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

FORM 10-Q

Check one

x     Quarterly report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2003 or

_____    Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

Commission file number 000-50160

HECHINGER LIQUIDATION TRUST
(Exact name of Registrant as specified in its charter)

|                                                        |  |                                                
|------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of incorporation) |  | 52-7230151
(I.R.S. Employer Identification No.)

|                                                                               |  |                 
|------------------------------------------------------------------------------ |  | ----------------
|1801 McCormick Drive, Largo, Maryland
(Address of principal executive offices) |  | 20774
(Zip Code)

Registrants telephone number,
including area code: (301) 883-4501

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.

|     |  |        
|---- |  | -------
|Yesx |  | No_____

Indicate by mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).

|         |  |    
|-------- |  | ---
|Yes_____ |  | Nox

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.

|     |  |        
|---- |  | -------
|Yesx |  | No_____





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HECHINGER LIQUIDATION TRUST
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

|                                                                                                 |                                                              |      |    |   | 
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ---- | -- | - | 
|Description                                                                                      |                                                              | Page
|                                                                                                 |                                                              |     
|                                                                                                
|PART I. FINANCIAL INFORMATION:                                                                   |                                                              |      |    |  
|                                                                                                 |                                                              |      |    |  
|Item 1.    Financial Statements                                                                  |                                                              |      |    |  
|                                                                                                 | Unaudited Statements of Net Assets in Liquidation            |      |    | 3 | 
|                                                                                                 | Unaudited Statements of Changes in Net Assets in Liquidation |      |    | 4 | 
|                                                                                                 | Unaudited Statements of Cash Receipts and Disbursements      |      |    | 5 | 
|                                                                                                 | Notes to Unaudited Financial Statements                      |      |    | 6 | 
|Item 2.    Managements Discussion and Analysis of Financial Condition and
Results of Operations |                                                              |      | 10 |  
|Item 3.    Quantitative and Qualitative Disclosures About Market Risk                            |                                                              |      | 13 |  
|Item 4.    Controls and Procedures                                                               |                                                              |      | 13 |  
|                                                                                                 |                                                              |      |    |  
|PART II. OTHER INFORMATION:                                                                      |                                                              |      |    |  
|                                                                                                 |                                                              |      |    |  
|Item 1.    Legal Proceedings                                                                     |                                                              |      | 14 |  
|Item 2.    Changes in Securities and Use of Proceeds                                             |                                                              |      | 14 |  
|Item 3.    Defaults Upon Senior Securities                                                       |                                                              |      | 14 |  
|Item 4.    Submission of Matters to a Vote of Security Holders                                   |                                                              |      | 14 |  
|Item 5.    Other Information                                                                     |                                                              |      | 14 |  
|Item 6.    Exhibits and Reports on Form 8-K                                                      |                                                              |      | 14 |  
|                                                                                                 |                                                              |      |    |  
|SIGNATURES                                                                                       |                                                              |      | 15 |  
|                                                                                                 |                                                              |      |    |  
|CERTIFICATIONS                                                                                   |                                                              |      | 16 |  
|                                                                                                 |                                                              |      |    |  
|INDEX TO EXHIBITS                                                                                |                                                              |      | 17 |  

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##### 



PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements

Hechinger Liquidation Trust
Unaudited Statements of Net Assets in Liquidation
(in thousands)

|                          |                                                                                           |                                                                        |        |           |        |               |        |        |        | 
|------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------ | --------- | ------ | ------------- | ------ | ------ | ------ | 
|                          |                                                                                           |                                                                        |        | As of     |        | As of        
|                          |                                                                                           |                                                                        |        | March 31, |        | September 30,
|                          |                                                                                           |                                                                        |        | 2003      |        | 2002         
|                          |                                                                                           |                                                                        |        |           |        |              
|Assets                    |                                                                                           |                                                                        |        |           |        |               |        |       
|                          | Cash and cash equivalents                                                                 |                                                                        |        |           |        |               |        |        |       
|                          |                                                                                           | Designated as available for distribution
to holders of impaired claims |        | $         | 8,529  |               |        | $      | 15,337 | 
|                          |                                                                                           | Reserved                                                               |        |           | 28,555 |               |        |        | 36,231 | 
|                          |                                                                                           | Restricted                                                             |        |           | 10,097 |               |        |        | 10,939 | 
|                          |                                                                                           | Other                                                                  |        |           | 14,129 |               |        |        | 134    | 
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          | Total cash and cash equivalents                                                           |                                                                        |        | 61,310    |        |               |        | 62,641 |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          | Preference claims receivable, net of costs
of recovery of $1,061 and $2,860,
respectively |                                                                        |        | 4,155     |        |               |        | 10,042 |       
|                          | Other assets                                                                              |                                                                        |        | 1,518     |        |               |        | 2,507  |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          |                                                                                           | Total assets                                                           |        |           | 66,983 |               |        |        | 75,190 | 
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|Liabilities               |                                                                                           |                                                                        |        |           |        |               |        |       
|                          | Unimpaired claims payable                                                                 |                                                                        |        | 13,763    |        |               |        | 15,452 |       
|                          | Convenience claims payable                                                                |                                                                        |        | 33        |        |               |        | 47     |       
|                          | Distribution payable to holders of
allowed impaired claims                                |                                                                        |        | 2,096     |        |               |        | 3,854  |       
|                          | Estimated costs of liquidation                                                            |                                                                        |        | 7,330     |        |               |        | 11,655 |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          |                                                                                           | Total liabilities                                                      |        |           | 23,222 |               |        |        | 31,008 | 
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       
|Net Assets in Liquidation |                                                                                           | $                                                                      | 43,761 |           |        | $             | 44,182 |       
|                          |                                                                                           |                                                                        |        |           |        |               |        |       

See accompanying notes to unaudited financial statements.

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Hechinger Liquidation Trust
Unaudited Statements of Changes in Net Assets in Liquidation
(in thousands)

|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |       |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------ | - | ------------------------------------------------------- | ----- | ------------------------------------------------------- | - | ------------------------------------------------------- | ----- | ------------------------------------------------------------------------ | - | ------ | ----- |  | - | ------ | ----- | -
|                                                                        |                                                                          |   | For the period fromJanuary 1, 2003through March 31,2003 |       | For the period fromJanuary 1, 2002through March 31,2002 |   | For the period fromOctober 1, 2002through March 31,2003 |       | For the period fromOctober 26, 2001(Effective Date)through March 31,2002
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                         
|Increase/(Decrease) in Net Assets in Liquidation                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|                                                                        | (Increase)/Decrease in estimated fair value of unimpaired claims payable |   | $                                                       | (248  | )                                                       |   | $                                                       | 2,142 |                                                                          |   | $      | 336   |  |   | $      | 2,142 |  
|                                                                        | Increase in estimated fair value of preference claims receivable, net    |   |                                                         | 1,187 |                                                         |   |                                                         | 591   |                                                                          |   |        | 1,187 |  |   |        | 591   |  
|                                                                        | Interest income                                                          |   |                                                         | 123   |                                                         |   |                                                         | 351   |                                                                          |   |        | 299   |  |   |        | 629   |  
|                                                                        | Other increases                                                          |   |                                                         | 199   |                                                         |   |                                                         |      |                                                                          |   |        | 245   |  |   |        |      |  
|                                                                        | (Increase) in estimated costs of liquidation                             |   |                                                         |      |                                                         |   |                                                         | (998  | )                                                                        |   |        |      |  |   |        | (998  | )
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|Increase in Net Assets in Liquidation before distribution               |                                                                          |   | 1,261                                                   |       |                                                         |   | 2,086                                                   |       |                                                                          |   | 2,067  |       |  |   | 2,364  |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|Distribution to holders of allowed impaired claims                      |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|                                                                        | Increase in distribution payable                                         |   |                                                         | 1,519 |                                                         |   |                                                         |      |                                                                          |   |        | 2,488 |  |   |        |      |  
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|Net (decrease)/increase in Net Assets in Liquidation after distribution |                                                                          |   | (258                                                    | )     |                                                         |   | 2,086                                                   |       |                                                                          |   | (421   | )     |  |   | 2,364  |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|Net Assets in Liquidation at beginning of period                        |                                                                          |   | 44,019                                                  |       |                                                         |   | 65,009                                                  |       |                                                                          |   | 44,182 |       |  |   | 64,731 |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      
|Net Assets in Liquidation at end of period                              |                                                                          | $ | 43,761                                                  |       |                                                         | $ | 67,095                                                  |       |                                                                          | $ | 43,761 |       |  | $ | 67,095 |      
|                                                                        |                                                                          |   |                                                         |       |                                                         |   |                                                         |       |                                                                          |   |        |       |  |   |        |      

See accompanying notes to unaudited financial statements.

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Hechinger Liquidation Trust
Unaudited Statements of Cash Receipts and Disbursements
(in thousands)

|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |       |        |       | 
|------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------- | --------------------- | ----- | -------------------------------------------------------- | ----- | ------------------------------------------------------------------------- | ----- | ------ | ----- | 
|                                                                          |                                                         |                             |                       |       | For the period fromOctober 1, 2002 throughMarch 31, 2003 |       | For the period fromOctober 26, 2001(Effective Date) throughMarch 31, 2002
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                          
|Cash receipts                                                             |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          | Preference claims collections, before costs of recovery |                             | $                     | 8,112 |                                                          |       | $                                                                         | 6,418 |       
|                                                                          | Other receipts, net                                     |                             |                       | 1,393 |                                                          |       |                                                                           | 664   |       
|                                                                          | Interest income                                         |                             |                       | 299   |                                                          |       |                                                                           | 629   |       
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         | Total cash receipts         |                       |       | 9,804                                                    |       |                                                                           |       | 7,711  |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|Cash disbursements                                                        |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          | Costs of liquidation                                    |                             |                       |       |                                                          |       |                                                                           |       |       
|                                                                          |                                                         | Legal and professional fees |                       |       |                                                          |       |                                                                           |       |        |      
|                                                                          |                                                         |                             | Litigation            |       |                                                          | 2,194 |                                                                           |       |        |      | 
|                                                                          |                                                         |                             | Preference recoveries |       |                                                          | 1,038 |                                                                           |       |        | 1,348 | 
|                                                                          |                                                         |                             | Trust operations      |       |                                                          | 785   |                                                                           |       |        | 961   | 
|                                                                          |                                                         | Operating expenses          |                       |       | 1,345                                                    |       |                                                                           |       | 1,268  |      
|                                                                          | Unimpaired claims                                       |                             |                       | 1,513 |                                                          |       |                                                                           | 7,466 |       
|                                                                          | Convenience claims                                      |                             |                       | 14    |                                                          |       |                                                                           | 177   |       
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         | Total cash disbursements    |                       |       | 6,889                                                    |       |                                                                           |       | 11,220 |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|Increase/(decrease) in cash and cash equivalents before distribution paid |                                                         |                             | 2,915                 |       |                                                          |       | (3,509                                                                    | )    
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          | Distribution paid                                       |                             |                       | 4,246 |                                                          |       |                                                                           |      |       
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|Decrease in cash and cash equivalents                                     |                                                         |                             | (1,331                | )     |                                                          |       | (3,509                                                                    | )    
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|Cash and cash equivalents at beginning of period                          |                                                         |                             | 62,641                |       |                                                          |       | 92,379                                                                    |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      
|Cash and cash equivalents at end of period                                |                                                         | $                           | 61,310                |       |                                                          | $     | 88,870                                                                    |      
|                                                                          |                                                         |                             |                       |       |                                                          |       |                                                                           |      

See accompanying notes to unaudited financial statements.

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Hechinger Liquidation Trust
Notes to Unaudited Financial Statements

1.     Background and Basis of Presentation

Background

Hechinger Liquidation Trust (the Trust) was established effective
October 26, 2001 (the Effective Date) in accordance with the Revised First
Amended Consolidated Plan of Liquidation (the Plan) for Hechinger Investment
Company of Delaware, Inc., et al., (Hechinger or the Debtors) confirmed by
the United States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court) by an order dated October 5, 2001. The Trust is governed
by, among other things, the Liquidation Trust Agreement.

The purpose of the Trust is to hold and effectuate an orderly disposition
of the trust assets (the Trust Assets) and to distribute the Trust Assets or
proceeds thereof in accordance with the Plan. All cash and other property of
Hechinger were transferred to the Trust pursuant to the terms of the Plan as of
the Effective Date so that, among other things, the Trust may (i) make all
distributions required under the Plan (Distributions) or payments to holders
of claims allowed pursuant to the Plan (Allowed Claims); (ii) resolve, either
consensually or through litigation, all disputed claims asserted against
Hechinger, pursuant to the Plan (Disputed Claims and, together with Allowed
Claims, the Claims); (iii) pursue claims assigned to the Trust; and (iv)
liquidate any and all remaining assets of Hechinger. The Trust will terminate
upon the earlier of (a) the fulfillment of the Trusts purpose by the
liquidation of all of the Trust Assets and the distribution of the proceeds
thereof in accordance with the Plan or (b) by October 26, 2005, unless the
Bankruptcy Court approves an extension of the term.

Certain types (Classes) of Claims will be paid in full under the Plan,
and therefore are also referred to as Unimpaired Claims. Unimpaired Classes
of Claims, as well as Convenience Class Claims (certain small Claims), are reflected
in the Statements of Net Assets in Liquidation as liabilities at estimated
aggregate settlement amounts. Reserves required under the Plan for future
estimated expenses of the Trust (i.e., the Wind-down Reserve and the Litigation
Reserve (see Note 7)) are reflected in the Statements of Net Assets in
Liquidation as estimated costs of liquidation.

Certain other Classes of Claims receive all remaining net proceeds, if
any, of the Trust after the expenses and all creditors of the Trust are paid.
Each holder of an Allowed Claim in the Plans Class 4A (Senior Unsecured
Claims), Class 4B (General Unsecured Claims), and Class 5 (Subordinated
Debentures Claims) (collectively, the Impaired Claims) is deemed to hold a
pro rata beneficial interest in the Trust based upon the Allowed amount of
their Claim as compared to the total amount of all Impaired Claims ultimately
allowed (the Beneficial Interests). Holders of Disputed Impaired Claims
receive Beneficial Interests in accordance with the Plan upon resolution of
their Disputed Claims and to the extent such Claims become Allowed Claims.
Holders of each Class of Beneficial Interests (i.e., each Class of Impaired
Claims) have the same rights, except with respect to payment of Distributions
(see Note 9).

On August 9, 2002, the Bankruptcy Court signed an Order (the Reserve
Order) allowing a motion by the Trust to establish the amounts of reserves for
Disputed Claims (the Disputed Claims Reserves). To the extent that the
Disputed Unimpaired Claims Reserve required under the Reserve Order exceeds
Unimpaired Claims Payable (see Note 5), the balance is a contingent reserve for
Excess Disputed Unimpaired Claims (see Note 8). The Reserve Order also
authorized the Trust to make an initial Distribution (the Initial
Distribution) to holders of Beneficial Interests (i.e., to holders of Allowed
Impaired Claims) of 4.515%, and established a 4.515% Reserve for Disputed
Impaired Claims (see Note 3). The unpaid amount of the Initial Distribution to
holders of Allowed Impaired Claims is reflected as a liability in the
Statements of Net Assets in Liquidation (see Note 6).

Basis of Presentation

The Trusts financial statements have been prepared using the liquidation
basis of accounting. Under this method of accounting, the Statements of Net
Assets in Liquidation reflect all assets and liabilities, including the
projected total cost of liquidating the assets and winding down the affairs of
the Trust, at estimated fair value. The Statements of Changes in Net Assets in
Liquidation primarily reflect

6



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##### 



any Distributions paid to holders of Beneficial Interests (as defined below)
and changes in the estimated fair value of the Trusts assets and liabilities.

The accompanying unaudited financial statements reflect all adjustments,
consisting only of normal recurring adjustments that are, in the opinion of the
Trustee, necessary for a fair statement of the results for the interim periods
presented. Such financial statements and these notes thereto should be read in
conjunction with the Trusts financial statements and notes thereto as of
September 30, 2002 and October 26, 2001 (Effective Date), and for the period
from October 26, 2001 (Effective Date) through September 30, 2002.

2.      Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires the Trustee to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Actual results are likely to
differ from those estimates and those differences may be significant.

3.      Cash

Cash Designated as Available for Distribution to Holders of Impaired
Claims (Available Cash) is reserved to assure the availability of funds for
payment to holders of Impaired Claims who have not received the 4.515% Initial
Distribution. During the period from October 1, 2002 through March 31, 2003,
the Trust paid approximately $4.2 million in Initial Distributions, and
decreased the required balance in Available Cash by a net amount of
approximately $2.6 million based on the resolution of a number of previously
Disputed Impaired Claims, leaving a total as of March 31, 2003 of approximately
$8.5 million of Available Cash.

Reserved Cash is held by the Trust to assure payment of the Trusts
obligations in accordance with the Plan. Under the terms of the Plan, Reserved
Cash is intended to provide for (a) operating expenses of the Trust, (b)
estimated payments to holders of Allowed Unimpaired and Convenience Claims in
accordance with the Plan, and (c) payments which may become necessary if and as
Disputed Unimpaired Claims become Allowed, or if certain specific contingencies
should occur. See Note 8 for details of specific reserves and their related
amounts.

Restricted Cash consists of cash held as collateral for a letter of credit
and cash held in escrow accounts.

Other Cash had not been designated to a specific reserve or fund as of a
particular date. Other Cash increased by approximately $14.0 million from
September 30, 2002 to March 31, 2003 to a balance of approximately $14.1
million. The increase is primarily the result of (i) net preference and other
cash receipts totaling approximately $6.2 million (after costs of preference
collection of approximately $1.0 million, and after allocating preference
collections of approximately $2.6 million to a reserve in accordance with a
stipulation), (ii) an approximately $4.5 million decrease in the contingent
reserve for Excess Disputed Unimpaired Claims (see Note 8), and (iii) the net
decrease of approximately $2.6 million in the required balance of Available
Cash.

4.      Preference Claims Receivable

The Trusts preference claims receivable (the Preference Receivables)
are reflected in the accompanying Statements of Net Assets in Liquidation at
their net estimated fair value of approximately $4.2 million, net of estimated
costs of recovery of approximately $1.1 million, at March 31, 2003 and
approximately $10.0 million, net of estimated costs of recovery of
approximately $2.9 million, at September 30, 2002.

7



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During the period from October 1, 2002 through March 31, 2003, the Trust
collected approximately $8.1 million in preference recoveries, paid
approximately $1.0 million in fees and expenses associated with such
recoveries, and increased its estimate of the fair value of the remaining
preference receivables by approximately $1.2 million. During the period from
October 26, 2001 (Effective Date) through March 31, 2002, the Trust collected
approximately $6.4 million in preference recoveries, paid approximately $1.3
million in fees and expenses associated with such recoveries, and increased its
estimate of the fair value of the remaining preference receivables by
approximately $0.6 million. Approximately $2.6 million of net preference
recoveries during the current period were required to be designated to a
reserve as part of a stipulation with Fleet Retail Finance Inc. (Fleet) (see
Note 8).

The fair value of Trust assets is reassessed at least quarterly and
adjustments to estimated fair values are reflected in the period in which they
become known. The eventual net realizable value of Preference Receivables is
likely to differ from their estimated net fair value and these differences may
be significant.

5.      Unimpaired Claims Payable

During the period from October 1, 2002 through March 31, 2003, the Trust
paid out approximately $1.5 million to holders of Allowed Unimpaired Claims,
and decreased its estimate of the aggregate settlement amounts of the remaining
Unimpaired Claims by approximately $0.3 million. During the period from
October 26, 2001 (Effective Date) through March 31, 2002, the Trust paid out
approximately $7.5 million to holders of Unimpaired Claims and decreased its
estimate of the aggregate settlement amounts of the remaining Unimpaired Claims
by approximately $2.1 million. These adjusted estimates resulted from certain
Unimpaired Claims being settled, in the aggregate, for less than the previously
estimated fair value of such Claims.

The fair value of Unimpaired Claims Payable is reassessed at least
quarterly and adjustments to estimated fair values are reflected in the period
in which they become known. However, no assurance can be given as to the
ultimate allowance, disallowance or settlement of the remaining Disputed
Unimpaired Claims, individually or in the aggregate.

6.      Distribution Payable

Distribution payable decreased by approximately $1.8 million from
September 30, 2002 to March 31, 2003 as a result of Initial Distributions from
Available Cash totaling approximately $4.2 million, offset by an increase of
approximately $2.5 million with respect to newly Allowed Impaired Claims not
yet paid the Initial Distribution.

7.      Estimated Costs of Liquidation

The Litigation Reserve and the Wind-down Reserve described below together
constitute the estimated costs of liquidation in the accompanying Statements of
Net Assets in Liquidation.

Under the Plan, the Trust was required to establish and fund the Wind-down
Reserve to pay administration costs and costs of holding and liquidating the
Trusts assets. During the period from October 1, 2002 through March 31, 2003,
the Trust paid out approximately $2.1 million of expenses from this reserve,
resulting in the remaining Wind-down Reserve of approximately $6.1 million as
of March 31, 2003. During the period from October 26, 2001 (Effective Date)
through March 31, 2002, the Trust paid out approximately $2.2 million of
expenses from this reserve, and increased the Wind-down Reserve by
approximately $1.0 million based on updated estimates of the aggregate
wind-down expenses of the Trust.

Pursuant to the Plan, the Trust also established a reserve of $3.0 million
as of October 26, 2001 (Effective Date) to pay the costs of pursuing certain
actions, primarily the Bondholder Action and the Committee Action (the
Litigation Reserve). During the period from October 1, 2002 through March
31, 2003, the Trust paid out approximately $2.2 million from the Litigation
Reserve, resulting in a remaining Litigation Reserve of approximately $1.2
million as of March 31, 2003. During the period from October

8



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26, 2001 (Effective Date) through March 31,
2002, no disbursements were made from the $3.0 million
Litigation Reserve. During the subsequent periods from April 1, 2002
through September 30, 2002, the Trust increased the Litigation
Reserve by $3.5 million, in accordance with the approval process set
forth in the Plan. During the same subsequent periods, the Trust paid
out approximately $3.1 million from the Litigation Reserve.

Discovery in the Committee Action is substantially complete, except for
the defendants delivering their expert reports, which the Court has ordered
them to do by June 16, 2003. The Trustee believes that the
remaining Litigation Reserve
of approximately $1.2 million as of March 31, 2003 may not be adequate to cover
all future expenses of these actions. However, a meaningful estimate of future
costs can only be made after the expert reports have been received and the
appropriate response can be formulated. Because any increase
in the Litigation Reserve requires approval, as provided in the Plan, an
increased estimate is not reflected in the financial statements of the Trust
until such time as this estimate of additional future costs, if any, can be
determined, and the requisite approval is obtained.

8.      Bankruptcy Reserves Required

Reserves, other than those funded by Restricted Cash, or included in Cash
Designated as Available for Distribution to Holders of Impaired Claims, consist
of:

|                                                                                               |                           |                |        |                    |  |   |        |        | 
|---------------------------------------------------------------------------------------------- | ------------------------- | -------------- | ------ | ------------------ |  | - | ------ | ------ | 
|($ in thousands)                                                                               |                           | As of          |        | As of             
|                                                                                               |                           | March 31, 2003 |        | September 30, 2002
|                                                                                               |                           |                |        |                    | 
|Liability Reserves                                                                             |                           |                |        |                    |  |   |        |       
|Wind-down (net of related escrow of $278)                                                      |                           | $              | 5,867  |                    |  | $ | 7,998  |       
|Litigation                                                                                     |                           |                | 1,185  |                    |  |   | 3,379  |       
|Unimpaired Claims (net of collateralized letter
of credit of $9,331 and $10,118, respectively) |                           |                | 4,432  |                    |  |   | 5,334  |       
|Convenience Claims                                                                             |                           |                | 33     |                    |  |   | 47     |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               | Total Liability Reserves  |                |        | 11,517             |  |   |        | 16,758 | 
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|Contingent Reserves                                                                            |                           |                |        |                    |  |   |        |       
|Fleet                                                                                          |                           |                | 11,000 |                    |  |   | 8,447  |       
|Excess Disputed Unimpaired Claims                                                              |                           |                | 3,013  |                    |  |   | 7,559  |       
|Minimum Reserve                                                                                |                           |                | 3,000  |                    |  |   | 3,000  |       
|Preference Vendors                                                                             |                           |                | 25     |                    |  |   | 60     |       
|Former Employees                                                                               |                           |                |       |                    |  |   | 407    |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               | Total
Contingent Reserves |                |        | 17,038             |  |   |        | 19,473 | 
|                                                                                               |                           |                |        |                    |  |   |        |       
|                                                                                               |                           |                |        |                    |  |   |        |       
|Total Reserves                                                                                 |                           | $              | 28,555 |                    |  | $ | 36,231 |       
|                                                                                               |                           |                |        |                    |  |   |        |       

A stipulation between the Trust and Fleet required that the Trust increase
the Fleet Reserve to a total of $11.0 million, funded from net preference
recoveries (see Note 4). During the period from October 1, 2002 through March
31, 2003, approximately $2.6 million of net preference proceeds were applied to
this reserve, increasing it to the stipulated $11.0 million balance.

The approximately $4.5 million decrease in the Excess Disputed Unimpaired
Claims Reserve from September 30, 2002 to March 31, 2003 resulted from the
Bankruptcy Court approving certain Claims settlements, the effects of which
were previously taken into account in the Trusts estimate of Unimpaired Claims
Payable as of September 30, 2002.

In January 2003, the
Former Employees Reserve was ordered released, as the
Former Employees appeal period from the related adverse ruling had expired.

9.      Impaired Claims

As of March 31, 2003 and as of September 30, 2002, the Trusts estimate of
the total fair value of Impaired Claims was approximately $793.4 million and
approximately $812.8 million, respectively. The

9



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fair value of Impaired Claims
is reassessed at least quarterly and adjustments to estimated fair values are
reflected in the period in which they become known.

During the period from October 1, 2002 through March 31, 2003,
approximately $4.2 million was distributed, under the Initial Distribution, to
holders of Allowed Impaired Claims. Distributions are made in accordance with
the priority and subordination provisions set forth in the Plan. Until such
time as all holders of Allowed Senior Unsecured Claims have received the full
amount of their Allowed Claims, any amounts allocated for payment to holders of
Subordinated Debentures Claims will be distributed to holders of Senior
Unsecured Claims. Therefore, although the holders of Subordinated Debentures
Claims are holders of Beneficial Interests, they have no current economic
interest in the Trust.

Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations.

Reference is made to the unaudited financial statements of the Trust as of
March 31, 2003 and September 30, 2002 and for the periods from October 1, 2002
through March 31, 2003 and from October 26, 2001 (Effective Date) through March
31, 2002, and the notes thereto (the Unaudited Trust Financial Statements),
included in Part I of this Form 10-Q. The following information concerning the
Trusts financial performance and condition should be read in conjunction with
the audited Trust Financial Statements as of September 30, 2002 and October 26,
2001 (Effective Date) and for the period from October 26, 2001 (Effective Date)
through September 30, 2002, and the notes thereto. The Unaudited Trust
Financial Statements have been prepared on the same basis as the audited Trust
Financial Statements, using the liquidation basis of accounting, and, in the
opinion of the Trustee, contain all adjustments, consisting of normal recurring
adjustments necessary for a fair presentation of the Trusts results for such
periods. The Trusts results for the six months ended March 31, 2003 are not
necessarily indicative of the results to be expected for any other interim
period or any future fiscal year.

Accounting Policies and Estimates.

The following discussion and analysis of the Trusts net assets in
liquidation, changes in net assets in liquidation and cash receipts and
disbursements is based on the Unaudited Trust Financial Statements which have
been prepared in accordance with accounting principles generally accepted in
the United States of America and in accordance with the liquidation basis of
accounting. During preparation of these Financial Statements, the Trustee is
required to make estimates and assumptions which affect the reported amounts of
assets in liquidation at estimated fair value, liabilities in liquidation at
estimated fair value, resolution of disputed claims, resolution of current and
potential litigation and the fair value, and related disclosure, of contingent
assets and liabilities. On an ongoing basis, the Trustee evaluates and updates
these estimates and assumptions based on historical experience and on various
other assumptions the Trustee believes are reasonable under the circumstances.
Actual results may differ from these estimates and different assumptions would
lead to different estimates.

Changes in net assets in liquidation and cash flows.

i) For the periods from January 1, 2003 through March 31, 2003 and from
January 1, 2002 through March 31, 2002.

Net assets in liquidation decreased by approximately $0.3 million during
the period from January 1, 2003 through March 31, 2003, to the balance of
approximately $43.8 million, as a result of an increase of approximately $1.5
million in Distribution Payable, and an increase of approximately $0.2 million
in estimated fair value of Unimpaired Claims payable, offset by an increase of
approximately $1.2 million in estimated fair value of net preference claims
receivable, and interest income and other increases of approximately $0.3
million.

Net assets in liquidation increased by approximately $2.1 million during
the period from January 1, 2002 through March 31, 2002, to the balance of
approximately $67.1 million, as a result of a decrease of approximately $2.1
million in estimated fair value of Unimpaired Claims payable, an approximately
$0.6 million increase in estimated fair value of preference claims receivable,
and interest income of approximately $0.4 million, offset by an increase of approximately $1.0
million in estimated costs of liquidation. The decrease in the estimated fair
value of Unimpaired Claims payable resulted from Claims settlements aggregating
approximately $2.1 million less than previously expected. The increase in

10



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estimated costs of liquidation was based on a revised forecast of operational
requirements prior to the termination of the Trust.

ii) For the periods from October 1, 2002 through March 31, 2003 and from
October 26, 2001 (Effective Date) through March 31, 2002.

Net assets in liquidation decreased by approximately $0.4 million during
the period from October 1, 2002 through March 31, 2003 as a result of an
increase of approximately $2.5 million in Distribution Payable, offset by an
increase of approximately $1.2 million in estimated fair value of net
preference claims receivable, a decrease of approximately $0.3 million in
estimated fair value of Unimpaired Claims payable and interest income and other
increases of approximately $0.5 million. Changes in net assets in liquidation
during the period from October 26, 2001 (Effective Date) through March 31, 2002
were the same as the changes during the three month period ended March 31, 2002,
except for approximately $0.3 million in additional interest income.

Cash and cash equivalents decreased approximately $1.3 million during the
period from October 1, 2002 through March 31, 2003, to the balance of
approximately $61.3 million, primarily as a result of approximately $4.2
million in Distributions paid, approximately $2.2 million in legal fees paid
with respect to the Bondholder Action and the Committee Action, and
approximately $2.1 million in operating expenses, offset by approximately $7.1
million in preference receipts, net of costs of collection. Distributions paid
related to the Initial Distribution pursuant to the Reserve Order entered in
August 2002.

Cash and cash equivalents decreased approximately $3.5 million during the
period from October 26, 2001 (Effective Date) through March 31, 2002, primarily
as a result of approximately $7.5 million in payments for Unimpaired Claims and
approximately $2.2 million in operating expenses, offset by approximately $5.1
million in preference receipts, net of costs of collection.

Net assets in liquidation.

i) Cash and cash equivalents and preference receivables.

The Trusts cash and cash equivalents balance of approximately $61.3
million and approximately $62.6 million as of March 31, 2003 and September 30,
2002, respectively, is classified as either (a) Available Cash, (b) Reserved,
(c) Restricted or (d) Other.

Available Cash decreased by approximately $6.8 million from September 30,
2002 to March 31, 2003, to a balance of approximately $8.5 million, as a result
of approximately $4.2 million in Initial Distributions made by the Trust, and a
net decrease in the required balance in Available Cash by approximately $2.6
million based on the resolution of a number of previously Disputed Impaired
Claims.

Reserved Cash decreased by approximately $7.7 million from September 30,
2002 to March 31, 2003, to a balance of approximately $28.6 million, as a
result of changes in the various liabilities and contingent reserves discussed
below (see also Note 8 to the Unaudited Trust Financial Statements filed
herein).

Restricted Cash decreased by approximately $0.8 million from September 30,
2002 to March 31, 2003, to a balance of approximately $10.1 million as of March
31, 2003. This balance primarily consists of the Secured Claim asserted by
Kemper.

Other Cash increased by approximately $14.0 million from September 30,
2002 to March 31, 2003, to a balance of approximately $14.1 million. The
increase is primarily a result of (i) the net decrease of approximately $2.6
million in the required balance of Available Cash, (ii) an approximately $4.5
million decrease in the contingent reserve for Excess Disputed Unimpaired
Claims (described below under iii), Contingent Reserves) and (iii) net
preference and other cash receipts totaling approximately $6.2 million (after
costs of preference collection of approximately $1.0 million, and after
allocating preference collections of approximately $2.6 million to the Fleet
Reserve in accordance with a stipulation between the Trust and Fleet). See
Significant Contingent Reserves, below, for further discussion and definitions.

Preference claims receivable, net of costs of recovery, decreased by
approximately $5.9 million from September 30, 2002 to March 31, 2003, to a
balance of approximately $4.2 million primarily due to collections of
approximately $7.1 million of preference claims, net of costs of
collection, and an increase in the estimated
fair value of the remaining preference claims receivable of approximately $1.2
million. This increase in the estimated fair

11



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value resulted from costs of collection which were lower than
previously estimated, as well
as from favorable settlements in several preference actions.

ii) Liabilities.

Unimpaired Claims payable decreased by approximately $1.7 million from
September 30, 2002 to March 31, 2003, to a balance of approximately $13.8
million, primarily as a result of Claims payments of approximately $1.5 million
and a decrease in the estimated fair value of the remaining Unimpaired Claims
payable of approximately $0.3 million.

Distributions payable decreased by approximately $1.8 million from
September 30, 2002 to March 31, 2003, to a balance of approximately $2.1
million primarily as a result of Initial Distributions from Available Cash
totaling approximately $4.2 million, offset by an increase of approximately
$2.5 million with respect to newly Allowed Impaired Claims. As Disputed
Impaired Claims become Allowed, their Initial Distribution is reflected in
Distributions payable until paid.

Estimated costs of liquidation decreased by approximately $4.3 million
from September 30, 2002 to March 31, 2003, to a balance of $7.3 million due to
disbursements totaling approximately $2.1 million from the Wind-down Reserve
and approximately $2.2 million from the Litigation Reserve.

Discovery in the Committee Action is substantially complete, except for
the defendants delivering their expert reports, which the Court has ordered
them to do by June 16, 2003. The Trustee believes that the
remaining Litigation Reserve
of approximately $1.2 million as of March 31, 2003 may not be adequate to cover
all future expenses of these actions. However, a meaningful estimate of future
costs can only be made after the expert reports have been received and the
appropriate response can be formulated. Because any increase
in the Litigation Reserve requires approval, as provided in the Plan, an
increased estimate is not reflected in the financial statements of the Trust
until such time as this estimate of additional future costs, if any, can be
determined, and the requisite approval is obtained.

The Litigation covered by this reserve is complex in nature and scale and
forecasting its total cost is very difficult, especially in the early stages of
the litigation and during the discovery process. The Litigation Reserve has
increased primarily from the unexpected level of activity and duration in
connection with the Committee Action. The initial plan for the case did not
anticipate the number and scope of discovery requests, depositions, and
motions, and various delays in scheduling and proceeding with the case.
Additionally, the defenses raised by the defendants required expenditures at
levels not originally anticipated; the expenses for experts in
insolvency and valuation have also been greater than originally
anticipated. In addition, the trial date for the Committee Action, originally expected to be in
late 2002, is now scheduled for early 2003. The trial date for the Bondholder
Action is scheduled for October 2003.

iii) Contingent Reserves.

Contingent reserves decreased by approximately $2.4 million from September
30, 2002 to March 31, 2003, to a balance of approximately $17.0 million (see
Note 8 to the Unaudited Trust Financial Statements). The most significant
changes in contingent reserves were as follows:

As a result of a stipulation between the Trust and Fleet, the amount of a
reserve for potential future claims of Fleet against the Trust in connection
with the Bondholder Action and the Committee Action is set at $11.0 million, to
be funded with preference receipts starting in August 2002. During the period
from October 1, 2002 through March 31, 2003, approximately $2.6 million of net
preference proceeds were applied to this reserve, increasing it to the
stipulated $11.0 million balance.

The reserve for Excess Disputed Unimpaired Claims decreased approximately
$4.5 million from September 30, 2002 to March 31, 2003, to a balance of
approximately $3.0 million, as a result of the Bankruptcy Court approving
certain Claims settlements, the effects of which were previously taken into
account in the Trusts estimate of Unimpaired Claims Payable as of September
30, 2002.

The Plan had provided for a reserve of approximately $0.4 million, based
on a motion filed in the Bankruptcy Court seeking allowance of purported
administrative expense Claims relating to certain severance and retention
benefits for certain former employees of Hechinger. In January 2003, this
Reserve was ordered released, as the Former Employees appeal period from the
related adverse ruling had expired.

12



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Forward-Looking Statements.

This quarterly report on Form 10-Q contains forward-looking statements
about the business, financial condition and prospects of the Trust. The actual
results of the Trust could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties,
including without limitation, the Trusts success in securing claims
settlements on the terms currently contemplated in ongoing negotiations and in
other estimates of settlement value, the effect of substantial delays in
settling contingent assets and liabilities, resulting in a prolonged period of
liquidation, economic conditions, changes in tax and other government rules and
regulations applicable to the Trust and other risks. These risks are beyond
the ability of the Trust to control, and in many cases, the Trust cannot
predict the risks and uncertainties that could cause its actual results to
differ materially from those indicated by any forward-looking statements
included in this Form 10-Q. When used in this quarterly report, the words
believes, estimates, plans, expects, anticipates and other similar
expressions as they relate to the Trust or the Trustee are intended to identify
forward-looking statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Trust does not hold any market risk sensitive instruments.

Item 4.  Controls and Procedures.

The Trust has designed and maintains disclosure controls and procedures to
ensure that information required to be disclosed in its reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Commissions rules and
regulations. These controls and procedures are also designed to ensure that
such information is communicated to the Liquidation Trustee, to allow him to
make timely decisions about required disclosures.

The Trust, including the Liquidation Trustee, has conducted an evaluation
of the effectiveness of disclosure controls and procedures pursuant to Exchange
Act Rule 13a-15. Based on that evaluation, which was conducted within 90 days
prior to the date of this report, the Liquidation Trustee concluded that the
Trusts disclosure controls and procedures are effective.

There have been no significant changes in the Trusts internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the Liquidation Trustees most recent evaluation.

13



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PART II  OTHER INFORMATION

Item 1.  Legal Proceedings.

No material developments during the period.

Item 2.  Changes in Securities and Use of Proceeds.

None.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

Item 5.  Other Information.

None.

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits

Exhibit Number                      Document

|     |  |                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|99.1 |  | Liquidation Trustees Certification Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K

None.

14



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SIGNATURES

Pursuant to the requirements 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.

|                   |  |                                                                                     
|------------------ |  | ------------------------------------------------------------------------------------
|                   |  | HECHINGER LIQUIDATION TRUST                                                         
|                  
|Date: May 15, 2003 |  | By: /s/   Conrad F. Hocking
Name:  Conrad F. Hocking
Title:      Liquidation Trustee

15



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CERTIFICATION

I, Conrad F. Hocking, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Hechinger
Liquidation Trust;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, changes in financial condition
and cash flows of the registrant as of, and for, the periods presented in
this quarterly report;          
|4. |  | I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:                                                                                                                                                      

| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
| | c) |  | presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;                                                                                                                          

|5. |  | I have disclosed, based on my most recent evaluation, to the registrants
auditors and representatives of the Committee:
|-- |  | ------------------------------------------------------------------------------------------------------------------------

| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

|6. |  | I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |     |  |                                                                        
|------------------ |  | --- |  | -----------------------------------------------------------------------
|Date: May 15, 2003 |  | By: |  | /s/ Conrad F. Hocking
      Conrad F. Hocking
      Liquidation Trustee

16



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INDEX TO EXHIBITS
FORM 10-Q

Exhibit No.

|     |  |                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|99.1 |  | Liquidation Trustees Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

17