financial statements and notes 
thereto which are contained elsewhere herein.

        
                                     13

<TABLE>
<CAPTION>

                                (In thousands, except per share amounts)

                                                  Successor Company                      Predecessor Company

                                               52 weeks       53 weeks      20 weeks       32 weeks      52 weeks        52 weeks
                                                 ended          ended         ended          ended         ended           ended  
                                                1/2/99         1/3/98       12/28/96        8/10/96      12/30/95        12/31/94 


   
Summary of Operating Data:
<S>                                           <C>            <C>           <C>            <C>           <C>             <C>       

 Sales, net                                   $ 529,576      $  527,993    $ 204,026      $ 323,747     $ 630,275       $ 785,121

 Cost of sales                                  402,261         401,691      154,099        244,423       479,119         588,405

 Gross profit                                   127,315         126,302       49,927         79,324       151,156         196,716

 Selling and administrative expense             114,335         112,590       43,995         73,183       144,052         193,643 

 Operational restructuring costs (1)               -               -            -              -           12,639          23,205

 Amortization of excess reorganization
  value (2)                                      13,672          14,527        5,819           -             -               -  

 Operating profit (loss)                           (692)           (815)         113          6,141        (5,535)        (20,132)

 Gain(loss) on disposal of assets                    34            (117)         (90)           114        (8,349)           -   

 Interest income                                    426             385           56             69           416            -   

 Interest expense                                (8,484)         (8,408)      (3,199)        (5,639)      (15,992)        (18,067)

 Income (loss) before reorganization
  items, income taxes and 
  extraordinary items                            (8,716)         (8,955)      (3,120)           685       (29,460)        (38,199)

 Reorganization items (3)                          -               -            -           (25,996)         -               -    

 Income tax provision                            (1,875)         (1,689)        -              -             -             (2,446) 

 Loss before extraordinary items                (10,591)        (10,644)      (3,120)       (25,311)      (29,460)        (40,645) 

 Extraordinary items (4)(5)                        -               -            -            63,118        (2,330)           -    

 Net income (loss)                              (10,591)        (10,644)      (3,120)        37,807       (31,790)        (40,645)

 Reduction in redemption value -
  redeemable common stock                          -               -            -              -              940           7,284 

 Net income (loss) available to common 
  stockholders                                $ (10,591)      $ (10,644)   $  (3,120)     $  37,807     $ (30,850)      $ (33,361) 

 Basic and diluted net income (loss) per
  common share (6)                            $   (2.18)      $   (2.23)   $   (0.66)     $    1.16     $   (0.93)      $   (0.96) 


Consolidated Balance Sheet Data:                1/2/99          1/3/98      12/28/96        8/10/96      12/30/95        12/31/94 

 Total assets                                 $ 159,204       $ 166,041    $ 168,486      $ 129,679     $ 137,582       $ 239,134  

 Long-term obligations, including current
  portion of long-term debt obligations       $  89,979       $  86,002    $  80,568      $ 124,411     $ 124,242       $ 176,731 

 Redeemable common stock                      $    -          $    -       $    -         $      17     $      17       $   1,235 

 Stockholders' equity (deficit)               $  31,868       $  42,324    $  52,941      $ (38,057)    $ (28,106)      $   4,071 


</TABLE>
    


                                     14




                 NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
                             (In thousands)


(1)  Operational restructuring costs during 1995 included the write-off of 
     software no longer utilized by the Company, the write-off of goodwill 
     in connection with the Restructuring and a termination charge resulting 
     from the cancellation of the Company's computer outsourcing agreement.  
     Operational restructuring costs during 1994 included the estimated 
     losses to be incurred on the AWG Transaction and associated expenses and 
     the estimated losses and expenses in connection with the anticipated 
     closing of 15 stores during 1995.

(2)  The Company's reorganization value in excess of amounts allocable to 
     identifiable assets, established in accordance with "fresh-start" 
     reporting, of $45,389 is being amortized on a straight-line basis over 
     three years.

(3)  As a result of the Company's Restructuring, the Company recorded certain 
     reorganization expenses separately in accordance to SOP 90-7.  
     Reorganization items for 1996 consist of: (a) $7,200 of allowed claims 
     in excess of liabilities; (b) $4,250 in professional fees; (c) $6,386 in
     employee buyout expenses; and (d) $8,160 in adjusting certain assets and 
     liabilities to estimated fair value.

(4)  Extraordinary items during 1996 consist of obligations of the Company 
     that were discharged by the Bankruptcy Court pursuant to the Company's 
     Plan of Reorganization.

(5)  Extraordinary items during 1995 included the payment of $906 in premiums 
     and consent fees on the redemption of $15,600 of the Company's Old Notes 
     and the write-off of $1,424 in unamortized financing costs related to 
     the Old Notes so redeemed and the prior revolving credit facility.

(6)  Old Common Stock held by management investors are presented as redeemable 
     common stock and excluded from stockholder's equity since the Company 
     had agreed to repurchase such shares under certain defined conditions,
     such as death, retirement or permanent disability.  In addition, net 
     income (loss) per common share reflects the accretion in/reduction to 
     redemption value as a reduction/increase in income available to all 
     common stockholders.


                                    15



ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Results of Operations

          General

               As discussed in Note 2 to the accompanying Consolidated 
Financial Statements of Holding and Subsidiaries, the Company's Plan of 
Reorganization became effective on August 2, 1996.  For financial reporting 
purposes, the Company accounted for the consummation of the Restructuring 
effective as of August 10, 1996. The Company has adopted "fresh-start" 
reporting pursuant to SOP No. 90-7. The periods prior to the Restructuring
have been designated "Predecessor Company" and the periods subsequent to the 
Restructuring have been designated "Successor Company."  For purposes of the 
discussion of Results of Operations and Liquidity and Capital Resources for 
the fifty-two weeks ended December 28, 1996, the results of the Predecessor
Company and Successor Company have been combined.

               Because of the adjustments associated with the adoption of 
"fresh-start" reporting pursuant to SOP No. 90-7, the periods prior to and 
subsequent to the Effective Date for financial reporting purposes are not 
necessarily comparable. In addition, it is difficult to identify trends 
between periods which are not necessarily comparable, particularly to the 
extent prior trends have been affected by the Restructuring.


                                    16



               The table below sets forth selected items from the Company's 
Consolidated Statements of Operations as a percentage of net sales for the 
periods indicated:

                                                        Fiscal Year

                                                1998        1997       1996

   
Sales, net..................................  100.00%     100.00%      100.00%
Cost of sales...............................   75.96       76.08        75.51
 Gross profit...............................   24.04       23.92        24.49

Selling and administrative..................   21.59       21.32        22.20
Amortization of excess
 reorganization  value......................    2.58        2.75         1.10
Operating profit (loss).....................   (0.13)      (0.15)        1.19
Gain(loss) on disposal of assets............    0.01       (0.02)         -
Interest income.............................    0.08        0.07         0.02
Interest expense............................   (1.60)      (1.59)       (1.67)

Loss before reorganization
 items, income taxes and
 extraordinary items........................   (1.64)      (1.69)       (0.46)
Reorganization items........................     -           -          (4.93)
Loss before income
 taxes and extraordinary items..............   (1.64)      (1.69)       (5.39)
Income tax provision........................   (0.36)      (0.32)         -
Loss before
 extraordinary items........................   (2.00)      (2.01)       (5.39)

Extraordinary items.........................     -           -          11.96

Net income (loss)...........................   (2.00)%     (2.01)%       6.57%
    



          Comparison of Fifty-Two Weeks Ended January 2, 1999, ("1998"), with
Fifty-Three Weeks Ended January 3, 1998 ("1997").

          Net sales increased $1.6 million, or 0.3%, from $528.0 million for 
1997 to $529.6 million for 1998. Fiscal 1997 was a 53 week year for the Company.
Excluding the net sales for the 53rd week in 1997, net sales increased $12.3
million, or 2.4%, from $517.3 million for 1997 to $529.6 million for 1998.
The increase in sales is attributable to four stores which were acquired during
1997 and were first included for a full year in 1998 (one in August and three
in October), partially offset by a 1.0% decline in comparable store sales and
the closing of one store during 1998. The decline in comparable store sales 
during 1998 was attributable to the seven new competitive store openings (four
Wal-Mart's and three independent stores), the loss of sales during the 
remodeling of Company


                                    17


stores, and limited inflation in selected food categories. The Company is 
conducting an ongoing store development and remodeling program, and believes 
that it will continue to experience temporary disruptions and lost sales 
during store remodelings in the future. The decline in comparable store sales
was somewhat offset by grand opening events at certain of the Company's stores
and incremental improvements from continued usage of frequency card based 
promotions and direct marketing efforts.

   
          Based in part on the anticipated impact of proposed and recent new
store openings and remodelings by competitors, management believes that 
market conditions will remain highly competitive, placing continued pressure
on comparable store sales and net sales. In response to this highly
competitive environment, the Company intends to build on its strengths which
consist of: (a) high quality perishable departments; (b) market position and
competitive pricing; (c) customer service; (d) excellent locations; and 
(e) the "Homeland Savings Card," a customer loyalty card program. The Company
is upgrading its stores by focusing its capital expenditures on projects that
will improve the overall appeal of its stores to targeted customers and is 
using its merchandising strategy is to emphasize a competitive pricing 
structure, as well as leadership in quality products and services, selection 
and convenient store locations. Additionally, the in-store merchandising 
strategy combine a strong presentation of fresh products along with 
meaningful values throughout the store on a wide variety of fresh and shelf 
stable products eac week. The Company's main vehicle of value delivery is its
Homeland Savings Card which allows customers with the card, the opportunity 
to purchase over 2,000 items at a reduced cost each week. Finally, the Company
continues the use of market research in order to maintain a better understanding
of customer behavior and trends in certain markets.
    

          Gross profit as a percentage of sales increased 0.1% from 23.9% in
1997 to 24.0% in 1998. The increase in gross profit margin reflects lower 
cost of goods in certain categories, additional incentive allowances in 
selected product categories and increased volume rebates, partially offset
by increased promotional activities as the Company responded to certain new
competitive store openings and special advertisements for the grand openings 
of the Company's remodeled stores.

          Selling and administrative expenses as a percentage of sales
increased 0.3% from 21.3% in 1997 to 21.6% in 1998. The increase is attributable
to an increase in occupancy costs associated with a full year of operation in
1998 for the four stores acquired in 1997; an increase in depreciation as a
result of the capital expenditure program for store remodels and maintenance
and modernization; and, an increase in administrative expenses. The increase
in expenses was partially offset by a reduction in general liability 
insurance expenses as a result of improved claims experience by the Company.
The Company continues to review alternatives to reduce selling and 
administrative expenses and cost of sales in order to provide apportunities to
pass additional savings along to its customers in the form of price reductions
in certain categories.

                                    18


   
          The amortization of the excess reorganization value amounted to 
$13.7 million in 1998. The excess reorganization value is being amortized 
over three years, on a straight line basis. The excess reorganization value 
will be fully amortized by the third quarter of 1999 and the elimination
of such amortization should increase net income commencing in the fourth 
quarter of 1999.
    

          Interest expense, net of interest income, increased $0.1 million 
from $8.0 million in 1997 to $8.1 million in 1998. The increase reflects an
additional amount of debt outstanding partially offset by lower interest rates. 
During 1999, the Company anticipates that interest expense will increase
once the acquisition of nine stores has been completed. See "Liquidity and
Capital Resources."

          The Company recorded $1.9 million of income tax expense for 1998, 
of which $1.7 million was deferred income tax. In accordance with SOP 90-7, 
the tax benefit realized from utilizing the pre-reorganization net operating 
loss carryforwards is recorded as a reduction of the reorganization value in 
excess of amounts allocable to identifiable assets rather than realized as
a benefit on the statement of operations. At January 2, 1999, the Company 
had a tax net operating loss carryforward of approximately $37.4 million, 
which may be utilized to offset future taxable income to the limited amount 
of $3.3 million for 1999 and each year thereafter.

          EBITDA (as defined hereinafter) increased $0.7 million from  $22.2
million, or 4.2% of sales, to $22.9 million or 4.3% of sales in 1998. The
improvement in EBITDA resulted primarily from the increased sales and reduced
selling and administrative expenses included in EBITDA. The Company believes 
that EBITDA is a useful supplemental disclosure for the investment community. 
EBITDA, however, should not be construed as a substitue for earnings or cash 
flow information required under generally accepted accounting principles. 

          Comparison of Fifty-Three Weeks Ended January 3, 1998, ("1997"),
with Fifty-Two Weeks Ended December 28, 1996 ("1996").

          Net sales increased $0.2 million from $527.8 million for 1996 to 
$528.0 million for 1997. Fiscal 1997 was a 53 week year for the Company.
Excluding the net sales for the 53rd week in 1997, net sales decreased $10.5
million, or 2.0%, from $527.8 million for 1996 to $517.3 million for 1997.
The decline in sales is attributable to a 3.2% decline in comparable store 
sales partially offset by the sales of four stores acquired during 1997
(one on August 11, 1997, and the other three on October 15, 1997). The decline
in comparable store sales was attributable to the eight new competitive store
openings and lower food price inflation as well as lower sales to food stamp
recipients as a result of more stringent eligibility requirements. The decrease
was somewhat offset by grand opening events at certain of the Company's stores
plus the closing of five Food Lion stores in the Company's market area in
October 1997.

          Gross profit as a percentage of sales decreased 0.6% from 24.5% in
1996 to 23.9% in 1997.  The decrease in gross profit margin was primarily a 
result of increased promotional activities as the Company responded to certain


                                    19


new competitive store openings and special advertisements at the grand openings
of six remodeled stores.

          Selling and administrative expenses as a percentage of sales decreased
0.9% from 22.2% in 1996 to 21.3% in 1997. The decrease in selling and 
administrative expense is primarily a result of lower labor costs associated 
with the Modified Union Agreements and lower occupancy cost that resulted from
renegotiated leases. The labor savings from the Modified Union Agreements were
somewhat offset by the federally-mandated minimum wage increases.

          The amortization of the excess reorganization value amounted to 
$14.5 million in 1997. 

          Interest expense, net of interest income, decreased $0.7 million
from $8.7 million in 1996 to $8.0 million in 1997. The decrease is a result
of higher borrowings by the Predecessor Company during the 32 weeks ended 
August 10, 1996, and to a lesser degree, a decline in interest rate.

          The Company recorded $1.7 million of income tax expense for 1997,
of which $1.6 million was deferred income tax. In accordance with SOP 90-7, 
the tax benefit realized from utilizing the pre-reorganization net operating
loss carryforwards is recorded as a reduction of the reorganization value
in excess of amounts allocable to identifiable assets rather than realized
as a benefit on the statement of operations. 

          EBITDA increased $2.7 million from $19.5 million, or 3.7% of sales,
to $22.2 million or 4.2% of sales in 1997. The improvement in EBITDA resulted
primarily from reduced selling and administrative expenses. The Company 
believes that EBITDA is a useful supplemental disclosure for the investment 
community. EBITDA, however, should not be construed as a substitute for 
earnings or cash flow information required under generally accepted accounting
principles.

Liquidity and Capital Resources

   
          Debt.  The primary sources of liquidity for the Company's operations 
have been borrowings under credit facilities and internally generated funds.  
On the Effective Date, pursuant to the Plan of Reorganization, the Company 
entered into the Old Loan Agreement with NBC, as agent and lender, and two other
lenders, Heller Financial, Inc. and IBJ Schroder Bank and Trust Company 
(subsequently assigned its position to IBJ Schroder Business Credit 
Corporation), under which those lenders provided a working capital and letter 
of credit facility and a term loan. The Old Loan Agreement, as amended, 
permitted the Company to borrow, under the working capital and letter of credit
facility, up to the lesser of (a) $32.0 million or (b) the applicable borrowing
base. Funds borrowed under such facility are available for general corporate 
purposes of the Company.
    


                                    20


          The Old Loan Agreement also provided the Company a $10.0 million term 
loan (the "Term Loan"), which was used to fund certain obligations of the 
Company under the Plan of Reorganization, including the Employee Buyout Offer 
and a new health and welfare plan required by the Modified Union Agreements, 
professional fees and "cure amounts" which were required to be paid under the 
Plan of Reorganization in connection with executory contracts, secured 
financing and unexpired leases. 

   
          On December 17, 1998, the Company executed a New Loan Agreement in
exchange for the Old Loan Agreement in order to extend the maturity to August
2, 2002, to provide additional term loan borrowing capacity of $10.0 million
for acquisitions ("Acquisition Term Loan"), to reduce interest rates, and
to incorporate other technical changes. As of January 2, 1999, there were no
borrowings outstanding under the Acquisition Term Loan facility. As of March
24, 1999, the original Term Loan has an outstanding balance of $7.5 million,
and the Company is required to make quarterly principal paydowns of
approximately $0.4 million.
    

          The interest rate payable quarterly under the New Loan Agreement is
based on the prime rate publicly announced by National Bank of Canada from 
time to time in New York, New York plus a percentage which varies based on 
a number of factors, including: (a) whether it is the Revolving Facility or
the Term Loan and the amount, if any, which is part of the Acquisition Term
Loan; (b) the time period; and (c) whether the Company elects to use a 
London Interbank Offered Rate.

          The obligations of the Company under the New Loan Agreement are 
secured by liens on, and security interests in, substantially all of the assets
of Homeland and are guaranteed by Holding, with a pledge of its Homeland stock 
to secure its obligation.

   
          The New Loan Agreement includes certain customary restrictions on 
acquisitions, asset dispositions, capital expenditures, consolidations and 
mergers, distributions, divestitures, indebtedness, liens and security 
interests and transactions with affiliates and payment of dividends. The New 
Loan Agreement also requires the Company to comply with certain financial and 
other covenants.
    

          As of the Effective Date, the Company entered into an Indenture 
with Fleet National Bank (predecessor to State Bank and Trust Company), as 
trustee, under which the Company issued $60.0 Million of New Notes. The New 
Notes, which are unsecured, will mature on August 1, 2003. Interest on the 
New Notes accrues at the rate of 10% per annum and is payable on February 1 
and August 1 of each year.

          The Indenture contains certain customary restrictions on 
acquisitions, asset sales, consolidations and mergers, distributions, 
indebtedness, transactions with affiliates and payment of dividends.


                                    21


          Working Capital and Capital Expenditures.  The Company's primary 
sources of capital have been borrowing availability under the revolving 
credit facility and cash flow from operations, to the extent available.  The 
Company uses the available capital resources for working capital needs, 
capital expenditures and repayment of debt obligations.

          The Company's EBITDA (earnings before net interest expense, taxes, 
depreciation and amortization, and gain/loss on disposal of assets) as presented
below, is the Company's measurement of internally-generated operating cash for
working capital needs, capital expenditures and payment of debt obligations:

                             52 Weeks Ended   53 Weeks Ended   52 Weeks Ended
                               January 2,       January 3,    December 28,
                                 1999             1998             1996

Loss before reorganization
 items, income taxes and
 extraordinary items           $ (8,716)        $ (8,955)        $ (2,435)

Interest income                    (426)            (385)            (125)

Interest expense                  8,484            8,408            8,838

(Gain) loss on disposal of 
 assets                             (34)             117              (24)

Amortization of excess
 reorganization value            13,672           14,527            5,819 

Depreciation and amortization     9,923            8,525            7,243 

EBITDA                         $ 22,903         $ 22,237         $ 19,316

As a percentage of sales          4.32%            4.21%            3.66%

As a multiple of interest  
 expense, net of interest 
 income                           2.84x            2.77x            2.22x

   
          Net cash provided by operating activities decreased $1.9 million, 
from $12.4 million in 1997 to $10.5 million in 1998. The decrease principally 
reflects a reduction in other current liabilities in 1998 which is primarily 
attributable to reductions in other accrued expenses during 1998.
    

          Net cash used in investing activities decreased $2.4 million from
$14.0 million in 1997 to $11.6 million in 1998. The Company invested $12.4
million, $14.0 million and $6.9 million in capital expenditures for 1998,
1997 and 1996, respectively. In August 1997, the Company acquired a Pratt


                                    22


Discount Food store and in October 1997, the Company acquired three Food Lion
stores. The acquisitions amounted to approximately $3.6 million. The capital 
expenditures for 1998 were funded by internally-generated cash flows from 
operations and the revolving credit facility under the Old Loan Agreement.

          Net cash provided by financing activities decreased $0.7 million from
$4.9 million in 1997 to $4.2 million in 1998. The decrease reflects additional
principal payments under its Term Loan.

          The Company considers its capital expenditure program a critical 
and strategic part of the overall plan to support its market competitiveness.  
Cash capital expenditures for 1999 are expected to be at approximately $10.5 
million. The New Loan Agreement limits the Company's capital expenditures for 
1999 to $13.0 million in cash capital expenditures and $12.0 million for 
capital expenditures which are financed through capital leases or equipment
loans. The estimated 1999 capital expenditues of $10.5 million is expected 
to be invested primarily in remodeling and maintenance of certain stores and
does not include provisions for acquisitions. The funds for the capital 
expenditures are expected to be provided by internally-generated cash flows
from operations and borrowings under the New Loan Agreement. As of March 24, 
1999, the Company had $16.6 million of borrowings, $3.3 million of letters of
credit outstanding and $10.8 million of availability under its revolving credit
facility.

          On February 15, 1999, the Company signed a letter of intent with 
AWG for the purchase of nine Apple Market supermarkets currently operated
by Horner Foods, Inc. in eastern Oklahoma. Consummation of the transaction,
which is expected during the second quarter of 1999, is subject to, among
other things, the execution of a definitive purchase agreement, completion
of due dilligence, and certain customary closing conditions. The financing
for this acquisition is likely to be a combination of loans through AWG, the
Acquisition Term Loans and/or availability under the revolving credit facility.

          The Company's ability to meet its working capital needs, meet its 
debt and interest obligations and capital expenditure requirements is 
dependent on its future operating performance. There can be no assurance that 
future operating performance will provide positive net cash and if the 
Company is not able to generate positive cash flow from its operations,
management believes that this could have a material adverse effect on the 
Company's business.

          Information discussed herein includes statements that are forward-
looking in nature, as defined in the Private Securities Litigation Reform Act.  
As with any forward-looking statements, these statements are subject to a 
number of factors and assumptions, including competitive activities, economic
conditions in the market area and results of its future capital expenditures.  
In reviewing such information, it should be kept in mind that actual results 
may differ materially from those projected or suggested in such forward-
looking statements.


                                    23


Year 2000

   
          The Year 2000 issue results from computer programs being written 
using two digits rather than four to define the applicable year. As the Year 
2000 approaches, systems using such programs may be unable to accurately 
process certain date-based information. Like many other companies, the 
Company is continuing to assess and modify its computer applications and 
business processes to provide for their continued functionality. Commencing
in October 1996, the Company implemented a program of evaluating its computer
systems to identify areas of potential concern, both with respect to information
technology and non-information technology systems (e.g., microcontrollers), 
remediating / replacing systems to address those potential areas of concern,
and ultimately, testing those changes for compliance. This continuing assessment
has been implemented on a system-by-system basis and includes the readiness of 
external entities, such as vendors, which interface with the Company. Such
program has included and will continue to include both consultation by 
Homeland with the vendors who provided its computer systems and internal
testing by Homeland of those computer systems. The Company has completed its
evaluation of systems and its detailed planning for remediating or replacing
non-compliant systems. Remediation / replacement efforts are approximately 
80% complete and testing procedures are approximately 75% complete. Testing
procedure have included tests of certain systems for which remediation /
replacement efforts were ultimately deemed unnecessary based on the positive
results of such tests.
    

          The Company has assessed its vendors' Year 2000 readiness, principally
through the review of questionnaires which the Company has circulated to its
vendors. AWG, which supplies approximately 70% of the goods sold in the 
Company's stores, believes that it will be Year 2000 compliant. Although not
all of the responses from other vendors have been conclusive, management does
not presently expect that it will be adversely affected by its vendors' Year
2000 readiness.

   
          A significant portion of the Company's systems were found to be
Year 2000 compliant without any remediation or replacement efforts. The area
of most concern for management has been the point of sale ("POS") computers 
used in the operation of the stores. Internal tests conducted by Homeland
generally reflect that its POS software is already Year 2000 compliant,
however, the Company was unable to obtain reasonable assurance and support
from the software provider to corroborate the conclusions of its POS testing
of the current software. As a result, the Company has elected to upgrade its
POS software to the Year 2000 version which the vendor states is compliant.
The incremental cost is approximately $0.4 million and will be installed 
during the second quarter of 1999. Additionally, the Company will further
test the software upon full installation. The Company is also replacing older
power management systems which operate various systems in the stores. The 
new systems are currently being installed and it is anticipated that the
conversion will be completed by the end of the third quarter of 1999. the
estimated capital investment is $1.3 million.
    

          The cost of the program is not expected to exceed $2.0 million, the
majority of which is described above for power management systems and upgrades
to POS software. Approximately $0.2 million has been incurred as of January 2,
1999. Homeland is funding these costs under its working capital facility.

          Based on its assessment, its progress to date, and its expectation
of continued testing of systems, the Company believes that its efforts will
result in Year 2000 compliance by the end of the third quarter of 1999. If
circumstances arise indicating the Company's and / or vendor's efforts will 
not be succesful in achieving Year 2000 compliance, the Company believes it 
can develop and implement effective contingency plans in a timely manner.

          Due to the general uncertainty inherent in the Year 2000 process,
primarily due to issues surrounding the Year 2000 readiness of third-party
suppliers and vendors, a reasonable worst case scenario is difficult to 
determine at this time. The Company does not anticipate more than temporary
isolated disruptions attributed to Year 2000 issues to affect either the 
Company or its primary vendors. The measurement of Year 2000 compliance
is necessarily fluid and management will continue to monitor the extent
of such compliance and its effects associated with any non-compliance.

Inflation/Deflation

          Although the Company does not expect inflation or deflation to have 
a material impact in the future, there can be no assurance that the Company's 
business will not be affected by inflation or deflation in future periods.


                                    24


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The Company's consolidated financial statements and notes thereto 
are included in this report following the signature pages.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

          None.


                                    25


                                PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Set forth below are the names, ages, present positions and years of 
service (in the case of members of management) of the directors and 
management of Homeland:

                                                             Years with the
                                                             Company and/or
                               Age   Position                   Safeway

John A. Shields*               55    Chairman of the                 --
                                     Board, Director
                           
David B. Clark*                46    President, Chief Executive       1
                                     Officer and Director

Wayne S. Peterson*             41    Senior Vice President           --
                                     Finance, Chief Financial
                                     Officer and Secretary

John C. Rocker                 44    Vice President - Operations     --

Steven M. Mason                44    Vice President - Marketing      28

Deborah A. Brown*              38    Vice President, Corporate        3
                                      Controller, Treasurer and
                                      Assistant Secretary
 
Prentess E. Alletag, Jr.       51    Vice President - Human          30
                                     Resources


Robert E. (Gene) Burris        51    Director                        --
Edward B. Krekeler, Jr.        54    Director                        --
Laurie M. Shahon               47    Director                        --
William B. Snow                67    Director                        --
David N. Weinstein             39    Director                        --


*    Holding's Board of Directors is identical to that of Homeland.  Mr. 
     Shields serves as Holding's Chairman of the Board, Mr. Clark as 
     President and Chief Executive Officer, Mr. Peterson as Senior Vice 
     President - Finance, Chief Financial Officer and Secretary and Ms. 
     Brown as Vice President, Corporate Controller, Treasurer and               
     Assistant Secretary.

                                    26


          John A. Shields became a director of the Company in May 1993, Acting
Chairman of the Board in September 1997 and Chairman of the Board on July 9,
1998. From 1994 to 1997, Mr. Shields was the Chairman and Chief Executive 
Officer of Delray Farms Fresh Markets. From 1983 to 1993, he was President
and Chief Executive Officer of First National Super Markets, Inc., a retail
grocery store chain. He is currently Chairman of the Board of Wild Oats 
Markets, Inc., a publicly reporting health food supermarket and Director of 
D.I.Y. Home Warehouse, Inc. and Shore Bank Corp., a publicly reporting bank.

          David B. Clark became President, Chief Executive Officer and a 
director of the Company in February 1998. From 1996 to February 1998, Mr. 
Clark was Executive Vice President, Merchandising and Distribution, for 
Bruno's, Inc., a $2.8 billion sales company with over 200 stores, having 
joined in 1995 as Senior Vice President, Operations and Distribution. Bruno's 
Inc. filed Chapter 11 bankruptcy on February 2, 1998. From 1992 through 1995, 
Mr. Clark was Vice President, Operations and subsequently Executive Vice 
President, Merchandising and Operations for the Cub Foods Division of Super 
Valu, Inc., responsible for stores producing sales volume of $1.7 billion.
Mr. Clark is a director of Associated Wholesale Grocers, Inc.

          Wayne S. Peterson joined the Company in October 1998 as Senior Vice
President - Finance, Chief Financial Officer, and Secretary. From October 1990
to October 1998, Mr. Peterson served as Director and Senior Vice President, 
Chief Financial Officer and Secretary of Buttrey Food and Drug Stores Company.

          John C. Rocker joined the Company in September 1998 as Vice President-
Operations. From October 1980 to September 1998, Mr. Rocker was with the 
Kroger Company, most recently as Director of Human Resources, Labor Relations
and Safety.

          Steven M. Mason joined Safeway in 1970 and the Oklahoma Division in 
1986. At the time of the acquisition of the Oklahoma division of Safeway by 
Homeland, he was serving as Special Projects Coordinator for the Oklahoma 
Division. In November 1987, he joined Homeland and in October 1988, he was 
appointed to the position of Vice President - Retail Operations. In October
1993, Mr. Mason was appointed to the position of Vice President - Marketing.

          Deborah A. Brown joined the Company in November 1995 and became
Vice President, Corporate Controller, Treasurer and Assistant Secretary as
of June 1998. From October 1985 to January 1995, Ms. Brown served as 
Consolidation Manager of Scrivner, Inc., the nations third larges grocery
wholesaler, prior to its acquisition by Fleming Co., Inc.

          Prentess E. Alletag, Jr. joined the Oklahoma Division in October 
1969, where, at the time of the acquisition of the Oklahoma division of 
Safeway by Homeland, he was serving as Human Resources and Public Affairs 
Manager. In November 1987, Mr. Alletag joined Homeland as Vice President - 
Human Resources.


                                    27


          Robert E. (Gene) Burris became a director of the Company on August 
2, 1996.  Since 1988, Mr. Burris has been President of the UFCW Local No. 
1000, which represents approximately 65% of the Company's unionized employees.  
Pursuant to the Modified Union Agreements, the UFCW has the right to 
designate one member of the Boards of Directors of Holding and Homeland.  Mr. 
Burris is the designee of the UFCW. Since February 1995, Mr. Burris has been 
the Chief Executive Officer and owner of G&E Railroad, a retail store.

          Edward B. Krekeler, Jr. became a director of the Company on August 
2, 1996. Mr. Krekeler has been a senior product manager of First National 
Bank of North Dakota since September 1997. From 1994 to August 1997, he was 
the President of Krekeler Enterprises, Ltd., a corporate financial consulting
firm. From 1984 to 1994, he served in various positions as an officer of 
Washington Square Capital, Inc., including Vice-President, Special 
Investments, Vice-President, Administration, Private Placements, Vice-
President, Portfolio Manager, Private Placements, and Chief Investment Analyst. 
From 1970 to 1984, Mr. Krekeler was Director, Fixed Income Investments, of 
The Ohio National Life Insurance Company, Inc. He was Chairman of the Board 
of Directors of Convenient Food Marts, Inc. from 1990 to 1994.

   
          Laurie M. Shahon became a director of the Company on August 2, 1996. 
Ms. Shahon has been President of Wilton Capital Group, a private direct 
investment firm since January 1994. Ms. Shahon previously served as Vice 
Chairman and Chief Operating Officer of Color Tile, Inc. in 1989. From 1988 
to 1993, she served as Managing Director of 21 International Holdings, Inc.,
a private holding company. From 1980 to 1988, she was Vice President of 
Salomon Brothers Inc, where she was founder and head of the retailing and 
consumer products group. Ms. Shahon is a director of One Price Clothing 
Stores, Inc. and Ames Department Stores, Inc.
    

          William B. Snow became a director of the Company on August 2, 1996. 
Mr. Snow previously served as Vice Chairman of Movie Gallery, Inc., the 
second largest video specialty retailer in the United States from 1994 to 
1997. From 1985 to 1994, he was Executive Vice President and a director of 
Consolidated Stores Corporation.  From 1980 to 1985, Mr. Snow was Chairman,
President and Chief Executive Officer of Amerimark, Inc., a diversified 
supermarket retailer and institutional food service distributor. From 1974 
to 1980, he was President of Continental Foodservice, Inc. From 1966 to 1974, 
Mr. Snow was Senior Vice President of Hartmarx, Inc. Mr. Snow is a director 
of Movie Gallery, Inc. and Action Industries, Inc.

   
          David N. Weinstein became a director of the Company on August 2, 
1996. He is a Managing Director of the High Yield Capital Markets group at 
BancBoston Securities, Inc. From 1993 to March 1996, he served as a Managing 
Director in the High Yield Capital Markets Group at Chase Securities, Inc.  
Mr. Weinstein is also a director of Ithaca Industries, Inc.
    


                                    28


Section 16(a) Beneficial Ownership Reporting Compliance

          Section 16 (a) of the 1934 Act requires directors, executive 
officers and persons who are the beneficial owners of more than 10% of any 
equity security of the Company to file reports with the Securities and Exchange
Commission.

          The following directors and executive officers failed to file 
timely reports under Section 16(a) with respect to the year ended January 2,
1999:

          On May 27, 1998, John A. Shields purchased 1,000 shares of Common
Stock at a purchase price of $7.375 and 500 shares of Common Stock at a
purchase price of $7.00, and filed his Form 4 on July 10, 1998. David B. Clark
was awarded stock options amounting to 100,000 on February 17, 1998, and filed
his Form 3 on April 2, 1998. John C. Rocker was awarded stock options amounting
to 25,000 on September 14, 1998, and reported such acquisition on September 
25, 1998, one day after the Form 3 was required to be filed. Prentess E.
Alletag, Jr. was awarded stock options amounting to 9,000 on May 13, 1998,
and filed his Form 4 on March 29, 1999. Steven N. Mason was awarded stock
options amounting to 13,000 on May 13, 1998 and filed his Form 4 on March 29,
1999.


                                    29



ITEM 11.  EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

          The following table provides certain summary information concerning 
compensation paid or accrued by the Company to, or on behalf of, the Company's 
Chief Executive Officer and each of the three other most highly compensated
executive officers of the Company (hereinafter referred to as the "Named 
Executive Officers") for the fiscal years ended January 2, 1999, January 3,
1998 and December 28, 1996:


   
                           SUMMARY COMPENSATION TABLE

                                 Annual Compensation

Name and                                        Long-Term
Principal                                      Compensation     All Other
Position                Year Salary   Bonus   Option Awards   Compensation 

John A. Shields (1)(2)1998 $100,000      -         5,000        $ 34,250
Chairman              1997   28,846      -        15,000          25,000 
                      1996     -         -          -              9,710 

David B. Clark (3)
 (4)(5)               1998 $216,346  $153,374    130,000        $ 52,591
President, Chief 
Executive Officer 
and Director               

Steven M. Mason(6)    1998 $130,500  $ 57,942     13,000        $  7,106
(9)(10 Vice -         1997  135,519    24,469     12,000           2,865
President/Marketing   1996  130,500   130,500       -              2,620

Prentess E. Alletag,  1998 $ 73,558  $ 32,689      9,000        $  4,165
Jr. (7)(9)(10) Vice - 1997   72,663    13,147     12,000           4,234
President/Human       1996   66,150    36,383       -              4,086
Resources

Larry W. Kordisch(8)  1998 $ 61,539  $   -          -           $165,960
Former Exec. Vice -   1997  166,154   150,000       -              2,387 
Pres. Finance, Chief  1996  150,000   150,000     62,500           1,539
Financial Officer and
Secretary

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

(1)  Mr. Shields was Acting Chairman until July 1998 at which time he was
     appointed Chairman. In 1998, he was compensated $100,000 per annum as
     Chairman, $25,000 for special services and $9,250 for meeting fees and
     retainer. In 1999, his Board stipend will be reduced 25% in January and
     by 25% in June.

(2)  Mr. Shields was awarded stock options pursuant to the 1997 Non-Employee 
     Directors Stock Option Plan in May 1998 amounting to 5,000 shares. The
     options are exercisable ratably over two years commencing July 10, 1999,
     and will expire July 10, 2008. Additionally, Mr. Shields was awarded 
     15,000 options in July 1997. The options are exercisable ratably over
     three years commencing on the grant date and will expire July 15, 2007.


                                    30


(3)  Mr. Clark joined the Company in February 1998.

(4)  Other compensation during 1998 for Mr. Clark includes principal and 
     interest forgiveness under that certain promissory note dated February
     17, 1998 of $35,255; reimbursement of a portion of relocation expenses
     of $12,933; auto allowance of $2,600; reimbursement for private life
     incurance premium of $1,377; and company-provided life insurance
     premium of $426.  

(5)  Mr. Clark was awarded stock options pursuant to the 1996 Stock Option
     Plan in February 1998 amounting to 100,000 shares. The options are
     exercisable ratably over five years commencing February 17, 1999, and
     will expire on February 17, 2008. Additionally, Mr. Clark was awarded
     30,000 options in June 1998. The options are exercisable ratably over 
     five years commencing June 1, 1999, and will expire June 1, 2008.

(6)  Other compensation during 1998 for Mr. Mason includes personal use of a  
     Company automobile of $4,226; reimbursement for private life insurance
     premium of $2,705; and, company-provided life insurance premium of $175.

(7)  Other compensation during 1998 for Mr. Alletag includes reimbursement for
     private life insurance premium of $4,027 and company-provided life
     insurance premium of $138.  

(8)  Mr. Kordisch resigned from the Company on May 15, 1998, and continued as
     a consultant through December 31, 1998. Other compensation during 1998
     for Mr. Kordisch includes a lump sum payment of $63,333 and consulting
     fees of $98,462 pursuant to that certain agreement dated April 28, 1998,
     reimbursement for private life insurance premium of $4,027 and company-
     provided life insurance premium of $138.

   
(9)  Mr. Mason and Mr. Alletag were awarded stock options pursuant to the
     Stock Option Plan in May 1997 amounting to 12,000 shares each. The options
     are exercisable as of January 1, 1998, and will expire on May 13, 2007.
    

(10) Mr. Mason and Mr. Alletag were awarded stock options pursuant to the
     Stock Option Plan in July 1998 amounting to 13,000 and 9,000 shares
     respectively. The options are exercisable ratably over five years 
     commencing July 9, 1999, and will expire on July 9, 2008.     


                                    31


The following table sets forth certain information with respect to grants of 
options to the Named Executive Officers during 1998:

                        Option Grants in Last Fiscal Year


                                                   Potential Realized Value at
                                                     Assumed Rates of Stock
                                                        Appreciation for
                  Individual Grants                       Option Terms
_____________________________________________________    _________________

                  Number of
                 Securities    % of Total
                 Underlying Options Granted
                  Options   to Employees   Exercise  Expiration
Name              Granted   in Fiscal Year  Price     Date     5%     10%

John S. Shields      5,000       1.7%  $7.50   July 10, 2008 $ 23,584 $ 59,766

David B. Clark     100,000      34.6%  $5.50   Feb. 17, 2008 $345,892 $876,558

David B. Clark      30,000      10.4%  $3.625  June 1, 2008    68,392  173,319 

Steven M. Mason     13,000       4.50% $7.625  May 13, 2008    62,339  157,979

Prentess E. Alletag, 
 Jr.                 9,000        3.1% $7.625  May 13, 2008    43,158  109,371

Compensation of Directors

          Since July 10, 1998, Non-Employee Directors are paid annual retainers
of $20,000 and $1,000 for each meeting of the Board or any Committee meeting
attended in person, but not to exceed $1,000 if more than one meeting is held
on the same day and $500 for each meeting of the Board or any Committee meeting
attended by telephonic conference call. Prior to July 10, 1998, Directors were
paid annual retainers of $15,000 and meeting fees of $1,000 for each meeting
of the Board or any Committee attended in person and $250 for each meeting
attended by telephone. In 1998, Mr. Shields and Ms. Shahon received a payment
of $25,000 each for special services rendered with respect to strategic 
planning matters. Beginning with the July 1998 Board of Directors meeting,
Mr. Shields will be compensated for his services as Chairman in the amount of
$100,000 per annum, retroactive to October, 1997, in lieu of his Board stipend.
Mr. Shields' compensation as Chairman will be reduced 25% in January 1999
and by 25% in June 1999.

          In 1997, with the approval of the Company's stockholders, the 
Company established the Homeland Holding Corporation 1997 Non-Employee 
Directors Stock Option Plan ("Directors Plan"). The maximum number of shares 
of Common Stock which may be subject to options is 200,000. The Directors 
Plan is administered by a committee appointed by the Board of Directors.
Options granted under this Plan are "non-qualified options."  Any option


                                    32

 
granted will terminate and expire at the earlier of (a) 10 years from date of 
grant; (b) termination of optionee's directorship for cause; and (c) 45 days 
after termination of service as director for other than a result of removal 
for cause. As of July 15, 1997, each of the non-employee directors was 
granted the option to purchase up to 15,000 shares of Common Stock of Holding 
at $7 5/8 per share. The options granted become exercisable ratably over 
3 years commencing on the grant date. As of May 26, 1998, each of the non-
employee directors was granted additional options on an annual basis under
the Directors Option Plan at the rate of 5,000 shares per year, such options
to be granted as of the close of business on the business day immediately
following each annual stockholders' meeting, commencing with the 1998 annual
stockholders' meeting on July 10, 1998. The additional options granted become
exercisable ratably over two years commencing on July 10, 1999.


Employment Agreements

   
          On February 17, 1998, the Company entered into an employment 
agreement with David B. Clark, the Company's President and Chief Executive 
Officer, for an indefinite period. The agreement provides a base annual 
salary of $250,000 subject to increase from time to time at the discretion of 
the Board of Directors. Mr. Clark is also entitled to participate in the 
Company's incentive plan with a target annual bonus of 75% of his base annual 
salary. The agreement also provides for (a) relocation expenses of up to 
$45,000 as it relates to the sale and relocation of his residence, such amounts
to be grossed up for any applicable income taxes; (b) a company car; (c) a 
temporary residence in Oklahoma City up to six months; (d) reimbursement of 
travel expenses up to two round trips per month; and (e) a loan of $125,000. 
Under the agreement, Mr. Clark is entitled to participate in the Company's 
employee benefit plans and programs generally available to employees and 
senior executives, if any. At the commencement of Mr. Clark's employment, he 
was granted options to purchase 100,000 shares of Common Stock of Holding at 
an exercise price of $5.50 per share and on June 1, 1998, Mr. Clark was 
granted additional options to purchase 30,000 shares of Common Stock of Holding
at an exercise price of $8.00 which was equal to the fair market value of the
Common Stock as of such date. This option agreement terminated on December 
8, 1998, and was replaced by an Amended & Restated Stock Option Agreement 
dated December 8, 1998, granting options to purchase 30,000 shares of Common
Stock of Holding at an exercise price of $3.625 per share. If the Company 
terminates Mr. Clark's employment for any reason other than cause or disability
or his employment is terminated by Mr. Clark after February 16, 1999, following
a change of control or certain trigger events (each as defined), Mr. Clark will
be paid (a) his annual base salary, (b) a pro rata amount of incentive 
compensation for the portion of the incentive year that precedes the date of 
termination, and (c) continuation of welfare benefit arrangements for a period 
of one year after the date of termination. Mr. Clark's loan of $125,000 from the
Company shall be deemed to be cancelled with all accrued interest if he remains
in continuous employment until February 16, 2001 or upon his termination of 
employment on or after February 16, 1999, following a change in control or 
trigger event.
    


                                    33


          On July 6, 1998, the Company entered into an employment agreement 
with Wayne S. Peterson, the Company's Senior Vice President, Chief Financial
Officer and Secretary. The agreement was contingent upon the completion of 
Mr. Peterson's commitments to Buttrey Food and Drug Stores Company. The
agreement provides for a base salary of $150,000, subject to increase from
time to time at the discretion of the Board of Directors. Mr. Peterson is also
entitled to participate in the Company's incentive plan with a target annual
bonus of 50% of his base annual salary. The agreement also provides for (a)
relocation expenses of up to $45,000 related to the relocation to the 
Oklahoma City area, such amounts to be grossed up for any applicable income
taxes; (b) a company car or car allowance; (c) temporary residence and rental
car in Great Falls, Montana for up to three months upon acquisition of the
Oklahoma City residence; (d) reimbursement of travel expenses up to two round
trips per month; and (e) an executive term life insurance policy in the face
amount of $500,000. At the commencement of Mr. Peterson's employment on 
October 19, 1998, he was granted options to purchase 50,000 shares of Common
Stock of Holding at an exercise price of $3.50 which was equal to the fair
market value of the Common Stock as of such date. If the Company terminates
Mr. Peterson's employment for any reason other than cause or disability, Mr.
Peterson will be paid (i) his base salary for one year and (ii) a lump sum
payment of an amount equal to the product of (A) Mr. Peterson's target bonus
under the Company's incentive bonus plan for the year in which employment
terminates and (B) a fraction, the numerator of which is the number of days
during such year prior to and including the date of termination of employment
and the denominator of which is 365.

   
          On September 14, 1998, the Company entered into an employment
agreement with John C. Rocker, the Company's Vice President of Operations. The
agreement provides for a base salary of $125,000, subject to increase from
time to time at the discretion of the Board of Directors. Mr. Rocker is also
entitled to participate in the Company's incentive plan with a target annual
bonus of 50% of his annual salary. Any bonus payable for the 1998 fiscal year
will be prorated for the partial 1998 year. The agreement also provides for
(a) signing bonus of $25,333; (b) relocation expenses of up to $40,000 as it
relates to the direct moving expenses related to his relocation to the 
Oklahoma City area, such amounts to be grossed up for any applicable income
taxes; and (c) a company car or a car allowance. At the commensement of Mr.
Rocker's employment, he was granted options to purchase 25,000 shares of 
Common Stock of Holding at an exercise price of $4.75 per share. If the
Company terminates Mr. Rocker's employment for any reason prior to December
31, 1999, for any reason other than cause or disability, Mr. Rocker will be
paid (i) his base salary for one year and (ii) a lump sum payment of an amount
equal to the product of (A) Mr. Rocker's target bonus under the Company's 
incentive bonus plan for the year in which employment terminates and (B)
a fraction, the numerator of which is the number of days during such year
prior to and including the date of termination of employment and the denominator
of which is 365.
    


                                    34


   
          On December 8, 1998, the Company entered into a letter agreement
regarding severance arrangements with Deborah A. Brown, the Company's Vice
President - Accounting, Corporate Controller, Treasurer and Assistant Secretary.
The agreement provides that in the event her employment is terminated prior
to December 31, 1999, for any reason other than cause or disability, the 
Company will contine to pay her base salary for a period of one year plus a
pro rata target amount of the incentive compensation for the portion of the
incentive year that precedes the date of termination. The pro rata incentive
compensation is payable only in the event that the results of the Company are
such that the criteria for paying bonus has been achieved pursuant to the 
Management Incentive Plan. Ms. Brown was also granted options on June 22, 1998,
to purchase 13,000 shares of Common Stock of Holding at an exercise price of
$6.125 per share which was equal to the fair value of the Common Stock as of
such date.
    

   
          On December 8, 1998, the Company entered into a letter agreement
regarding severance arrangements with Prentess E. Alletag, Jr., the Company's
Vice President of Human Resources. The agreement provides that in the event
his employment is terminated prior to December 31, 1999, for any reason other
than cause or disability. the Company will continue to pay his base salary 
for a period of one year plus a pro rata target amount of the incentive 
compensation for the portion of the incentive that precedes the date of
termination. The pro rata incentive compensation is payable only in the event
that the results of the Company are such that the criteria for paying bonus
has been achieved pursuant to the Management Incentive Plan. Mr. Alletag was
also granted options on May 13, 1998, to purchase 9,000 shares of Common
Stock of Holding at an exercise price of $7.625 per share which was equal
to the fair market value of the Common Stock as of such date.
    

   
          On December 8, 1998, the Company entered into a letter agreement
regarding severance arrangements with Steven N. Mason, the Company's Vice
President of Marketing. The agreement provides that in the event his employment
is terminated prior to December 31, 1999, for any reason other than cause or
disability, the Company will continue to pay his base salary for a period of
one year plus a pro rata target amount of the incentive compensation for the
portion of the incentive year that precedes the date of termination. The pro
rata incentive compensation is payable only in the event that the results of 
the Company are such that the criteria for paying bonus has been achieved 
pursuant to the Management Incentive Plan. Mr. Mason was also granted options
on May 13, 1998, to purchase 13,000 shares of Common Stock of Holding at an
exercise price of $7.625 per share which was equal to the fair market value
of the Common Stock as of such date.
    

          On April 28, 1998, the Company entered into a letter agreement with
Larry W. Kordisch, the Company's former Executive Vice President - Finance, 
Chief Financial Officer and Secretary, in connection with his termination of
employment with the Company. Pursuant to the terms of the letter agreement,
the Company agreed to provide Mr. Kordisch with the following: (a) reimbursement
of health insurance benefits under his current plan through December 31, 1998;
(b) a lump sum payment of $63,333; and (c) his company car.


                                    35


Management Incentive Plan

   
          Homeland maintains a Management Incentive Plan to provide incentive 
bonuses for members of its management and key employees. During 1998, bonuses
were determined according to a formula based on both corporate, store and 
individual performance and accomplishments or other achievements and are paid 
only if minimum performance and/or accomplishment targets are reached.  At 
minimum performance level, the bonus payout ranges from 25% to 50% of 
salaries for officers (as set forth in the plan), including the Chief 
Executive Officer. Maximum bonus payouts range from 100% to 200% of salary 
for officers and up to 150% of salary for the Chief Executive Officer.  
Performance levels must significantly exceed target levels before the maximum 
bonuses will be paid. Under limited circumstances, individual bonus amounts 
can exceed these levels if approved by the Compensation Committee of the 
Board. Incentive bonuses paid to managers and supervisors vary according to 
their reporting and responsibility levels. The plan is administered by a 
committee consisting, unless otherwise determined by the Board of Directors, 
of members of the Board who are ineligible to participate in the plan. 
Incentive bonuses earned for Named Executive Officers under the plan for 
performance during fiscal year 1998 are included in the Summary Compensation 
Table.
    

Retirement Plan

          Homeland maintains a retirement plan in which all non-union 
employees, including members of management, participate.  Under the plan, 
employees who retire at or after age 65 and after completing five years of 
vesting service (defined as calendar years in which employees complete at 
least 1,000 hours of service) will be entitled to retirement benefits equal 
to 1.50% of career average annual compensation (including basic, overtime and 
incentive compensation) plus .50% of career average annual compensation in 
excess of the social security covered compensation, such sum multiplied by 
years of benefit service (not to exceed 35 years).  Retirement benefits will 
also be payable upon early retirement beginning at age 55, at rates 
actuarially reduced from those payable at normal retirement. Benefits are paid 
in annuity form over the life of the employee or the joint lives of the 
employee and his or her spouse or other beneficiary.

   
          Under the retirement plan, estimated annual benefits payable to the 
Named Executive Officers of the Company upon retirement at age 65, assuming no 
changes in covered compensation or the social security wage base, would be 
as follows:  David B. Clark, $53,002; Steven M. Mason, $88,392; and Prentess
E. Alletag, Jr., $38,793.
    

Management Stock Option Plan

   
          In December 1996, pursuant to the Plan of Reorganization, the Board 
of Directors adopted the Homeland Holding Corporation 1996 Stock Option Plan 
(the "Stock Option Plan"). The Stock Option Plan, which is 
    


                                    36


administered by the Compensation Committee, provides for the granting of options
to purchase up to an aggregate of up to 432,222 shares of Common Stock. Options
granted under the Stock Option Plan are "non-qualified options." The option 
price of each option must not be less than the fair market value as determined 
by the Board or the Committee. Unless the Board or the Committee otherwise 
determines, options shall become exercisable ratably over a five-year period or 
immediately in the event of a "change of control" as defined in the Stock Option
Plan. Each option must be evidenced by a written agreement and must expire and 
terminate on the earliest of (a) ten years from the date the option is granted 
(b) termination for cause and (c) three months after termination for other than
cause.

Compensation Committee Report

          The Compensation Committee is composed entirely of non-employee  
directors. The Compensation Committee reviews and approves all compensation  
arrangements for executive officers and in that regard, has developed 
compensation policies for the executive which seek to enhance the profitability
of the Company and to assure the ability of the Company to attact and retain
executive employees with competitive compensation. Actions by the Compensation
Committee are reported to the Board of Directors and, in appropriate cases,
ratified by the Board of Directors prior to implementation.

          The compensation program of the Company seeks specifically to motivate
the executives of the Company to achieve objectives which benefit the Company
within their respective areas of responsibility, with particular emphasis on
continued growth in revenues, expense control, operating efficiency, and the
ultimate realization of profits for the Company.

          Base salary levels for the Company's executive officers, including
the Chief Executive Officer, are set so that the overall cash compensation 
package for executive officers, including bonus opportunity, compares reasonably
to companies with which the Company competes for executive talent. In 
determining salaries, the Compensation Committee also takes into account a
number of factors, which primarily include experience and performance, the
officer's level of responsibility, the cost of living and historical salary
levels. The measures of individual performance considered include, to the extent
applicable to an individual executive officer, a number of quantitative and
qualitative factors such as the Company's financial performance, the 
individual's achievement of particular nonfinancial goals within his or her
responsibility and other contributions made by the officer to the Company's
success.

          In addition to base salary, certain executives, including the Chief
Executive Officer, may earn an incentive of up to 150% of such executive's 
base pay. The compensation policies of the Company are general and subjective
both as to salary and as to the other components of the compensation program.
The Company's compensation program also includes benefits typically offerred
to executives of similar businesses to promote management stability, consisting
of a retirement plan, stock option plan and employment agreements.


                                    37


Performance Graph

          Shown below is a line graph comparing cumulative total shareholder
return for the Company, the S&P Retail Stores (Food), and the S&P 500
since April 14, 1997.

Comparison of the Cumulative Total Return* -- Homeland Holding Corporation,
S&P 500 Retail Food Stores, and S&P 500


                   Homeland -- S&P 500 Retail -- S&P 500


                          [GRAPHS APPEARS HERE]


                Date       Homeland       S&P 500 Retail       S&P 500

                04/97       $100.00         $100.00             $100.00
                01/98         78.79          133.18              130.48
                01/99         41.67          190.32              165.28


           *Total return assumes reinvestment of dividends on quarterly basis.


Note:  Companies comprising the S&P Retail Stores (Food) Index include: 
Albertson's Inc.; American Stores Co.; Great Atlantic & Pacific Tea Co.;
Kroger Co.; Fred Meyer Inc.; Safeway Inc.; and Winn-Dixie Stores Inc.

Compensation Committee Interlocks and Insider Participation

          None of the persons serving on the Compensation Committee during
fiscal year 1998 was an officer or an employee of the Company or Stores or
was formerly an officer or an employee of the Company or Stores. There are
no interlocks with respect to the Compensation Committee.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

   
          Under the Company's Plan of Reorganization, each holder of a general 
unsecured claim against the Company, including $40.1 million of general 
unsecured claims in respect of the Old Notes, will receive its ratable share 
of 4,450,000 shares of Common Stock, based on the amount of such holder's 
claim relative to all general unsecured claims. As of March 24, 1998, the 
final amount of the general unsecured claims has not been determined.
    


                                    38


          Under the Plan of Reorganization, the Company has reserved for the 
account of each creditor holding a disputed general unsecured claim the 
Common Stock that would otherwise be distributable to such creditor on the 
Effective Date if such disputed claim were allowed by the Bankruptcy Court.  
If a disputed claim is disallowed in whole or in part, the Company will 
distribute the Common Stock held in reserve ratably to holders of general 
unsecured claims allowed by the Bankruptcy Court. Such distribution will be 
made on June 30 and December 31 of each following year until the earlier of 
(a) the date on which all disputed claims have been resolved or (b) less than 
5,000 shares of Common Stock are on deposit in the disputed claims reserve.  
If any time after the Effective Date, the number of shares of Common Stock in 
the disputed claims reserve is less than 5,000, the remaining shares of 
Common Stock held in such reserve will, at the Company's option, be cancelled 
or treated as treasury shares.

          The Company estimates that total general unsecured claims will be 
approximately $63.1 million, consisting of approximately $40.1 million in 
general unsecured claims in respect of the Old Notes and approximately $23.0 
million of other general unsecured claims. Based on such estimate (a) holders 
of the Old Notes received (in the aggregate) approximately 2,827,922 
shares of Common Stock representing approximately 60.2% of the Common Stock 
outstanding upon consummation of the Restructuring and (b) holders of the other
general unsecured claims received (in the aggregate) approximately 1,622,029
shares of Common Stock representing approximately 34.5% of the Common Stock 
outstanding upon consummation of the Restructuring.

          In addition, under the Plan of Reorganization, all of the Company's 
issued and outstanding Class A Common Stock, par value $.01 per share (the 
"Old Common Stock"), was exchanged for (a) an aggregate of 250,000 shares 
of Common Stock, representing approximately 5.3% of the Common Stock 
outstanding, and (b) warrants to purchase (in the aggregate) up to 263,158 
shares of Common Stock (the "New Warrants") at an exercise price of $11.85 
per share. Each holder of the Old Common Stock received 7.73 shares of 
Common Stock and 8.14 New Warrants for each 1,000 shares of Old Common Stock 
held by such holder.


                                    39



          Set forth below is certain information as of March 24, 1999, 
regarding the beneficial ownership of Holding's Common Stock by: (a) any 
person or group known to have beneficial ownership of more than 5% of the 
Common Stock of Holding; (b) each of the Named Executive Officers; (c) each 
director; (d) other officers of the Company and (e) all directors, Named 
Executive Officers and officers as a group:


                                            Shares
                                          Beneficially       Percent of
Name of Beneficial Owner                    Owned**           Class 
Soros Fund Management, LLC (1)             666,700             12.61%
888 Seventh Avenue, 33rd Floor
New York, NY  10106

Jeffrey D. Tannebaum (2)                   562,195             10.63%
Fir Tree Partners
1211 Avenue of the Americas
New York, NY  10036

John A. Shields (3)(4)                      63,961              1.21%
David B. Clark (5)(6)                       22,700               *
Steve M. Mason (7)(8)                       15,265               *
Prentess E. Alletag, Jr. (9)(10)            15,193               *
Robert E. (Gene) Burris (3)                 10,000               *
Edward B. Krekeler, Jr. (3)(13)             10,270               *
Laurie M. Shahon (3)(11)                    15,000               *
William B. Snow (3)                         10,000               *
David N. Weinstein (3)(12)                  11,000               *

Officers and directors as a group 
 (12 persons)                              201,389              3.81%
______________________
*  Less than 1%

** Shares benefically owned reflect common stock owned and vested options 
including options that will vest within sixy days of the date hereof.

(1)       Based on the Schedule 13G filed by Soros Fund Management LLC, 
          these shares are held for the accounts of Quantum Partners (as 
          defined below) and Quasar Partners (as defined below).  Soros Fund 
          Management LLC, a Delaware limited liability company, serves as
          principal investment manager to Quantum Partners LDC, a Cayman 
          Island exempted duration company ("Quantum Partners"), and Quasar 
          International Partners, C.V., a Netherlands Antilles limited 
          partnership ("Quasar Partners"), and as such, has been granted 
          investment discretion over the shares of Holding.

(2)       Based on the Schedule 13F filed by Mr. Jeffrey Tannebaum and Fir 
          Tree Partners, these shares are for the accounts of Fir Tree Value 
          Fund, L.P., Fir Tree Institutional Value Fund, L.P. and Fir Tree 
          Value Partners LDC.  Mr. Tannebaum is the sole shareholder, officer, 
          director and principal of Fir Tree Partners and he serves as 
          general partner of the Fir Tree Value Fund L.P. and the Fir Tree 
          Institutional Value Fund L.P. and as an investment advisor to the 
          Fir Tree Value Partners LDC.


                                    40 



(3)       Stock options for 15,000 shares, of which 10,000 shares are 
          exercisable, were granted to each director under the Directors Plan in
          1997. The options are exercisable ratably over three years commencing
          July 15, 1997, and will expire on July 14, 2007. In July 1998, 
          additional stock options of 5,000 shares were granted to each 
          director under the Directors Plan. The options are exercisable 
          ratably over two years commencing July 10, 1999, and will expire on
          July 10, 2008.

(4)       Mr. Shields is the beneficial owner of 53,961 shares of Common Stock.

   
(5)       Mr. Clark was awarded options to purchase 100,000 shares, of which 
          20,000 shares are exercisable under the Stock Option Plan as provided
          for under his employment agreement with the Company. The options 
          become exercisable ratably over five years commencing February 17, 
          1999, and will expire on February 17, 2008. Mr. Clark was granted 
          additional stock options of 30,000 shares on June 1, 1998. This 
          option agreement terminated on December 8, 1998, and was replaced by 
          the Amended & Restated Stock Option Agreement dated December 8, 1998, 
          granting Mr. Clark options to purchase 30,000 shares of Common Stock 
          of Holding at an exercise price of $3.625 per share. The options 
          become exercisable ratably over five years commencing June 1, 1999, 
          and will expire on June 1, 2008.
    

(6)       Mr. Clark is the beneficial owner of 2,700 shares of Common Stock.

(7)       Mr. Mason was awarded options in May 1997 to purchase 12,000 shares
          shares under the Stock Option Plan. The options are exercisable as of
          January 1, 1998, and will expire on May 13, 2007. Mr. Mason was 
          awarded options in July 1998 to purchase 13,000 shares under the
          Stock Option Plan. The options are exercisable as of May 13, 1999,
          and will expire on July 9, 2008.

(8)       Mr. Mason is the beneficial owner of 324 shares of Common Stock and 
          341 New Warrants.

(9)       Mr. Alletag was awarded options in May 1997 to purchase 12,000 shares
          under the Stock Option Plan. The options are exercisable as of 
          January 1, 1998, and will expire on May 13, 2007. Mr. Alletag was
          awarded options in July 1998 to purchase 9,000 shares under the Stock
          Option Plan. The options are exercisable as of May 13, 1999, and
          will expire on July 9, 2008.

(10)      Mr. Alletag is the beneficial owner of 986 shares of Common Stock 
          and 407 New Warrants.

(11)      Ms. Shahon is the beneficial owner of 5,000 shares of Common Stock.

(12)      Mr. Weinstein is the beneficial owner of 1,000 shares of Common Stock.

(13)      Mr. Krekeler is the beneficial owner of 270 shares of Common Stock.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          Mr. Gene Burris, a director of the Company, is President of UFCW 
Local No. 1000, which represents approximately 91% of the Company's unionized 
employees. Pursuant to the Modified Union Agreements, the UFCW has the right 
to designate one member of the Board of Directors of Holding and Homeland.
Mr. Burris is the designee of the UFCW.


                                     41 



                                  PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

    The following documents are filed as part of this Report:

          (a)   Financial Statements and Exhibits.

                1.  Financial Statements.  The Company's financial statements 
                    are included in this report following the signature pages.  
                    See Index to Financial Statements and Financial Statement
                    Schedules on page F-1.

                2.  Exhibits.  See attached Exhibit Index on page E-1.

          (b)   Reports on Form 8-K.  No reports on Form 8-K were filed 
                during the last quarter of the period
                covered by this report.




SIGNATURES


          Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, the registrant has duly caused this report 
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                       HOMELAND HOLDING CORPORATION
                                                                 
                                                                 
Date:   April 2, 1999                  By:   /s/  David B. Clark
                                            David B. Clark, President & C.E.O.


          Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.


   
        Signature                      Title                         Date

    /s/  John A. Shields       Chairman of the Board            April 2, 1999
John A. Shields


   /s/   David B. Clark        President, Chief Executive       April 2, 1999
David B. Clark                 Officer and Director
                               (Principal Executive Officer)


   /s/   Wayne S. Peterson     Senior Vice President/           April 2, 1999
Wayne S. Peterson              Finance, C.F.O. and Secretary                    
                               (Principal Financial Officer)


   /s/   Deborah A. Brown      Vice President, Controller,      April 2, 1999
Deborah A. Brown               Treasurer and Asst. Secretary 
                               (Principal Accounting Officer) 
    

                                    II-1



        Signature                      Title                         Date


   /s/   Robert E. (Gene) Burris    Director                    April 2, 1999
Robert E. (Gene) Burris


   /s/   Edward B. Krekeler, Jr.    Director                    April 2, 1999
Edward B. Krekeler, Jr.


   /s/    Laurie M. Shahon          Director                    April 2, 1999
Laurie M. Shahon


   /s/   William B. Snow            Director                    April 2, 1999
William B. Snow


   /s/   David N. Weinstein         Director                    April 2, 1999
David N. Weinstein



                                    II-2


                                  
                       INDEX TO FINANCIAL STATEMENTS
                                   
                       HOMELAND HOLDING CORPORATION
                     Consolidated Financial Statements
                                   
                                   
                                   
                                   
Report of Independent Accountants                                      F-2

Consolidated Balance Sheets as of January 2, 1999,
 and January 3, 1998                                                   F-3

Consolidated Statements of Operations
 for the 52 weeks ended January 2, 1999, and
 53 weeks ended January 3, 1998, and the 
 20 weeks ended December 28, 1996
 (Successor Company), and the 32 weeks ended
 August 10, 1996, 1996 (Predecessor Company)                           F-5

Consolidated Statements of Stockholders' Equity
 for the 52 weeks ended January 2, 1999, and 53 weeks
 ended January 3, 1998, and the 20 weeks ended
 December 28, 1996 (Predecessor Company), and the
 32 weeks ended August 10, 1996 (Predecessor Company)                  F-6

Consolidated Statements of Cash Flows for the 52 weeks
 ended January 2, 1999, and 53 weeks ended January 3,
 1998, and the 20 weeks ended December 28, 1996
 (Successor Company), and the 32 weeks ended 
 August 10, 1996 (Predecessor Company)                                 F-7

Notes to Consolidated Financial Statements                             F-9



                                   F-1

                                   
                                   
                      REPORT OF INDEPENDENT ACCOUNTANTS
                                   
                                   
                                   
To the Board of Directors and Stockholders of
Homeland Holding Corporation


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Homeland
Holding Corporation and its subsidiaries, (the "Company") at January 2, 1999
and January 3, 1998, and the results of their operations and their cash flows
for the 52 weeks ended January 2, 1999, the 53 weeks ended January 3, 1998, 
the 20 weeks ended December 28, 1996, and the 32 weeks ended August 10, 1996,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our 
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit 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, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.


PRICEWATERHOUSECOOPERS LLP
Oklahoma City, Oklahoma
March 3, 1999


                                   F-2



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES               
                    
                        CONSOLIDATED BALANCE SHEETS                   

             (In thousands, except share and per share amounts)


                                   ASSETS
                                         
                                                   January 2,      January 3,
                                                      1999            1998
Current assets:
 Cash and cash equivalents                        $   7,856       $   4,778
 Receivables, net of allowance for uncollectible 
  accounts of $972 and $1,198                         9,961           9,313
 Inventories                                         46,280          45,946
 Prepaid expenses and other current assets            2,527           2,581

   Total current assets                              66,624          62,618

Property, plant and equipment:
 Land and land improvements                           9,346           9,303
 Buildings                                           20,216          19,995
 Fixtures and equipment                              28,466          22,267
 Leasehold improvements                              17,488          13,459
 Software                                             5,396           4,991
 Leased assets under capital leases                   9,053           8,610
 Construction in progress                             3,278           2,769

                                                     93,243          81,394

Less, accumulated depreciation
 and amortization                                    20,832          11,299

Net property, plant and equipment                    72,411          70,095

Reorganization value in excess of amounts
 allocable to identifiable assets, less
 accumulated amortization of $34,018 and
 $20,346 at January 2, 1999, and January 3,
 1998, respectively                                   7,791          23,162

Other assets and deferred charges                    12,378          10,166

    Total assets                                  $ 159,204       $ 166,041




                 The accompanying notes are an integral part
                 of these consolidated financial statements.


                                    F-3



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS, Continued

             (In thousands, except share and per share amounts)

                    LIABILITIES AND STOCKHOLDERS' EQUITY



                                                   January 2,     January 3,
                                                      1999            1998
Current liabilities:
 Accounts payable - trade                         $  20,267       $  18,941
 Salaries and wages                                   2,827           2,508
 Taxes                                                3,093           3,605
 Accrued interest payable                             2,622           2,619
 Other current liabilities                            8,548          10,042
 Current portion of long-term debt                    1,728           1,728
 Current portion of obligations under capital
  leases                                              1,235           1,286

   Total current liabilities                         40,320          40,729

Long-term obligations:
 Long-term debt                                      83,852          78,353
 Obligations under capital leases                     1,700           2,608
 Other noncurrent liabilities                         1,464           2,027

   Total long-term obligations                       87,016          82,988

Commitments and contingencies                          -               -

Stockholders' equity:
 Common stock $0.01 par value, authorized 
  - 7,500,000 shares, issued 4,904,417 shares 
  and 4,820,637 shares at January 2, 1999, and 
  January 3, 1998, respectively                          49              48
 Additional paid-in capital                          56,174          56,040
 Accumulated deficit                                (24,355)        (13,764)
Total stockholders' equity                           31,868          42,324

Total liabilities and stockholders' equity        $ 159,204       $ 166,041




                 The accompanying notes are an integral part
                 of these consolidated financial statements.


                                   F-4



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS                       

             (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
   

                                                          Successor Company                Predecessor
                                                                                             Company        

                                              52 weeks         53 weeks       20 weeks       32 weeks     
                                               ended             ended          ended         ended         
                                             January 2,       January 3,     December 28,   August 10,   
                                                1999             1998           1996           1996         

<S>                                          <C>              <C>            <C>            <C>           
Sales, net                                   $ 529,576        $ 527,993      $ 204,026      $ 323,747     

Cost of sales                                  402,261          401,691        154,099        244,423 

 Gross profit                                  127,315          126,302         49,927         79,324 

Selling and administrative expenses            114,335          112,590         43,995         73,183  
Amortization of excess reorganization value     13,672           14,527          5,819           -         

 Operating profit (loss)                          (692)            (815)           113          6,141 

Gain(loss) on disposal of assets                    34             (117)           (90)           114         
Interest income                                    426              385             56             69      
Interest expense                                (8,484)          (8,408)        (3,199)        (5,639)  

Income (loss) before reorganization items,
 income taxes and extraordinary items           (8,716)          (8,955)        (3,120)           685 

Reorganization items:
 Allowed claims in excess of liabilities          -                -              -             7,200    
 Professional fees                                -                -              -             4,250        
 Employee buyout expense                          -                -              -             6,386   
 Adjustments of accounts to estimated 
  fair value                                      -                -              -             8,160      
                                                  -                -              -            25,996   

Income tax provision                            (1,875)          (1,689)          -              -        
 Loss before extraordinary items               (10,591)         (10,644)        (3,120)       (25,311)  

Extraordinary item - debt discharge              -                -              -            63,118      

Net income (loss)                            $ (10,591)       $ (10,644)     $  (3,120)     $  37,807  

Basic and diluted earnings per share:
 Loss before extraordinary items per
  common share                               $   (2.18)       $   (2.23)     $   (0.66)     $   (0.78)  
 Extraordinary items per common share               -                -              -            1.94     
 Net income (loss) per common share          $   (2.18)       $   (2.23)     $   (0.66)     $    1.16   
Weighted average shares outstanding           4,857,130        4,782,938      4,758,025     32,599,707  

</TABLE>
    



                 The accompanying notes are an integral part
                  of these consolidated financial statements

                                     F-5



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

             (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>



                                                        Common Stock                  Additional
                                           Successor    Predecessor                    Paid-In       Accumulated
                                            Shares         Shares         Amount       Capital         Deficit

<S>                                        <C>          <C>             <C>           <C>            <C>
Balance, December 30, 1995                      -       33,748,482      $    337      $  55,886      $ (80,188)

Net income                                      -             -                -           -            37,807

Eliminate predecessor equity                    -      (33,748,482)         (337)       (55,886)        (2,637)

Issuance of successor's common stock       4,758,025          -               48         56,013           -

Adjustment to eliminate
 minimum pension liability                      -             -                -           -              -

Record excess of
 reorganization value                           -             -                -           -            45,018

Balance, August 10, 1996                   4,758,025          -               48         56,013           -

Net loss                                        -             -                -           -            (3,120)

Balance, December 28, 1996                 4,758,025          -               48         56,013         (3,120)

Net loss                                        -             -                -           -           (10,644)

Issuance of common stock                      62,612          -                -             27           -

Balance, January 3, 1998                   4,820,637          -         $     48      $  56,040      $ (13,764)

Net loss                                        -             -                -           -           (10,591)                     

Issuance of common stock                      83,780          -                1            134           -         

Balance, January 2, 1999                   4,904,417          -         $     49      $  56,174      $ (24,355)             

</TABLE>

Continued


<TABLE>
<CAPTION>


                 HOMELAND HOLDING CORPORATION AND SUBSIDIARY

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

             (In thousands, except share and per share amounts)


                                           Minimum
                                           Pension                                      Total
                                           Liability          Treasury Stock          Stockholders'
                                          Adjustment       Shares        Amount      Equity(Deficit)

<S>                                       <C>            <C>          <C>            <C>
Balance, December 30, 1995                $   (1,327)    2,869,493    $   (2,814)    $      (28,106)

Net income                                      -             -             -                37,807

Eliminate predecessor equity                    -       (2,869,493)        2,814            (56,046)

Issuance of successor's common stock            -             -             -                56,061

Adjustment to eliminate 
 minimum pension liability                     1,327          -             -                 1,327

Record excess of
 reorganization value                           -             -             -                45,018

Balance, August 10, 1996                        -             -             -                56,061

Net loss                                        -             -             -                (3,120)

Balance, December 28, 1996                      -             -             -                52,941

Net loss                                        -             -             -               (10,644)

Issuance of common stock                        -             -             -                    27

Balance, January 3, 1998                        -             -             -                42,324

Net loss                                        -             -             -               (10,591)          

Issuance of common stock                        -             -             -                   135   

Balance, January 2, 1999                  $     -             -       $     -        $       31,868   

</TABLE>

                     The accompanying notes are an integral part
                     of these consolidated financial statements.


                                     F-6



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS

              (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                                       Successor Company                Predecessor
                                                                                           Company

                                           52 weeks        53 weeks        20 weeks       32 weeks  
                                             ended           ended           ended          ended    
                                           January 2,      January 3,     December 28,    August 10, 
                                             1999            1998           1996           1996      
<S>                                      <C>             <C>             <C>            <C>         
Cash flows from operating activities:    
 Net income (loss)                       $  (10,591)     $  (10,644)     $  (3,120)     $  37,807   
 Adjustments to reconcile net
  income (loss) to net cash
  provided by operating activities:
  Depreciation and amortization               9,802           8,404          2,954          4,163    
  Amortization of beneficial interest
   in operating leases                          121             121             51             75   
  Amortization of excess reorganization
   value                                     13,672          14,527          5,819           -       
  Amortization of financing costs               120              64             24            359   
  Reorganization items                         -               -              -            15,360     
  Extraordinary gain on debt discharged        -               -              -           (63,118)   
  Loss (gain) on disposal of assets             (34)            117             90           (114)   
  Deferred income taxes                       1,699           1,589           -              -      
  Change in assets and liabilities:
   Increase in receivables                     (648)           (791)          (439)           (32) 
   (Increase) decrease in inventories          (334)           (937)        (6,225)         3,754  
   (Increase) decrease in prepaid ex-
     penses and other current assets             54             179            531            (83)  
   Increase in other assets
     and deferred charges                    (2,487)         (2,722)        (3,110)          (649)  
   Increase in accounts
     payable - trade                          1,326           1,525          2,460            298 
   Increase (decrease) in salaries
     and wages                                  319            (991)           846            105  
   Increase (decrease) in taxes                (512)            702         (2,198)           226  
   Increase (decrease) in accrued
     interest payable                             3             (70)         2,672          3,823   
   Increase (decrease) in other current
     liabilities                             (1,494)          1,572         (1,181)        (2,656)  
   Decrease in restructuring reserve           -               -              -            (1,396)  
   Increase (decrease) in other non-
     current liabilities                       (531)           (283)           122           (886) 

   Net cash provided by (used in)
    operating activities                     10,485          12,362           (704)        (2,964)    
                                                                            Continued
                                                                                           

</TABLE>

                     The accompanying notes are and integral part
                     of these consolidated financial statements.

                                     F-7



                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

              (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                      Successor Company                  Predecessor 
                                                                                           Company

                                           52 weeks        53 weeks        20 weeks       32 weeks  
                                             ended           ended           ended          ended    
                                           January 2,      January 3,     December 28,    August 10, 
                                              1999            1998           1996           1996       
<S>                                      <C>             <C>             <C>            <C>           
Cash flows from investing activities:
 Capital expenditures                       (12,404)        (14,021)        (5,085)        (1,860)   
 Cash received from sale of assets              775              70              5          1,738     

   Net cash used in in investing 
    activities                              (11,629)        (13,951)        (5,080)          (122)  


Cash flows from financing activities:
  Borrowings under term loan                   -               -              -            10,000    
  Payments under term loan                   (1,667)           (833)          -              -      
  Borrowings under revolving credit loans   129,567         141,463         42,349         74,250  
  Payments under revolving credit loans    (122,340)       (134,106)       (39,080)       (79,718)   
  Principal payments under notes payable        (61)            (61)          -              -     
  Principal payments under capital
   lease obligations                         (1,412)         (1,615)          (700)        (1,596)  
  Payment of obligations to noteholders        -               -              -            (1,500) 
  Proceeds from issuance of common stock        135              27           -              -     

   Net cash provided by financing 
    activities                                4,222           4,875          2,569          1,436  

Net increase (decrease) in cash and
 cash equivalents                             3,078           3,286         (3,215)        (1,650) 

Cash and cash equivalents at beginning
 of period                                    4,778           1,492          4,707          6,357   

Cash and cash equivalents at end of period $  7,856       $   4,778      $   1,492      $   4,707    

Supplemental information:
 Cash paid during the period for            
  interest                                 $  8,419       $   8,414      $     524      $   1,566  
  
 Cash paid during the period for
  income taxes                             $    100       $     100      $    -         $    -     

Supplemental schedule of
 non-cash investing activities:
  Capital lease obligations assumed        $    453       $   1,161      $    -         $    -   


</TABLE>

                     The accompanying notes are an integral part
                     of these consolidated financial statements

                                     F-8


                 HOMELAND HOLDING CORPORATION AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             (In thousands, except share and per share amounts)


1.   Organization:

     Homeland Holding Corporation ("Holding"), a Delaware corporation, was 
     incorporated on November 6, 1987, but had no operations prior to November  
     25, 1987. Effective November 25, 1987, Homeland Stores, Inc. ("Homeland"),
     a wholly-owned subsidiary of Holding, acquired substantially all of the 
     net assets of the Oklahoma Division of Safeway Inc.  Holding, its 
     consolidated subsidiary, Homeland, and Homeland's wholly-owned subsidiary, 
     SLB Marketing, Inc. are collectively referred to herein as the "Company."
     The Company is a leading supermarket chain in the Oklahoma, southern Kansas
     and Texas Panhandle retion. The Company operates in four distinct market
     places: Oklahoma City, Oklahoma; Tulsa, Oklahoma; Amarillo, Texas; and
     certain rural areas of Oklahoma, Kansas and Texas. 

     Holding has guaranteed substantially all of the debt issued by Homeland.   
     Holding is a holding company with no significant operations other than
     its investment in Homeland. Separate financial statements of Homeland
     are not presented herein since they are identical to the consolidated
     financial statements of Holding in all respects except for
     stockholders' equity which is as follows:


                                           January 2,          January 3,  
                                             1999                1998

     Homeland stockholder's equity:
      Common stock, $.01 par value,
       authorized, issued and
       outstanding 100 shares             $       1          $       1
      Additional paid-in capital             56,222             56,087
      Accumulated deficit                   (24,355)           (13,764)
       Total Homeland stockholder's
        equity                            $  31,868          $  42,324

2.   Reorganization:

     On May 13, 1996, the Company filed Chapter 11 petitions with the United 
     States Bankruptcy Court for the District of Delaware (the "Bankruptcy 
     Court"). Simultaneous with the filing of such petitions, the Company 
     filed a plan of reorganization and a disclosure statement, which set 
     forth the terms of the Company's restructuring (the "Restructuring").   
     On June 13, 1996, the Company filed a first amended plan of 
     reorganization and disclosure statement.  The Company's


                                   F-9


2.   Reorganization, continued:

     first amended plan of reorganization, as modified (the "Plan"), was 
     confirmed by the Bankruptcy Court on July 19, 1996 and became effective 
     on August 2, 1996 (the "Effective Date").

     On the Effective Date, each of Holding and Homeland adopted amended and  
     restated certificates of incorporation, the principal effects of which 
     were: (a) eliminate the old common stock (the "Old Common Stock") and old 
     class B common stock of Holding, (b) authorize 7,500,000 shares of new 
     common stock of Holding (the "New Common Stock") and (c) include a 
     provision to prohibit the issuance of non-voting securities as and to the 
     extent required by Section 1123 (a) (6) of the Bankruptcy Code for both 
     Homeland and Holding.

     As of the Effective Date, the outstanding $59,375 of Series C Senior 
     Secured Fixed Rate Notes due 1999, $26,126 of Series D Senior Secured 
     Floating Rate Notes due 1997 and $9,499 of Series A Senior Secured 
     Floating Rate Notes due 1997, (collectively, the "Old Notes"), 
     ($95,000 in aggregate face amount plus accrued interest), were cancelled 
     and such holders received (in the aggregate) $60,000 face amount of 
     newly-issued 10% Senior Subordinated Notes due 2003 (the "New  Notes"), 
     $1,500 in cash and approximately 60% of the New Common Stock. The New 
     Notes are unsecured and bear interest at 10% per annum and mature in 2003.

     As of the Effective Date, all of the outstanding Old Common Stock of 
     Holding was canceled and the holders received their ratable share of (a) 
     250,000 shares of New Common Stock and (b) warrants to purchase up to 
     263,158 shares of New Common Stock at an exercise price of $11.85. Each  
     warrant entitles the holder to purchase one share of New Common Stock at 
     any time up to August 2, 2001. Holders of general unsecured claims 
     (including certain trade creditors for unpaid prepetition trade claims 
     and the allowed unsecured noteholders' claims) are entitled to receive  
     their ratable share of 4,450,000 shares of New Common Stock.

     As of the Effective Date, the Company entered into a bank credit agreement
     with a group of lenders (the "Old Loan Agreement") consisting of a 
     revolving credit facility of up to $27,500 (subject to a borrowing base 
     requirement) and a term loan facility of $10,000. 


                                    F-10


2.   Reorganization, continued:

     On the Effective Date, the modified union agreements negotiated with the 
     Company's labor unions (the "Modified Union Agreements") became
     effective. The Modified Union Agreements, which are effective for a
     term of five years, consist of five basic elements: (a) wage rate and
     benefit contribution reductions and work rule changes, (b) an employee 
     buyout offer, (c) the establishment of an employee stock bonus plan 
     which will entitle plan participants to receive/purchase up to 522,222
     shares of New Common Stock, (d) the right to designate one member of
     the Board of Directors, and (e) the elimination of certain wage 
     reinstatement provisions, incentive plans and "maintenance of benefits."

     The Company's Restructuring was accounted for in accordance with the 
     American Institute of Certified Public Accountants Statement of Position  
     No. 90-7, "Financial Reporting by Entities in Reorganization under the 
     Bankruptcy Code" ("SOP No. 90-7"). The accounting under SOP No. 90-7 
     resulted in "fresh-start" reporting for the Company in which a new entity 
     was created for financial reporting purposes. The Company applied the 
     provisions of SOP No. 90-7 as the holders of the Old Common Stock 
     received less than 50% of the New Common Stock and the reorganized value 
     of the assets of the reorganized Company is less than the total of all
     post-petition liabilities and allowed claims.

     For financial reporting purposes, the Company accounted for the 
     consummation of the Restructuring effective August 10, 1996, which is the 
     Company's normal four week period ending date. The periods prior to the 
     Effective Date have been designated "Predecessor Company" and the periods
     subsequent to the Effective Date have been designated "Successor
     Company." As a result of the adoption of the "fresh-start" reporting, 
     the Successor Company's financial statements are not comparable to the
     Predecessor Company's financial statements.

     In accordance with SOP No. 90-7, the Company valued its assets and 
     liabilities at their estimated fair value and eliminated its accumulated 
     deficits on the Effective Date. The total reorganization value of the 
     reorganized Company was determined by analyzing market cash flow
     multiples as applied to the Company's projected annual cash flows as
     well as comparing the reorganization value to a discounted projected
     cash flow calculation. Based on analyses prepared by the Company's
     financial advisor and by the financial advisor to the ad hoc committee
     of noteholders, the total reorganization value was agreed to by the
     parties and confirmed by the Bankruptcy Court. The total reorganization
     value as of the Effective Date was estimated to be $167.4 million,
     which was $45.4 million in excess of the Company's tangible and
     identifiable assets. The excess of the reorganization value over the 
     value of the identifiable assets is reported as "Reorganization value
     in excess of amounts allocable to identifiable assets" and is being
     amortized on a straight-line basis over a three year period.


                                    F-11


2.   Reorganization, continued:

     The components of reorganization items and gain recognized on debt 
     discharged resulting from the Restructuring are as follows:

     (i) Reorganization items:

           Fresh-start reporting
            Allowed claims in excess of recorded
             liabilities                                       $    7,200
           Revaluation of property, plant and
            equipment, net                                          4,004
           Other adjustments to estimated fair value                4,156
                   Total fresh-start                               15,360
           Employee buyout expense                                  6,386
           Professional fees incurred with
            the Restructuring                                       4,250

                   Total reorganization items                  $   25,996


    (ii) Gain on debt discharged:

           Elimination of Old Notes and accrued interest       $  101,697
           Elimination of other liabilities                        22,921
           Cash payment to holders of Old Notes                    (1,500)
           Issuance of New Notes                                  (60,000)

                   Gain on debt discharged                     $   63,118

3.   Summary of Significant Accounting Policies:

     Fiscal year - The Company has adopted a fiscal year which ends on the  
     Saturday nearest December 31. Fiscal 1996 includes the 32 weeks prior to 
     the Effective Date which has been designated "Predecessor Company" and  
     the 20 weeks subsequent to the Effective Date which has been designated
     "Successor Company."

     Basis of consolidation - The consolidated financial statements include  
     the accounts of Homeland Holding Corporation and its wholly-owned 
     subsidiary.  All significant intercompany balances and transactions have 
     been eliminated in consolidation.

     Revenue recognition - The Company recognizes revenue at the "point of 
     sale," which occurs when groceries and related merchandise are sold to 
     its customers.
     

                                    F-12 

     
3.   Summary of Significant Accounting Policies, continued:
     
     Concentrations of credit and business risk - Financial instruments which  
     potentially subject the Company to concentrations of credit risk consist  
     principally of temporary cash investments and receivables. The Company
     places its temporary cash investments with high quality financial 
     institutions. Concentrations of credit risk with respect to receivables 
     are limited due to the diverse nature of those receivables, including a 
     large number of retail customers within the region and receivables from  
     vendors throughout the country. The Company purchases approximately 70%  
     of its products from Associated Wholesale Grocers, Inc. ("AWG").  
     Although there are similar wholesalers that could supply the Company 
     with merchandise, if AWG were to discontinue shipments, this could have 
     a material adverse effect on the Company's financial condition.

     Inventories - Inventories are stated at the lower of cost or market, 
     with cost being determined primarily using the gross margin method.

   
     Property, plant and equipment - As discussed in Note 2, in conjunction  
     with the emergence from Chapter 11 proceedings, the Company implemented  
     "fresh-start" reporting and, accordingly, all property, plant and 
     equipment was restated to reflect reorganization value, which 
     approximates fair value in continued use. Depreciation and amortization,
     including amortization of leased assets under capital leases, are 
     computed on a straight-line basis over the lesser of the estimated useful
     life of the asset or the remaining term of the lease. Property, plant
     and equipment acquired subsequent to "fresh start" are stated at cost.
     Depreciation and amortization, of newly acquired assets, for financial 
     reporting purposes are based on the following estimated lives:
    


                                                 Estimated lives
     Buildings                                       10 - 40
     Fixtures and equipment                           5 - 12.5
     Leasehold improvements                             15
     Software                                         3 - 5

     The costs of repairs and maintenance are expensed as incurred, and the  
     costs of renewals and betterments are capitalized and depreciated at the 
     appropriate rates. Upon sale or retirement, the cost and related  
     accumulated depreciation are eliminated from the respective accounts and
     any resulting gain or loss is included in the results of operations for 
     that period. 


                                    F-13



3.   Summary of Significant Accounting Policies, continued:

     Reorganization value in excess of amounts allocable to identifiable assets 
     - The Company's reorganization value in excess of amounts allocable to 
     identifiable assets, established in accordance with "fresh start" 
     reporting (see Note 2), is being amortized on a straight-line basis over
     three years.

     Store Closings / Asset Impairment - Provision is made on a current basis
     for the write-down of identified owned-store closings to their net 
     realizable value. For identified lease-store closings, leasehold 
     improvements are written down to their net realizable value and a 
     provision is made on a current basis if anticipated expenses are in 
     excess of expected sublease rental income. The Company's long-lived assets,
     including excess reorganization value, are reviewed for impairment and 
     written down to fair value whenever events or changes in circumstances 
     indicate that the carrying value may not be recovable.     

   
     Other assets and deferred charges - Other assets and deferred charges  
     consist primarily of patronage refund certificates issued by AWG as part  
     of its year-end distribution of income from AWG's cooperative operations 
     and beneficial interests in operating leases amortized on a straight-line 
     basis over the remaining terms of the leases, including all available 
     renewal option periods. The AWG patronage refund certificates bear annual 
     interest of 6% and are redeemable for cash seven years from the date of
     issuance. The carrying value of certificates, including those earned not
     yet received, at 1998 and 1997 was $9,119, and $6,669, respectively.
    

     Earnings per share - The Company presents the two earnings per share  
     ("EPS") amounts as required under Statement of Accounting Standard No. 
     128, Earnings Per Share ("SFAS 128"). Basic EPS is computed using the 
     weighted average number of common shares outstanding. Diluted earnings 
     per share is computed using the weighted average number of common shares 
     outstanding and equivalent shares based on the assumed exercise of stock 
     options and warrants (using the treasury method). Earnings (loss) per 
     share data is not meaningful for periods prior to the Effective Date due  
     to the significant change in the Company's capital structure.

     Cash and cash equivalents - For purposes of the statements of cash flows,  
     the Company considers all short-term investments with an original 
     maturity of three months or less when purchased to be cash equivalents.

     Advertising costs - Costs of advertising are expensed as incurred.  Gross 
     advertising costs for 1998, 1997 and 1996, were $8,349, $7,906 and 
     $8,453, respectively.

     Income taxes - The Company provides for income taxes based on enacted 
     tax laws and statutory tax rates at which items of income and expense 
     are expected to be settled in the Company's income tax return. Certain 
     items of revenue and expense are reported for Federal income tax purposes  
     in different periods than for financial reporting purposes, thereby 


                                     F-14


     resulting in deferred income taxes. Deferred taxes also are recognized 
     for operating losses that are available to offset future taxable income 
     and tax credits that are available to offset future Federal income taxes.
     Valuation allowances are established when necessary to reduce deferred 
     tax assets to the amounts expected to be realized.

3.   Summary of Significant Accounting Policies, continued:

     Self-insurance reserves - The Company is self-insured for property loss,  
     general liability and automotive liability coverage subject to specific 
     retention levels. Estimated costs of these self-insurance programs are 
     accrued based on projected settlements for claims using actuarially 
     determined loss development factors based on the Company's prior 
     experience with similar claims. Any resulting adjustments to previously 
     recorded reserves are reflected in current operating results. As a result  
     of the Company's filing of Chapter 11 petitions with the Bankruptcy Court  
     on May 13, 1996, all outstanding claims under the self-insured programs,  
     as of that date, will be settled under the terms of the Plan.

     Pre-opening  costs - Store pre-opening costs are charged to expense as 
     incurred.
     
     Use of estimates - The preparation of 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 assets and liabilities at the 
     dates of the financial statements and the reported amounts of revenues 
     and expenses during the reporting periods. The most significant 
     assumptions and estimates relate to the reserve for self-insurance 
     programs, the deferred income tax valuation allowance, the accumulated  
     benefit obligation relating to the employee retirement plan and the  
     allowance for bad debts. It is reasonably possible that the Company's  
     estimates for such items could change in the near term.
     
     Comprehensive Income - In January 1998, the Company adopted the provisions
     of SFAS No. 130, "Reporting Comprehensive Income," which is required
     for fiscal years beginning after December 15, 1997. The statement 
     establishes standards for reporting comprehensive income and its
     components in a full set of general-purpose financial statements.
     Comprehensive income is the change in equity of a business enterprise
     during a period from net income and other events, except activity resulting
     from investments by owners and distributions to owners. There was no 
     impact on adoption of this statement to the Successor Company.

     Reclassifications - Certain reclassifications have been made to prior
     years' statements of operations to conform with the current presentation.
     

                                    F-15


     
4.   Store Acquisitions.

     The Company acquired one store from Pratt Discount Foods, Inc. and three 
     stores from Food Lion, Inc. on August 11, 1997, and October 15, 1997, 
     respectively. The result of operations from these stores from the  
     acquisition date through fiscal year-end are included in the fiscal 1997
     Consolidated Statements of Operations.

     On February 15, 1999, the Company signed a letter of intent with AWG for
     the purchase of nine Apple Market supermarkets currently operated by
     Horner Foods, Inc. in eastern Oklahoma. Consummation of the transaction,
     which is expected during the second quarter of 1999, is subject to, among
     other things, the execution of a definitive purchase agreement, completion
     of due diligence, and certain customary closing conditions. The financing
     for this acquisition is likely to be a combination of loans through AWG,
     the Acquisition Term Loans and/or availability under the revolving credit
     facility.

5.   Long-Term Debt:

     Long-term debt at year-end consists of:

     
                                             January 2,       January 3,
                                               1999             1998
     
     New Notes                               $  60,000        $  60,000
     Term Loan                                   7,500            9,167
     Revolving Credit Loans                     17,887           10,626
     Note Payable                                  193              288
                                                85,580           80,081
     Less current portion                        1,728            1,728
     
     Long-term debt due after one year       $  83,852        $  78,353
     
     The New Notes bear an interest rate of 10%, which is payable semi-
     annually each February 1 and August 1. The New Notes are uncollaterized 
     and will mature on  August 1, 2003. The Indenture relating to the New 
     Notes has certain customary restrictions on consolidations and mergers, 
     indebtedness, issuance of preferred stocks, asset sales and payment of
     dividends.


                                    F-16


     Long-Term Debt, continued:
     
     On December 17, 1998, the Company executed a New Loan Agreement in exchange
     for the Old Loan Agreement in order to extend the maturity to August 2, 
     2002, to reflect additional term loan borrowing capacity of $10,000 for 
     acquisitions ("Acquisition Term Loans"), to reduce interest rates, and to
     incorporate other technical changes. Consistent with the Old Loan 
     Agreement, as amended, the New Loan Agreement also consists of a $32,000
     revolving facility for working capital and letters of credit (The 
     "Revolving Facility") and a $10,000 term loan (the "Term Loan"). The
     Revolving Facility permits the Company to borrow up to the lesser of 
     $32,000 or the applicable borrowing base. As of January 2, 1999, there
     were no borrowinngs outstanding under the Acquisition Term Loan facility.

     The interest rate, payable quarterly, under the New Loan Agreement is based
     on the Prime Rate, as defined, plus a percentage that varies based on a  
     number of factors, including (a) whether it is the Revolving Facility or  
     the Term Loan, (b) the time period, and (c) whether the Company elects to 
     use the London Interbank Offered Rate. At January 2, 1999, the interest 
     rate on borrowings on the Revolving Facility was 7.90% (weighted average) 
     and the Term Loan was 7.98%.

     The Revolving Facility provides for certain mandatory prepayments based  
     on occurrence of certain defined and specified transactions. The Term 
     Loan requires quarterly principal payments of $417 and will mature, 
     along with the Revolving Facility, on August 2, 2002.
     
     The obligations of the Company under the New Loan Agreement are
     collateralized by liens on, and a security interest in, substantially
     all of the assets of Homeland and are guaranteed by Holding. The New Loan
     Agreement, among other things, requires a maintenance of EBITDA, 
     consolidated fixed charge ratio, debt-to-EBITDA ratio, current ratio,
     excess cash flow paydown, each as defined, and limits the Company's
     capital expenditures, incurrence of additional debt, consolidation and
     mergers, acquisitions and payments of dividends.


                                    F-17


     Long-Term Debt, continued: 
     
     At January 2, 1999, the aggregate annual debt maturities were as follows:
     
               1999                               $  1,728
               2000                                  1,728
               2001                                  1,728
               2002                                 20,396
               2003                                 60,000
                                                  $ 85,580

     The Company has outstanding at January 2, 1999, $3,349 in letters of credit
     which are not reflected in the accompanying financial statements. The
     letters of credit are issued under the credit agreements and the Company
     paid associated fees of $43, $146, and $259 in 1998, 1997 and 1996,
     respectively.

6.   Fair Value of Financial Instruments:

     The carrying amounts of cash and cash equivalents, receivables, AWG 
     patronage refund certificates, accounts payable and accrued expenses
     and other liabilities are reasonable estimates at their fair values. 
     Based on borrowing rates currently available to the Company for bank
     borrowings with similar terms and maturities, the Company believes the 
     carrying amount of borrowings under the New Loan Agreement approximates 
     fair value. The fair valud of publicly-traded debt is valued based on 
     quoted market values. At January 2, 1999, the carrying amount and the fair
     value of the New Notes were $60,000 and $55,200, respectively.


 
                                     F-18


7.   Income Taxes:

     The components of the income tax provision for 1998, 1997, the 20
     weeks ended December 28, 1996, and the 32 weeks ended August 10,
     1996, were as follows:

                                                                 Predecessor
                                   Successor Company               Company
                                                   20 Weeks       32 Weeks
                                                    Ended          Ended
                                                  December 28,    August 10, 
                              1998       1997        1996           1996

     Federal and State: 
      Current             $  (176)   $  (  100)    $    -         $    - 
      Deferred             (1,699)      (1,589)         -              - 
       Total income tax 
        provision          (1,875)   $  (1,689)    $    -         $    -

     A reconciliation of the income tax benefit (provision) at the statutory  
     Federal income tax rate to the Company's effective tax rate is as follows:


                                                                  Predecessor
                                  Successor Company                 Company
                                                     20 Weeks      32 Weeks
                                                      Ended          Ended
                                                    December 28,    August 10,
                               1998        1997        1996           1996

     Federal income tax at
      statutory rate        $  3,051    $   3,134    $  1,092     $ (13,232)
     Benefit of non-taxable
      forgiveness of debt       -            -            945        14,720 
     Non-deductible 
      reorganization      
       expenses                 -            -           -           (1,488) 
     Amortization of 
      intangibles             (4,785)      (5,084)     (2,037)         -  
     Change in valuation
      allowance                 (141)         261        -             -
      Total income tax 
       provision            $ (1,875)   $  (1,689)   $   -        $    - 
       



                                    F-19



7.   Income Taxes, continued:

     The components of deferred tax assets and deferred tax liabilities are 
     as follows:

                                                January 2,      January 3,
                                                  1999             1998
     Current assets (liabilities):
      Allowance for uncollectible
       receivables                             $    340          $    419
      Prepaid pension                              (347)             (393)
      Other, net                                     19                18

       Net current deferred tax assets               12                44

     Noncurrent assets (liabilities):
      Property, plant and equipment               1,402               855
      Employee compensation and benefits            262               262
      Self-insurance reserves                       574               673
      Net operating loss carryforwards           13,096            14,315
      AMT credit carryforwards                      299               737
      Capital leases                                  5               104
      Other, net                                   (177)              185
       Net noncurrent deferred tax
        assets                                   15,461            17,131

      Total net deferred assets                  15,473            17,175
      Valuation allowance                       (15,473)          (17,175)

     Net deferred tax assets                   $    -            $    -


                                    F-20           


     Income taxes, continued:

     Due to the uncertainty of realizing the future tax benefits, a full  
     valuation allowance was deemed necessary to entirely offset the net 
     deferred tax assets as of January 2, 1999 and January 3, 1998. If the 
     Company's current trend toward profitability continues, then deferred tax 
     assets of up to approximately $15.5 million could be recognized. At 
     January 2, 1999 and January 3, 1998, the Company had the following 
     operating loss and tax credit carryforwards available for tax purposes:


                                                                Expiration
                                                Amount             Dates

     Federal regular tax net
      operating loss carryforwards              $37,417           2002-2010
     Federal AMT credit carryforwards
      against regular tax                       $   299          indefinite

     The net operating loss carryforwards are subject to utilization limitations
     due to ownership changes. The net operating loss carryforwards may be 
     utilized to offset future taxable income as follows: $3,251 in each of 
     years 1999 through 2009 and $1,656 in 2010. Loss carryforwards not utilized
     in any year that they are available may be carried over and utilized in 
     subsequent years, subject to their expiration provisions.
     
     In accordance with SOP 90-7, the tax benefit realized from utilizing the   
     pre-reorganization net operating loss carryforwards is recorded as a 
     reduction of the reorganization value in excess of amounts allocable to
     identifiable assets rather than realized as a benefit in the statement  
     of operations. The Company recorded $1,699 and $1,589 of such reductions
     in 1998  and 1997, respectively.
     
8.   Incentive Compensation Plans:

     The Company has bonus arrangements for store management and other key  
     management personnel. During 1998, 1997, and 1996, approximately $1,480
     $981, and $2,273 respectively, were charged to costs and expenses for 
     such bonuses.

     In December 1996, the Board of Directors of the Company, pursuant to the  
     Plan, adopted the Homeland Holding Corporation 1996 Stock Option Plan  
     (the "Stock Option Plan"). In 1997, the Company established the 1997 
     Non-Employee Directors Stock Option Plan (the "Directors Stock Option 
     Plan"). The Company applies APB Opinion No. 25, "Accounting for Stock  
     Issued to Employees" and related Interpretations in accounting for these  



                                    F-21



     Incentive Compensation Plan, continued:

     plans. SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 
     123") was issued by the FASB in 1995 and, if fully adopted, changes the  
     methods for recognition of expense on plans similar to the Company's.  
     Adoption of SFAS 123 is optional; however, pro forma disclosures as if 
     the Company adopted the cost recognition requirements under SFAS 123 in  
     1998, 1997 and 1996 are presented below.
     
     The Stock Option Plan and the Directors Stock Option Plan, to be 
     administered by the Board of Directors (the "Board"), or a committee of 
     the Board (the "Committee"), provides for the granting of options to 
     purchase up to an aggregate of 432,222 and 200,000 shares of New Common 
     Stock, respectively. Options granted under the plans must be "non-
     qualified options." The option price of each option is determined by the  
     Board or the Committee and it must be not less than the fair market
     value at the date of grant. Unless the Board or the Committee otherwise 
     determines, options must become exercisable ratably over a five-year 
     period or immediately in the event of a "change of control" as defined in 
     each of the plans. Each option must be evidenced by a written agreement 
     and must expire and terminate on the earliest of: (a) ten years from the 
     date the option is granted; (b) termination for cause; or (c) three 
     months after termination for other than cause.
     
     Options granted under the Company's stock option plans have exercise  
     prices ranging from $3.50 to $7.63 per share and have a weighted average 
     contractual life of 9.2 years. A summary of the status of the Company's 
     outstanding stock options as of January 2, 1999, January 3, 1998 and
     December 28, 1996, and changes during the years ended on those dates is 
     as follows:
     
     
                             1998                1997                1996
                              Wgtd. Avg.          Wgtd. Avg.          Wgtd. Avg.
                     Shares  Exer. Price  Shares Exer. Price  Shares Exer. Price
     Outstanding at
      beginning of 
      year           198,500   $7.45      197,500   $8.00        -      $  -

     Granted         319,000    6.05      136,000    7.20     197,500    8.00
     Exercised        13,200    6.50         -        -          -         -
     Forfeited        75,300    7.80      135,000    8.00        -         -

     Outstanding at 
      end of year    429,000    6.39      198,500    7.45     197,500    8.00

     Options 
      exercisable as 
      of year end     84,000    7.30      138,500    7.42     197,500    8.00



                                    F-22


     Incentive Compensation Plan, continued:

     The weighted average fair value of options granted during 1998, 1997 and  
     1996 was $2.83, $3.53 and $4.02, respectively. No compensation was charged
     against income in 1998, 1997 and 1996.
     
     The fair value of the options granted was estimated on the date of the  
     grant using the Black-Scholes option-pricing model with the following 
     assumptions used:
     
     
                                             1998       1997       1996
     
       Expected dividend yield                 0%         0%         0%
      
       Expected stock price volatility        37%        39%        30%
     
       Weighted average risk-free
        interest rate                        5.3%       6.4%       6.4%
     
       Weighted average expected
        life of options                    6 years    6 years    8 years
     
     
     Had compensation cost of the Company's option plans been determined using 
     the fair value at the grant date of awards consistent with the method of 
     SFAS 123, the Company's net loss and net loss per common share for the 
     Successor Company would have been reduced to the pro forma amounts 
     indicated in the table below:
     
     
                                                Successor Company
                                                                 20 weeks
                                                                   Ended
                                                                December 28, 
                                        1998          1997         1996

        
     Net loss - as reported           $(10,591)     $(10,644)     $(3,120)
     Net loss - pro forma             $(10,722)     $(10,846)     $(3,914)
     
     Basic EPS - as reported            $(2.18)       $(2.23)      $(0.66)
     Basic EPS - pro forma              $(2.21)       $(2.27)      $(0.82)
     
     Diluted EPS - as reported          $(2.18)       $(2.23)      $(0.66)
     Diluted EPS - pro forma            $(2.21)       $(2.27)      $(0.82)
    
     

                                    F-23


8.   Incentive Compensation Plans, continued:
     
     All options and warrants outstanding at January 2, 1999, January 3, 1998 
     and December 28, 1996, were not included in the computation of diluted 
     earnings per share because the effect would be antidilutive to applicable 
     periods.
     
     Pursuant to the terms of the Modified Union Agreements, the Company  
     established an employee stock bonus plan for the benefit of the unionized 
     employees (the "Stock Bonus Plan"). The Stock Bonus Plan consists of 
     three separate elements: (a) the issuance of 58,025 shares of New Common 
     Stock each year for three years; (b) up to 58,025 shares of the New 
     Common Stock may be purchased by the plan participants during each of the 
     second, third and fourth years of the Modified Union Agreements (the 
     "Stock Purchase") and (c) the granting of 58,025 shares of New Common 
     Stock for each of the first, second and third anniversaries of the  
     Modified Union Agreements upon the Company's achievement of certain
     escalating EBITDA-based performance goals (see Note 2). The purchase  
     price of the shares under the Stock Purchase element shall be equal to 
     the appraised value or at fair value if the shares are readily tradable 
     on a securities market. For each share of New Common Stock purchased by  
     a participant under the Stock Purchase element, the Company will match 
     33 1/3% of such purchase in the form of stock. The Stock Bonus Plan does 
     not fall under the provisions of SFAS 123.
     
9.   Retirement Plans:

     Effective January 1, 1988, the Company adopted a non-contributory,  
     defined benefit retirement plan for all executive and administrative 
     personnel. Benefits are based on length of service and career average  
     pay with the Company. The Company's funding policy is to contribute an
     amount equal to or greater than the minimum funding requirement of the 
     Employee Retirement Income Security Act of 1974, but not in excess of 
     the maximum deductible limit. Plan assets were invested in mutual funds
     during 1998, 1997 and 1996.


                                    F-24


     Information regarding the plan follows:


                                             1998       1997       

     Change in benefit obligation:
      Benefit obligation at beginning 
       of year                            $ 9,911    $ 7,694 
      Service Cost                            514        449
      Interest Cost                           725        630
      Actuarial loss                          513      1,344 
      Benefits paid                          (231)      (206)
      Benefit obligation at end
       of year                            $11,432    $ 9,911

     Change in plan assets:
      Fair value of plan assets at
       beginning of year                  $ 9,673    $ 8,436 
      Actual return on plan assets          1,075      1,418
      Employer contributions                  175         24 
      Benefits paid                          (231)      (205)  
      Fair value of plan assets at        $10,692    $ 9,673
       end of year

     Reconciliation of funded status:
      Funded status                       $  (739)   $  (238)
      Unrecognized net actuarial loss       1,793      1,533
      Unrecognized prior service loss         (62)       (73)
      Prepaid benefit cost                $   992    $ 1,222

     Weighted-average assumptions as of
     end of year:
      Discount rate                          6.75%      7.00% 
      Expected return on plan assets         9.00%      9.00%
      Rate of compensation increase
        Before age 35                        5.50%      5.50%
        Ages 35 - 49                         4.50%      4.50%
        After age 49                         3.50%      3.50%

   
     Components of net periodic pension
     cost:                                   1998       1997      1996
      Service Cost                         $  514     $  449     $  503
      Interest Cost                           725        630        574
      Expected return on plan assets         (868)      (748)      (651)
      Amortization of prior service cost      (11)       (11)       (11)
      Recognized net actuarial cost            46          7         89
      Net periodic pension cost            $  406     $  327     $  504
    

     

                                    F-25


     The Company also contributes to various union-sponsored, multi-employer  
     defined benefit plans in accordance with collective bargaining agreements. 
     The Company could, under certain circumstances, be liable for the 
     Company's unfunded vested benefits or other costs of these multi-employer
     plans. The allocation to participating employers of the actuarial 
     present value of vested and nonvested accumulated benefits in multi-
     employer plans as well as net assets available for benefits is not 
     available and, accordingly, is not presented. The costs of these plans for 
     1998, 1997, and 1996 were $1,235, $1,188, and $1,412, respectively.

     Effective January 1, 1988, the Company adopted a defined contribution  
     plan covering substantially all non-union employees of the Company.  
     Participants may contribute from 1% to 12% of their pre-tax compensation.  
     The plan allows  for a discretionary Company matching contribution  
     formula based on the Company's operating results. The Company did not  
     make any contributions to this plan in 1998, 1997 or 1996.

10.  Leases:

     The Company leases 56 of its retail store locations under noncancellable  
     agreements, which expire at various times between 1999 and 2013. These 
     leases, which include both capital leases and operating leases, generally 
     are subject to six five-year renewal options. Most leases also require
     the payment of taxes, insurance and maintenance costs and many of the 
     leases covering retail store properties provide for additional contingent 
     rentals based on sales in excess of certain stipulated amounts.

     Leased assets under capital leases consists of the following:


                                              January 2,      January 3,
                                                1999            1998

     Buildings                               $  2,706         $  2,706
     Equipment                                  3,174            2,731
     Beneficial interest in capital leases      3,173            3,173
                                                9,053            8,610
     Accumulated amortization                   3,204            1,984

     Net leased assets                       $  5,849         $  6,626


                                     F-26


10.  Leases, continued:

     Future minimum lease payments under capital leases and noncancellable 
     operating leases as of January 2, 1999, are as follows:


                                                  Capital        Operating
     Fiscal Year                                  Leases          Leases

     1999                                           1,503           6,452
     2000                                             653           5,990
     2001                                             276           4,957
     2002                                             182           3,814
     2003                                             182           3,333
     Thereafter                                     1,288          19,349
     Total minimum obligations                      4,084        $ 43,895

     Less estimated interest                        1,149
     Present value of net minimum
      obligations                                   2,935      
     Less current portion                           1,235
      Long-term obligations under
       capital leases                             $ 1,700

     Rent expenses for 1998, 1997 and 1996 are as follows:


                                          1998          1997          1996

     Minimum rents                     $ 6,680        $ 6,067       $ 6,039
     Contingent rents                      115            105           105

                                       $ 6,795        $ 6,172       $ 6,144


                                    F-27


11.  Commitments and Contingencies:

     In 1995, the Company and AWG entered into a seven-year supply agreement 
     (the "Supply Agreement"), whereby the Company became a retail member of 
     the AWG cooperative and AWG became the Company's primary supplier (see 
     Note 4 - Concentrations of credit and business risk). The terms of the 
     Supply Agreement allow the Company to purchase products at the lowest 
     prices and best terms available to AWG members and also entitle the 
     Company to participate in its store cost savings programs and receive 
     member rebates and refunds on purchases. In addition, the Supply
     Agreement includes certain Volume Protection Rights, as defined therein.
     
     The Company has entered into employment contracts with certain key 
     executives providing for the payment of minimum salary and bonus amounts  
     in addition to certain other benefits in the event of termination of the 
     executives or change of control of the Company.

     The Company is party to various lawsuits arising from the Restructuring  
     and also in the normal course of business. Management believes that the 
     ultimate outcome of these matters will not have a material effect on 
     the Company's consolidated financial position, results of operations and
     cash flows.


           
                                    F-28 




                                 EXHIBIT INDEX


     Exhibit No.         Description

        2a               Disclosure Statement for Joint Plan of Reorganization
                         of Homeland Stores, Inc. ("Homeland") and Homeland 
                         Holding Corporation ("Holding") dated as of May 13, 
                         1996. (Incorporated by reference to Exhibit 2a to 
                         Form 8-K dated May 31, 1996.)

        2b               First Amended Joint Plan of Reorganization, as 
                         modified, of Homeland and Homeland Stores, Inc. 
                         ("Homeland"), dated July 19, 1996. (Incorporated by 
                         reference to Exhibit 2b to Form 10-Q for the quarterly
                         period ended June 15, 1996.)

        3a               Restated Certificate of Incorporation of Holding,
                         dated August 2, 1996. (Incorporated by reference
                         to Form 10 filed as of November 20, 1996).

        3b               By-laws of Holding, as amended and restated on 
                         November 14, 1989 and further amended on September
                         23, 1992. (Incorporated by reference to Exhibit 3b
                         to Form 10-Q for quarterly period ended June 19,
                         1993.)

        3c               Restated Certificate of Incorporation of Homeland,
                         dated August 2, 1996. (Incorporated by reference
                         to Form 10 filed as of November 20, 1996).

        3d               By-laws of Homeland, as amended and restated on 
                         November 14, 1989, and further amended on September
                         23, 1992. (Incorporated by reference to Exhibit 3d
                         to Form 10-Q for quarterly period ended June 19,
                         1993.)

        4a               Indenture, dated as of August 2, 1996, among Homeland,
                         Fleet National Bank, as Trustee, and Holding, as
                         Guarantor. (Incorporated by reference to Exhibit T3C
                         to Form T-3 of Homeland, SEC File No. 22-22239.)

        4b               Warrant Agreement, dated as of August 2, 1996, 
                         between Holding and Liberty Bank and Trust Company
                         of Oklahoma City, N.A., as Warrant Agent.
                         (Incorporated by reference to Exhibit 4h to
                         Amendment No. 1 to Form 10.)

        4c               Equity Registration Rights Agreement, dated as of
                         August 2, 1996, by Holding for the benefit of
                         holders of Old Common Stock. (Incorporated by
                         reference to Exhibit 4i to Amendment No. 1 to 
                         Form 10.)

        4d               Noteholder Registration Rights Agreement, dated as 
                         of August 2, 1996, by Holding for the benefit of 
                         holders of Old Notes. (Incorporated by reference
                         to Exhibit 4j to Amendment No. 1 to Form 10.)

        10a 1            Homeland Profit Plus Plan, effective as of January
                         1, 1988. (Incorporated by reference to Exhibit 10q
                         to Form S-1 Registration Statement, Registration
                         No. 33-22829.)

        10a.1 1          Homeland Profit Plus Plan, effective as of January
                         1, 1989. (Incorporated by reference to Exhibit 10q.1 
                         to Form 10-K for the fiscal year ended December 29,
                         1990.)


                                     E-1 



      Exhibit No.        Description

        10b              Homeland Profit Plus Trust, dated March 8, 1988,
                         between Homeland and the individuals named therein,
                         as Trustees. (Incorporated by reference to Exhibit
                         10r to Form S-1 Registration Statement, Registration
                         No. 33-22829.)

        10c              Homeland Profit Plus Trust, dated January 1, 1989,
                         between Homeland and Bank of Oklahoma, N.A., as
                         Trustee. (Incorporated by reference to Exhibit
                         10r.1 to Form 10-K for the fiscal year ended
                         December 29, 1990.)

        10d.1 1          1995 Homeland Management Incentive Plan. 
                         (Incorporated by reference to Exhibit 10s.7 to
                         Form 10-K for the fiscal year ended December 30,
                         1995.)

        10d.2 1          1996 Homeland Management Incentive Plan.
                         (Incorporated by reference to Exhibit 10.d3 to
                         Form 10-K for the fiscal year ended December 28,
                         1996.)

        10d.3 1          1997 Homeland Management Incentive Plan.

        10e 1            Form of Homeland Employees' Retirement Plan, 
                         effective as of January 1, 1988. (Incorporated
                         by reference to Exhibit 10t to Form S-1
                         Registration Statement, Registration No. 33-22829.)

        10e.1 1          Amendment No. 1 to Homeland Employees' Retirement
                         Plan effective January 1, 1989. (Incorporated
                         by reference to Form 10-K for the fiscal year ended
                         December 30, 1989.)

        10e.2 1          Amendment No. 2 to Homeland Employees' Retirement
                         Plan effective January 1, 1989. (Incorporated
                         herein by reference to Form 10-K for the fiscal
                         year ended December 30, 1989.)

        10e.3 1          Third Amendment to Homeland Employees' Retirement
                         Plan effective as of January 1, 1988. (Incorporated
                         by reference to Exhibit 10t.3 to Form 10-K for
                         the fiscal year ended December 29, 1990.)

        10e.4 1          Fourth Amendment to Homeland Employees' Retirement
                         Plan effective as of January 1, 1989. (Incorporated
                         by reference to Exhibit 10t.4 to Form 10-K for
                         the fiscal year ended December 28, 1991.)

        10e.5 1          Fifth Amendment to Homeland Employees' Retirement
                         Plan effective as of January 1, 1989. (Incorporated
                         by reference to Form 10-Q for the quarterly period
                         ended September 9, 1995.)

        10f 1            Executive Officers Medical/Life Insurance Benefit
                         Plan effective as of December 9, 1993. (Incorporated
                         by reference to Exhibit 10kk to Form 10-K for
                         the fiscal year ended January 1, 1994.)

        10g              Asset Purchase Agreement, dated as of February 6, 
                         1995, between Homeland and Associated Wholesale 
                         Grocers, Inc. (Incorporated by reference to Exhibit
                         10pp.1 to Form 10-K for the fiscal year ended
                         December 30, 1995.)


                                    E-2


    Exhibit No.          Description   

        10h              Amended and Restated Revolving Credit Agreement,
                         dated as of April 21, 1995, among Homeland,
                         Holding, National Bank of Canada, as Agent and
                         lender, Heller Financial, Inc. and any other lenders
                         thereafter parties thereto. (Incorporated by 
                         reference to Exhibit 10uu to Form 8-K dated
                         March 14, 1996.)

        10h.1            Waiver Agreement, dated as of December 29, 1995,
                         among Homeland, Holding, National Bank of Canada and
                         Heller Financial, Inc. (Incorporated by reference
                         to Exhibit 10uu.1 to Form 8-K dated March 14, 1996.)

        10h.2            Second Waiver Agreement, dated as of March 1, 1996,
                         among Homeland, Holding, National Bank of Canada and
                         Heller Financial, Inc. (Incorporated by reference
                         to Exhibit 10uu.2 to Form 8-K dated March 14, 1996.)

        10h.3            Ratification and Amendment Agreement to the 
                         $27,000,000 Amended and Restated Revolving Credit
                         Agreement, dated as of May 10, 1996, among
                         Homeland, Holding, National Bank of Canada, as
                         Agent and lender, Heller Financial, Inc. and
                         any other lenders thereafter parties thereto.
                         (Incorporated by reference to Exhibit 10uu.3 to
                         Form 10-Q for quarterly period ended March 23, 1996.)

        10i 1            Employment Agreement dated as of July 10, 1995 and
                         as amended September 26, 1995, between Homeland and
                         Larry W. Kordisch. (Incorporated by reference to 
                         Exhibit 10pp to Form 10 Form 10-K dated September
                         9, 1995.)

        10i.1 1          Amendment to Employment Agreement between Homeland
                         and Larry W. Kordisch, dated as of April 29, 1996.
                         (Incorporated by reference to Exhibit 10vv.1 to
                         Form 10-K for the fiscal year ended December 30,
                         1995.)

        10i.2 1          Second Amendment to Employment Agreement between
                         Homeland and Larry W. Kordisch, dated as of
                         September 19, 1997.

        10j 1            Employment Agreement dated as of February 25,
                         1998, between Homeland and Steven M. Mason.

        10k 1            Employment Agreement dated as of February 25, 1998,
                         between Homeland and Terry Marczewski.

        10l 1            Employment Agreement dated as of February 17, 1998,
                         between Homeland and David B. Clark.

        10m              Indenture, dated as of August 2, 1996, among
                         Homeland, Fleet National Bank, as Trustee, and
                         Holding, as Guarantor. (Incorporated by reference
                         to Exhibit 10aaa to Form 8-K dated September 30,
                         1996.)

        10n              Loan Agreement, dated as of August 2, 1996, among
                         IBJ Schroder Bank & Trust Company, Heller Financial,
                         Inc., National Bank of Canada, Homeland and Holding.
                         (Incorporated by reference to Exhibit 10q to Form 
                         10-K for the fiscal year ended December 28, 1996.)


                                    E-3



     Exhibit No.         Description

        10n.1            First Amendmant to the Loan Agreement dated as of
                         November 24, 1997, among IBJ Schroder Bank & Trust
                         Company, Heller Financial, Inc., National Bank of
                         Canada, Homeland and Holding.

        10o              Subsidiaries. (Incorporated by reference to Exhibit
                         22 to Form S-1 Registration Statement, Registration
                         No. 33-22829.) Amended

        10p 1            Employee Stock Bonus Plan for union employees
                         effective as of August 2, 1996. (Incorporated by
                         reference to Exhibit 10s to Form 10-K for the fiscal
                         year ended December 28, 1996.)

        10q 1            Management Stock Option Plan effective as of
                         December 11, 1996. (Incorporated by reference to
                         Exhibit 10t to Form 10-K for the fiscal year ended
                         December 28, 1996.)

   
        10r*             Loan Agreement dated as of December 17, 1998, among
                         IBJ Schroder Business Credit Corporation, Heller
                         Financial, Inc., and National Bank of Canada, 
                         Homeland and Holding.

        10s*1            1998 Homeland Management Incentive Plan.

        10t*1            Letter agreement regarding severance arrangements
                         dated as of April 28, 1998, between Homeland and
                         Larry W. Kordisch.

        10u*1            Employment agreement dated as of July 6, 1998, 
                         between Homeland and Wayne S. Peterson.

        10v*1            Employment agreement dated as of September 14, 1998,
                         between Homeland and John C. Rocker.

        10w*1            Letter agreement regarding severance arrangements
                         dated as of December 8, 1998, between Homeland
                         and Steven M. Mason.

        10x*1            Letter agreement regarding severance arrangements
                         dated as of December 8, 1998, between Homeland
                         and Prentess E. Alletag, Jr.

        10y*1            Letter agreement regarding severance arrangements
                         dated as of December 8, 1998, between Homeland
                         and Deborah A. Brown
 
        10z*1            Stock Option Agreement dated as of October 21, 1998,
                         between Homeland and Wayne S. Peterson.

        11a*1            Stock Option Agreement dated as of September 14, 
                         1998, between Homeland and John C. Rocker.

        21*              Subsidiaries

        23*              Consent of PricewaterhouseCoopers LLP

        27 *             Financial Data Schedule.
    


                                    E-4