<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

(MARK ONE)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 2005 OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     FOR THE TRANSITION PERIOD FROM ______________ TO ___________

     COMMISSION FILE NUMBER: 2-20910

                               TRUE VALUE COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
                   DELAWARE                                       36-2099896
       (State or other jurisdiction of                         (I.R.S. Employer
        incorporation or organization)                       Identification No.)
</TABLE>

<TABLE>
<S>                                                               <C>
8600 WEST BRYN MAWR AVENUE, CHICAGO, ILLINOIS                     60631-3505
   (Address of principal executive offices)                       (Zip Code)
</TABLE>

                                 (773) 695-5000
              (Registrant's telephone number, including area code)

                                 Not applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of each of the issuer's classes of common
stock, as of October 29, 2005.

<TABLE>
<S>                                    <C>
Class A common stock, $100 Par Value     318,360
Class B common stock, $100 Par Value   1,171,282
</TABLE>

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.
($ in thousands - except per share information)

                               TRUE VALUE COMPANY
                      CONDENSED CONSOLIDATED BALANCE SHEET

                                   (UNAUDITED)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                       October 1,   December 31,
                                                                          2005          2004
                                                                       ----------   ------------
<S>                                                                    <C>          <C>
CURRENT ASSETS:
   Cash and cash equivalents                                            $  6,024      $  7,222
   Accounts and notes receivable, net of allowance for doubtful
      accounts of $3,206 and $3,835                                      233,862       200,958
   Inventories                                                           335,801       264,235
   Prepaid expenses                                                       16,787        15,070
                                                                        --------      --------
      Total current assets                                               592,474       487,485

Properties, net of accumulated depreciation of $252,703 and $267,932      63,530        70,448
Goodwill                                                                  91,474        91,474
Other assets                                                              11,284         6,112
                                                                        --------      --------
      Total assets                                                      $758,762      $655,519
                                                                        ========      ========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                        2

<PAGE>

                         LIABILITIES AND MEMBERS' EQUITY

<TABLE>
<CAPTION>
                                                                         October 1,   December 31,
                                                                            2005          2004
                                                                         ----------   ------------
<S>                                                                      <C>          <C>
CURRENT LIABILITIES:
   Accounts payable                                                       $258,196      $230,046
   Drafts payable                                                           33,815        56,209
   Accrued expenses                                                         99,441        70,405
   Current maturities of long-term debt, notes and capital lease
      obligations                                                           68,212        31,109
   Patronage dividend payable in cash                                        6,776        12,669
                                                                          --------      --------
      Total current liabilities                                            466,440       400,438
                                                                          --------      --------
LONG-TERM LIABILITIES AND DEFERRED CREDITS:
   Long-term debt including notes and capital lease obligations, less
      current maturities                                                   160,725       139,192
   Deferred gain on sale leaseback                                          45,144        47,230
   Other long-term liabilities                                              21,443        18,837
   Redeemable non-qualified Class B non-voting common stock,
      $100 par value; 207,577 and 216,261 shares issued and fully paid      20,758        21,626
                                                                          --------      --------
      Total long-term liabilities and deferred credits                     248,070       226,885
                                                                          --------      --------
      Total liabilities and deferred credits                               714,510       627,323
                                                                          --------      --------
Commitments and contingencies                                                   --            --

MEMBERS' EQUITY:
   Redeemable Class A voting common stock, $100 par value;
      750,000 shares authorized; 292,200 and 296,820 shares
      issued and fully paid; 26,160 and 22,920 shares issued (net
      of subscriptions receivable of $1,274 and $1,484)                     30,562        30,490
   Redeemable qualified Class B non-voting common stock and paid-in
      capital, $100 par value; 4,000,000 shares authorized;
      966,566 and 1,008,882 shares issued and fully paid                    97,955       102,187
   Loss allocation                                                         (18,297)      (19,420)
   Deferred patronage                                                      (23,737)      (24,298)
   Accumulated deficit                                                     (40,328)      (58,860)
   Accumulated other comprehensive loss                                     (1,903)       (1,903)
                                                                          --------      --------
      Total members' equity                                                 44,252        28,196
                                                                          --------      --------
      Total liabilities and members' equity                               $758,762      $655,519
                                                                          ========      ========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                        3

<PAGE>

                               TRUE VALUE COMPANY
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  For the quarter ended    For the first three quarters ended
                                                 -----------------------   ----------------------------------
                                                 October 1,   October 2,         October 1,   October 2,
                                                    2005         2004               2005         2004
                                                 ----------   ----------         ----------   ----------
<S>                                              <C>          <C>          <C>                <C>
Net revenue                                       $486,815     $474,516          $1,541,976   $1,549,223
Cost of revenue                                    424,630      418,560           1,363,755    1,381,766
                                                  --------     --------          ----------   ----------
Gross margin                                        62,185       55,956             178,221      167,457
Operating expenses:
   Logistics and manufacturing expenses             16,139       14,551              50,314       46,528
   Selling, general and adminstrative expenses      22,261       25,010              75,239       79,799
   Arbitration provision                            18,200           --              18,200           --
   Other income, net                                  (768)        (527)             (1,163)      (1,590)
                                                  --------     --------          ----------   ----------
Operating income                                     6,353       16,922              35,631       42,720
Interest expense to members                          1,362        1,602               4,047        4,353
Third-party interest expense                         2,021        1,899               6,523        5,797
                                                  --------     --------          ----------   ----------
Net margin before income taxes                       2,970       13,421              25,061       32,570
Income tax expense                                      12           20                  43          130
                                                  --------     --------          ----------   ----------
Net margin                                        $  2,958     $ 13,401          $   25,018   $   32,440
                                                  ========     ========          ==========   ==========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                       4

<PAGE>

                               TRUE VALUE COMPANY
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  For the first three quarters ended
                                                                  ----------------------------------
                                                                        October 1,   October 2,
                                                                           2005         2004
                                                                        ----------   ----------
<S>                                                               <C>                <C>
Operating activities:
   Net margin                                                            $ 25,018     $ 32,440
   Adjustments to reconcile net margin to net cash and cash
      equivalents from operating activities:
      Depreciation and amortization                                        10,175       12,748
      Benefit for losses on accounts and notes receivable                    (175)        (704)
      Loss on sale of assets                                                  803          155
      Provision for inventory reserves                                      8,565        8,315
      Amortization of deferred gain on sale leaseback                      (2,086)      (2,052)
      Net change in working capital components and other assets           (61,723)      (5,584)
                                                                         --------     --------
         Net cash and cash equivalents provided by / (used for)
            operating activities                                          (19,423)      45,318
                                                                         --------     --------
Investing activities:
   Additions to properties                                                (11,520)      (8,101)
   Proceeds from sale of properties                                         8,343          450
                                                                         --------     --------
      Net cash and cash equivalents used for investing
         activities                                                        (3,177)      (7,651)
                                                                         --------     --------
Financing activities:
   Payment of patronage dividend                                          (11,939)      (8,452)
   Payment of notes, long-term debt and lease obligations                    (722)        (851)
   Decrease in drafts payable                                             (22,394)     (11,364)
   Increase / (decrease) in revolving credit facility, net                 56,000      (13,003)
   Proceeds from common stock and stock subscriptions receivable            1,625          997
   Purchase of common stock                                                (1,168)      (7,231)
                                                                         --------     --------
      Net cash and cash equivalents provided by / (used for)
         financing activities                                              21,402      (39,904)
                                                                         --------     --------
Net decrease in cash and cash equivalents                                  (1,198)      (2,237)
Cash and cash equivalents at beginning of period                            7,222        9,234
                                                                         --------     --------
Cash and cash equivalents at end of period                               $  6,024     $  6,997
                                                                         ========     ========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                        5

<PAGE>

                               TRUE VALUE COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)
                                ($ IN THOUSANDS)

NOTE 1 - GENERAL

     The condensed consolidated balance sheet at October 1, 2005, the condensed
consolidated statement of operations for the quarters and the first three
quarters ended October 1, 2005 and October 2, 2004, and the condensed
consolidated statement of cash flows for the first three quarters ended October
1, 2005 and October 2, 2004 are unaudited and, in the opinion of the management
of True Value, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of financial position at the balance
sheet dates and results of operations and cash flows for the respective interim
periods. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. These financial statements should be read in conjunction
with the consolidated financial statements for the year ended December 31, 2004
included in True Value's 2004 Annual Report on Form 10-K.

NOTE 2 - RECLASSIFICATIONS

     Certain reclassifications have been made to the prior year's condensed
consolidated financial statements to conform to the current year's presentation.
These reclassifications had no effect on Net margin for any period or on Total
members' equity at the balance sheet dates.

NOTE 3 - ESTIMATED PATRONAGE DIVIDENDS

     Participation in the earnings or losses of a cooperative is based on member
patronage purchases and reflected by the payment of patronage dividends. If
financial and operating conditions permit, patronage dividends are declared and
paid by True Value after the close of each fiscal year. True Value's By-Laws and
Internal Revenue Service regulations require that the payment of at least 20% of
patronage dividends be in cash. Commencing with the 2004 patronage dividend that
was paid in 2005, the board of directors authorized retaining 5% of net
patronage source income, as a reasonable reserve, to reduce the Accumulated
deficit account. The estimated cash portion of the patronage dividend for the
first three quarters ended October 1, 2005 was $6,776 or 30% of the first three
quarters' estimated patronage dividend of $22,585, which was patronage income
less the 5% retained as a reasonable reserve. The estimated cash portion of the
patronage dividend for the corresponding period for 2004 was $9,643, which was
30% of the estimated patronage dividend. Consistent with the prior year, to the
extent True Value declares a patronage dividend for 2005, it intends to issue in
2006 the non-cash portion of the dividend in the form of Redeemable qualified
Class B common stock and Promissory (subordinated) notes. For those members who
have Loss allocation accounts, the value of the Redeemable qualified Class B
common stock will be offset against those accounts. The non-cash portion of the
estimated 2005 patronage dividend will remain in the Accumulated deficit account
until the dividend is declared. To the extent True Value declares a patronage
dividend, it is allowed a deduction in that amount to determine taxable income.
Based on the estimated patronage dividend, the U.S. federal effective income tax
rate for 2005 is 0%.


                                        6

<PAGE>

NOTE 4 - INVENTORIES

<TABLE>
<CAPTION>
                                        October 1,   December 31,
                                           2005          2004
                                        ----------   ------------
<S>                                     <C>          <C>
Manufacturing inventories:
   Raw materials                         $  2,381      $  1,666
   Work-in-process and finished goods      26,349        22,492
   Manufacturing inventory reserves        (1,324)       (1,112)
                                         --------      --------
                                           27,406        23,046
                                         --------      --------
Merchandise inventories:
   Warehouse inventory                    320,540       250,273
   Merchandise inventory reserves         (12,145)       (9,084)
                                         --------      --------
                                          308,395       241,189
                                         --------      --------
   Total                                 $335,801      $264,235
                                         ========      ========
</TABLE>

     Inventories are stated at the lower of cost, determined on the first-in,
first-out basis, or market. The cost of inventory also includes indirect costs
incurred to bring inventory to its existing location for resale. The amount of
indirect costs included in ending inventory at October 1, 2005 and December 31,
2004 was $22,007 and $17,373, respectively.

NOTE 5 - DEBT

     On August 29, 2003, True Value entered into a four-year $275,000 revolving
credit bank facility (the "Bank Facility"). Availability under the Bank Facility
is limited to the lesser of $275,000 or the collateral value of eligible assets
(the "borrowing base"), less outstanding borrowings, letters of credit and
reserves. The reserve amounts, if any, are set at the discretion of the lenders.
True Value's availability at October 1, 2005 was $55,308.

     True Value amended its Bank Facility on May 6, 2005 primarily to lower the
interest rates charged on this debt, extend the term of the Bank Facility for
one year to August of 2008, and ease certain restrictive language, which had the
primary effect of increasing the spending limitations on capital expenditures,
leases and various distributions to members.

     The interest rate charged for the Bank Facility borrowings is variable at
either the London Interbank Offering Rate ("LIBOR") or prime, plus in either
case, an additional amount of interest determined based on a performance-based
pricing grid. True Value has the option to select LIBOR or prime as the base
rate. The performance grid is based upon True Value's fixed charge coverage
ratio, measured quarterly. Based on this performance pricing grid, True Value
achieved 0.25% of improved variable pricing effective May 1, 2004. The
performance-based pricing grid was amended in May 2005 to (1) lower the interest
rate that is added to LIBOR or prime borrowings and (2) decrease the fixed
charge ratio needed to achieve improved pricing. Based on this amended
performance pricing grid, True Value achieved 0.75% of improved variable pricing
effective May 11, 2005. As of October 1, 2005 and October 2, 2004, this interest
rate was 5.44% and 3.84%, respectively, as the decrease to interest cost
resulting from the amended performance grid was more than offset by an increase
in the underlying LIBOR and prime rates. The unused commitment fee is 0.375%.
Letters of credit issued under the Bank Facility have a fee based on the
performance pricing grid and this fee was 1.5% and 2.0% as of October 1, 2005
and October 2, 2004, respectively. Fees paid for acquiring the Bank Facility
totaled $3,752 and these fees are being amortized by True Value over the term of
the agreement.

     The Bank Facility has no financial covenants unless daily average excess
availability for the last 60 days of each quarter drops below $35,000. If the
average is below $35,000, True Value is subject to a fixed charge coverage ratio
of 1 to 1. This fixed charge coverage ratio increases to 1.1 to 1 beginning with
the second half of 2006. As of October 1, 2005, True Value's average excess
availability for the last 60 days was greater than $35,000 and True Value was
therefore not subject to the fixed charge coverage ratio test. Additionally,
True Value is required to


                                        7

<PAGE>

maintain $15,000 of excess availability at all times. Management believes it is
in compliance with this requirement and is in compliance with all terms and
conditions of the Bank Facility.

     At October 1, 2005, True Value had Current maturities of long-term debt,
notes and capital lease obligations of $68,212. Only $13,912 of this amount has
required payments during the next 12 months and the remaining $54,300 was the
current portion of the Bank Facility, which reflects the seasonality of True
Value's business. The required payments consist of $6,053 of subordinated
installment notes, $5,706 of subordinated promissory notes, $1,251 of accrued
stock redemption liability and $902 of capital leases. Historically, a minimum
of 50% of the subordinated promissory notes have been renewed, extending the
maturity for an additional three years. True Value has received note renewal
commitments for an additional three year term on approximately 75% of the notes
scheduled to mature on December 31, 2005 and has classified these notes as
long-term debt as of October 1, 2005. In 2004, this renewal rate was
approximately 70%. The current and long-term portions of the Bank Facility do
not have any required payments until 2008. At October 1, 2005, True Value had
$144,300 in revolving credit loans, of which $54,300 was included in Current
maturities of long-term debt, notes and capital lease obligations, and $90,000
was included in Long-term debt, notes and capital lease obligations, less
current maturities. Based on management's projection of seasonal working capital
needs, the amount classified as Long-term debt, notes and capital lease
obligations, less current maturities represents the estimated lowest level of
borrowings during the next 12 months.

NOTE 6 - ASSET SALE

     On April 20, 2005, True Value sold its 640,000 square foot East Butler,
Pennsylvania facility to a third party for a purchase price of $6,188. In the
first quarter of 2005, True Value recorded an impairment charge of $942 to write
down this facility that was classified as held-for-sale to fair value. Pursuant
to the Purchase and Sale Agreement, True Value leased back approximately 100,000
square feet of warehouse space through the end of 2005 and approximately 15,000
square feet of office space through the end of 2006 under an operating lease.
The lease on the warehouse space has been extended to the end of the first
quarter of 2006.

NOTE 7 - SEGMENT INFORMATION

      True Value is principally engaged as a wholesaler of hardware and related
products and is a manufacturer of paint products. True Value identifies segments
based on management responsibility and the nature of the business activities of
each of its components. True Value measures segment net margin as operating
earnings, including an allocation for interest expense and income taxes.
Information regarding the identified segments and the related reconciliation to
consolidated information are as follows:

<TABLE>
<CAPTION>
                                  For the quarter ended October 1, 2005
                                  -------------------------------------
                                                         Consolidated
                                    Hardware    Paint       Totals
                                    --------   -------   ------------
<S>                               <C>          <C>       <C>
Net sales to external customers     $455,728   $31,087     $486,815
Interest expense                       3,172       211        3,383
Depreciation and amortization          2,677       420        3,097
Segment net margin                      (386)    3,344        2,958
</TABLE>

<TABLE>
<CAPTION>
                                  For the quarter ended October 2, 2004
                                  -------------------------------------
                                                         Consolidated
                                    Hardware    Paint       Totals
                                    --------   -------   ------------
<S>                               <C>          <C>       <C>
Net sales to external customers     $443,135   $31,381     $474,516
Interest expense                       2,820       681        3,501
Depreciation and amortization          3,458       323        3,781
Segment net margin                     9,555     3,846       13,401
</TABLE>


                                        8

<PAGE>

<TABLE>
<CAPTION>
                                  For the first three quarters ended October 1, 2005
                                  --------------------------------------------------
                                                                 Consolidated
                                           Hardware     Paint        Totals
                                          ----------   -------   ------------
<S>                               <C>                  <C>       <C>
Net sales to external customers           $1,457,346   $84,630    $1,541,976
Interest expense                               8,979     1,591        10,570
Depreciation and amortization                  8,580     1,595        10,175
Segment net margin                            19,388     5,630        25,018
Identifiable segment assets                  701,951    56,811       758,762
</TABLE>

<TABLE>
<CAPTION>
                                  For the first three quarters ended October 2, 2004
                                  --------------------------------------------------
                                                                 Consolidated
                                           Hardware     Paint        Totals
                                          ----------   -------   ------------
<S>                               <C>                  <C>       <C>
Net sales to external customers           $1,462,347   $86,876    $1,549,223
Interest expense                               8,378     1,772        10,150
Depreciation and amortization                 11,737     1,011        12,748
Segment net margin                            21,722    10,718        32,440
Identifiable segment assets                  629,411    53,928       683,339
</TABLE>

NOTE 8 - BENEFITS

Pension Plans

     The components of net periodic pension cost for True Value administered
pension plans were as follows for the quarters and the first three quarters
ended October 1, 2005 and October 2, 2004:

<TABLE>
<CAPTION>
                                                                       For the first three
                                            For the quarter ended         quarters ended
                                           -----------------------   -----------------------
                                           October 1,   October 2,   October 1,   October 2,
                                              2005         2004         2005         2004
                                           ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>
Components of net periodic pension cost:
   Service cost                             $ 1,500      $ 1,300      $ 4,500      $ 4,200
   Interest cost                              1,200        1,100        3,500        3,200
   Expected return on assets                 (1,200)      (1,200)      (3,600)      (3,400)
   Amortization of prior service cost            --           --           --         (100)
   Amortization of actuarial loss               400          400        1,000        1,100
   Settlement loss                              700          700        2,000        2,400
                                            -------      -------      -------      -------
      Net pension cost                      $ 2,600      $ 2,300      $ 7,400      $ 7,400
                                            =======      =======      =======      =======
</TABLE>

Contributions

     True Value expects to contribute approximately $7,300 to its qualified
pension plan and $295 to its supplemental retirement plan in 2005. As of October
1, 2005, True Value had contributed $7,300 to its qualified pension plan and
$221 to its supplemental retirement plan.

NOTE 9 - PLANT CLOSURE

     In the first quarter of 2005, True Value announced that it will close its
Chicago paint manufacturing facility ("Blackhawk") and move its operations to
the Cary, Illinois paint manufacturing facility. The move of the operations is
expected to occur in December 2005. The decision was made as a result of
declining operations at the under-utilized facility in Chicago.


                                        9

<PAGE>

NOTE 10 - COMMITMENTS AND CONTINGENCIES

ACTIVE LEGAL MATTERS:

FLEGLES ACTION

     On February 12, 2003, a former True Value member, Flegles Inc. ("Flegles"),
filed suit against True Value in the Circuit Court of Carlisle County, Kentucky.
The complaint alleges that True Value is liable to Flegles for the role True
Value played with respect to Flegles' construction of a new retail store
facility in Bardwell, Kentucky that has allegedly incurred financial losses.
Flegles sought $2,400 in compensatory damages and also an award of punitive
damages. On July 30, 2004, a jury found True Value liable to Flegles for certain
losses incurred by Flegles and awarded Flegles $1,300 in compensatory damages.
The jury did not award any punitive damages. As True Value believes that the
verdict was rendered in error, it pursued post-trial motions before the Circuit
Court, including a request that the verdict be set aside or that True Value be
awarded a new trial. Such relief was denied by the Circuit Court and True Value
is now pursuing an appeal for such relief in the Kentucky Appellate Court. True
Value posted with the court a bond in an amount necessary to prevent Flegles
from enforcing its judgment during the appeal. True Value intends to continue to
vigorously defend this case.

NOTE 11 - SUBSEQUENT EVENT

     The following is a status update on an arbitration matter between True
Value and Ernst & Young LLP ("E&Y") relating to events dating back to 1999.

     On July 28, 2005, an arbitration panel denied True Value's claims against
E&Y in their entirety. This decision of the arbitration panel also requires True
Value to reimburse E&Y for reasonable attorneys' fees and expenses related to
this matter. On August 17, 2005, True Value filed a motion asking the panel to
reconsider its award of attorneys' fees and expenses. In its motion, True Value
claimed that the panel exceeded its authority when it awarded attorneys' fees
and expenses to E&Y. On October 19, 2005, the panel denied this motion.

     E&Y has requested attorneys' fees and expenses in this matter of
approximately $18,200. True Value is challenging the reasonableness of this
amount with the arbitration panel, but has recorded the requested amount as a
reserve in the third quarter 2005 results. It is expected that the panel will
make a final award of reasonable fees and expenses in the first half of 2006.
Any adjustment to the reserve resulting from the final award will be
reflected in the financial statements at that time.


     True Value will continue to explore all of its options to challenge both
the reasonableness of E&Y's attorneys' fees and expenses and the authority of
the panel to award attorneys' fees and expenses in any amount. As True Value
previously disclosed, the arbitration is subject to confidentiality
requirements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. ($ in thousands)

OVERVIEW

     In the third quarter of 2005, True Value's Net revenue increased by
$12,299, or 2.6%, compared to the third quarter of 2004, while Net revenue for
the first three quarters of this year decreased by $7,247, or 0.5%, compared to
the first three quarters of last year. The primary reason for the quarter
increase in revenue was the timing of the Fall Market. The timing of the Fall
Market, which was held in September 2005 compared to October 2004, resulted in a
shifting of direct ship Market orders being delivered and other revenue
recognized during the third quarter of 2005 versus the fourth quarter of 2004.
On a year-to-date basis, the decrease in revenue was primarily impacted by an
unfavorable change in the number of participating members, partially offset by
the favorable timing of the Fall Market.

     In the third quarter of 2005, True Value's member store count declined by
42 to 5,884 from 5,926; terminations of 92 outpaced new store signings of 50. In
the first three quarters of 2005, the member store count dropped by 141 to 5,884
from 6,025, as terminations of 320 outpaced new store signings of 179. In
regards to the level of patronage from True Value members in the first three
quarters of 2005, approximately one quarter of True Value's member stores
accounted for less than 5% of True Value's Net revenue and approximately 75% of
the terminations were members in that quartile.


                                       10

<PAGE>
     True Value continued to perform and launch vendor line reviews. Line
reviews in the third quarter and the first three quarters of 2005 generated
approximately $2,176 and $3,693, respectively, of recognized savings from the
net effects of reduced merchandise acquisition costs, reduced vendor rebate
programs, increased amortization of transition funds from vendors and reduced
pricing to members on these line review products.

     True Value achieved a Net margin of $2,958 in the third quarter this year
compared to a Net margin of $13,401 for the same period last year, bringing the
Net margin in the first three quarters of 2005 to $25,018 compared to a Net
margin of $32,440 in 2004. The driver for both the third quarter and first three
quarters' Net margin decrease was the non-recurring arbitration provision
recorded in the third quarter of 2005 of $18,200, which was partially offset by
the shifting of True Value's Fall Market to the third quarter of 2005 versus the
fourth quarter of 2004.

     During 2005, True Value increased its inventory in order to reduce
out-of-stock items, improve fill rates and for the establishment of two China
warehouses in the third quarter of 2005 to handle increased importing
activities. In order to support this higher inventory level, True Value
increased its debt to $228,937 from $170,301 at year-end and from $210,678 for
the same period last year. Management expects a modest increase in its debt
balance at year-end 2005 compared to year-end 2004. True Value's Accounts
receivable and Accounts payable have been consistent with prior years except for
adjusting for the timing of the Fall Market.

QUARTER ENDED OCTOBER 1, 2005 COMPARED TO QUARTER ENDED OCTOBER 2, 2004

RESULTS OF OPERATIONS:

Net Revenue and Gross Margin

     A reconciliation of Net revenue and Gross margin for the quarters ended
October 1, 2005 and October 2, 2004 follows:


                                       11

<PAGE>

<TABLE>
<CAPTION>
                                                                                     GROSS
                                                     NET     % OF NET    GROSS     MARGIN %
                                                   REVENUE    REVENUE    MARGIN   OF REVENUE
                                                  --------   --------   -------   ----------
                                                               ($ IN THOUSANDS)
<S>                                               <C>        <C>        <C>       <C>
Quarter ended October 2, 2004 results             $474,516    100.0%    $55,956      11.8%
                                                  --------    -----     -------      ----
   Same store sales:
      Warehouse and relay revenue                   (1,661)    (0.4%)     5,610
      Vendor direct revenue                          5,956      1.3%         88
      Paint revenue                                   (168)    (0.0%)      (916)
                                                  --------    -----     -------
         Net same store sales                        4,127      0.9%      4,782
                                                  --------    -----     -------

   Change in participating members:
   Terminated members:
      Warehouse and relay revenue                   (8,306)    (1.7%)    (1,406)
      Vendor direct revenue                         (2,951)    (0.6%)       (30)
      Paint revenue                                   (749)    (0.2%)      (328)
                                                  --------    -----     -------
         Net terminated members                    (12,006)    (2.5%)    (1,764)
                                                  --------    -----     -------
   New members:
      Warehouse and relay revenue                    5,866      1.2%        864
      Vendor direct revenue                          3,649      0.8%         24
      Paint revenue                                    623      0.1%        257
                                                  --------    -----     -------
         Net new members                            10,138      2.1%      1,145
                                                  --------    -----     -------

            Net change in participating members     (1,868)    (0.4%)      (619)
   Other revenue and cost of revenue                10,040      2.1%      2,066
                                                  --------    -----     -------
         Total change                               12,299      2.6%      6,229
                                                  --------    -----     -------

Quarter ended October 1, 2005 results             $486,815    102.6%    $62,185      12.8%
                                                  ========    =====     =======      ====
</TABLE>

     Net revenue for the quarter ended October 1, 2005 totaled $486,815, an
increase of $12,299, or 2.6%, as compared to the same period last year. True
Value's other revenue increased by $10,040, or 2.1% and same store sales
increased by $4,127, or 0.9%. The other revenue and same store sales categories
were positively impacted by the timing of True Value's Fall Market. The Fall
Market was held in September 2005 compared to October 2004, which shifted other
revenue and vendor direct sales into the third quarter of 2005 compared to the
fourth quarter of 2004. Partially offsetting the favorability from the Fall
Market timing was a 3.1% net decline in the number of participating member
retail outlets that True Value experienced compared to the end of the third
quarter last year, resulting in a revenue reduction of $1,868, or 0.4%.

     Gross margin for the quarter ended October 1, 2005 increased by $6,229, or
11.1%, over the same period last year. The increase in gross margin was driven
principally by the shift in the Fall Market of $6,738, increased margins on
advertising activities of $2,346 and favorable results from vendor line review
activities that accounted for a net benefit of approximately $2,176. Advertising
margins increased primarily due to a lower subsidy by True Value of regional
advertising performed by member regional advertising groups and lower television
production costs in the third quarter of 2005 compared to 2004. Partial offsets
to the favorable margin components were higher inventory reserves of $4,389 and
reduced margins on transportation of $1,014 and paint of $986. Inventory
reserves were higher in the third quarter of 2005 compared to the same period in
2004 due to an increase in overstock inventory along with an overall increase in
inventory levels. Transportation margins decreased primarily due to fuel costs
while paint margins declined due to lower volume, increased production costs and
charges related to the initial outsourcing of the brush manufacturing line and
the Blackhawk facility closure.


                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                2005      2004     $ Expense Increase
                                               -------   -------   ------------------
<S>                                            <C>       <C>       <C>
Logistics and manufacturing expenses           $16,139   $14,551         $1,588
</TABLE>

     Logistics and manufacturing expenses increased by $1,588, or 10.9%, as
compared to the same period last year. This increase in expense mainly relates
to increased manufacturing expenses primarily due to higher advertising expenses
for manufactured paint products and higher logistics labor mainly due to wage
increases and higher safety incentive expense, partially offset by lower
outbound volume.

<TABLE>
<CAPTION>
                                                 2005     2004     $ Expense (Decrease)
                                               -------   -------   --------------------
<S>                                            <C>       <C>       <C>
Selling, general and administrative expenses   $22,261   $25,010         $(2,749)
</TABLE>

     Selling, general and administrative ("SG&A") expenses decreased by $2,749,
or 11.0%, as compared to the third quarter of 2004. SG&A expenses decreased
primarily due to lower labor costs of $987 as a result of lower claims related
to group medical insurance and workers compensation, partially offset by higher
incentive plan expenses. In addition, rents and leases were lower in the quarter
by $822 compared to the same period last year primarily due to a Hagerstown,
Maryland facility lease that was terminated in November 2004. Also, legal fees
were favorable by $957 in the third quarter of 2005 compared to the third
quarter of 2004 due to lower litigation activities.

<TABLE>
<CAPTION>
                                                2005      2004     $ Expense Increase
                                               -------   -------   ------------------
<S>                                            <C>       <C>       <C>
Arbitration provision                          $18,200    $--            $18,200
</TABLE>

     True Value recorded a reserve in the third quarter of 2005 related to the
arbitration panel's decision in the Ernst & Young LLP ("E&Y") matter. The
reserve represents E&Y's requested attorneys' fees and expenses incurred in this
matter. True Value does not expect a determination from the arbitration panel on
the reasonableness of this amount until the first half of 2006.

<TABLE>
<CAPTION>
                                                2005      2004     $ (Decrease)
                                               -------   -------    ------------
<S>                                            <C>       <C>       <C>
Net margin                                     $2,958    $13,401     $(10,443)
</TABLE>

     The third quarter 2005 Net margin of $2,958 decreased from a Net margin of
$13,401 for the same period a year ago. The primary reason for the decrease in
2005 was the non-recurring arbitration provision of $18,200 partially offset by
higher gross margins as discussed above. See "Results of Operations - Net
Revenue and Gross Margin."

FIRST THREE QUARTERS ENDED OCTOBER 1, 2005 COMPARED TO FIRST THREE QUARTERS
ENDED OCTOBER 2, 2004

RESULTS OF OPERATIONS:

Net Revenue and Gross Margin

     A reconciliation of Net revenue and Gross margin for the first three
quarters ended October 1, 2005 and October 2, 2004 follows:


                                       13

<PAGE>

<TABLE>
<CAPTION>
                                                                                           GROSS
                                                         NET      % OF NET     GROSS     MARGIN %
                                                       REVENUE     REVENUE    MARGIN    OF REVENUE
                                                     ----------   --------   --------   ----------
                                                                    ($ IN THOUSANDS)
<S>                                                  <C>          <C>        <C>        <C>
First three quarters ended October 2, 2004 results   $1,549,223    100.0%    $167,457      10.8%
                                                     ----------    -----     --------      ----
   Same store sales:
      Warehouse and relay revenue                         5,020      0.3%      16,241
      Vendor direct revenue                               1,979      0.1%         (15)
      Paint revenue                                      (1,301)     0.0%      (3,053)
                                                     ----------    -----     --------
         Net same store sales                             5,698      0.4%      13,173
                                                     ----------    -----     --------
   Change in participating members:
   Terminated members:
      Warehouse and relay revenue                       (27,899)    (1.8%)     (4,449)
      Vendor direct revenue                             (13,642)    (0.9%)       (122)
      Paint revenue                                      (2,386)    (0.2%)       (991)
                                                     ----------    -----     --------
         Net terminated members                         (43,927)    (2.9%)     (5,562)
                                                     ----------    -----     --------
   New members:
      Warehouse and relay revenue                        14,540      0.9%       2,375
      Vendor direct revenue                              10,635      0.7%          57
      Paint revenue                                       1,441      0.1%         486
                                                     ----------    -----     --------
         Net new members                                 26,616      1.7%       2,918
                                                     ----------    -----     --------
            Net change in participating members         (17,311)    (1.2%)     (2,644)
   Other revenue and cost of revenue                      4,366      0.3%      (4,069)
   Accounting change (EITF 02-16)                            --      0.0%       4,304
                                                     ----------    -----     --------
         Total change                                    (7,247)    (0.5%)     10,764
                                                     ----------    -----     --------
First three quarters ended October 1, 2005 results   $1,541,976     99.5%    $178,221      11.6%
                                                     ==========    =====     ========      ====
</TABLE>

     Net revenue for the first three quarters ended October 1, 2005 totaled
$1,541,976, a decrease of $7,247, or 0.5%, as compared to the same period last
year. A 3.1% net decline in the number of participating member retail outlets
compared to the end of the first three quarters last year resulted in a revenue
reduction of $17,311, or 1.2%. The negative revenue impact from the reduction in
participating member retail outlets was partially offset by the timing of the
Fall Market, from the fourth quarter in 2004 to the third quarter in 2005, which
helped drive increased same store sales of $5,698 and other revenue of $4,366.

     Gross margin for the first three quarters ended October 1, 2005 increased
by $10,764, or 6.4%, over the same period last year. The shifting of the Fall
Market increased gross margin in 2005 by $6,738. In addition, gross margin was
favorably impacted by increased advertising margins of $4,627 primarily due to a
lower subsidy by True Value of regional advertising performed by member regional
advertising groups and lower television production cost in the first three
quarters of 2005 compared to 2004. Also, the negative impact of $4,304 to the
2004 gross margin from the application of EITF 02-16 did not reoccur in 2005, as
discussed below. In addition, favorable results from vendor line review
activities accounted for a net benefit of approximately $3,693. Partially
offsetting these favorable impacts to gross margin were a decline in paint
margins of $3,558 and higher freight-in costs. Paint margins decreased due to
lower volume, increased production costs, charges related to the initial
outsourcing of the brush manufacturing line and the Blackhawk facility closure.
The higher freight-in costs were primarily the result of increased fuel costs
and additional importing activity.


                                       14

<PAGE>
     The effect of Emerging Issues Task Force ("EITF") Issue No. 02-16,
"Accounting by a Customer (including a Reseller) for Certain Consideration
Received from a Vendor" ("EITF 02-16"), which unfavorably impacted the 2004
gross margin by $4,304, did not reoccur in 2005. On January 1, 2003, True Value
adopted EITF 02-16, which addresses the accounting and income statement
classification for consideration given by a vendor to a retailer in connection
with the sale of the vendor's products or for the promotion of sales of the
vendor's products. The EITF concluded that such consideration received from
vendors should be reflected as a decrease in prices paid for inventory and
recognized in cost of sales as the related inventory is sold, unless specific
criteria are met qualifying the consideration for treatment as reimbursement of
specific, identifiable incremental costs. The EITF became effective for
arrangements with vendors initiated on or after January 1, 2003. Most of True
Value's arrangements with vendors in 2003 were initiated before January 1, 2003
and thus were recorded according to accounting policies in effect prior to
adoption of EITF 02-16 and recognized as a current period benefit. However, most
arrangements with vendors for 2004 were initiated in the fourth quarter of 2003,
and the application of EITF 02-16 negatively impacted Gross margin in the first
three quarters of 2004 as these vendor funds were deferred into inventory and
recognized when the product was sold.

<TABLE>
<CAPTION>
                                         2005      2004    $ Expense Increase
                                       -------   -------   ------------------
<S>                                    <C>       <C>       <C>
Logistics and manufacturing expenses   $50,314   $46,528         $3,786
</TABLE>

     Logistics and manufacturing expenses increased by $3,786 or 8.1%, as
compared to the same period last year. This increase in expense primarily
relates to manufacturing and was mainly due to higher advertising expenses for
manufactured paint products. In addition, logistics operating expenses were
higher primarily due to wage increases, higher safety incentive expense and
increased staffing to support True Value's import and vendor compliance
initiatives.

<TABLE>
<CAPTION>
                                        2005      2004     $ Expense (Decrease)
                                       -------   -------   --------------------
<S>                                    <C>       <C>       <C>
Selling, general and administrative
   expenses                            $75,239   $79,799         $(4,560)
</TABLE>

     SG&A expenses decreased by $4,560, or 5.7%, as compared to the first three
quarters of 2004. SG&A expenses decreased primarily due to lower labor expense
of $3,770 in 2005 compared to 2004 as a result of lower claims related to group
medical insurance and lower severance charges in 2005 compared to 2004. In
addition, rents and leases were lower by $2,474 as a result of a Hagerstown,
Maryland facility lease that was terminated in November 2004.

<TABLE>
<CAPTION>
                                        2005      2004     $ Expense Increase
                                       -------   -------   ------------------
<S>                                    <C>       <C>       <C>
Arbitration provision                  $18,200   $    --         $18,200
</TABLE>

     True Value recorded a reserve in the third quarter of 2005 related to the
arbitration panel's decision in the E&Y matter. The reserve represents E&Y's
requested attorneys' fees and expenses incurred in this matter. True Value does
not expect a determination from the arbitration panel on the reasonableness of
this amount until the first half of 2006.

<TABLE>
<CAPTION>
                                        2005      2004     $(Decrease)
                                       -------   -------   -----------
<S>                                    <C>       <C>       <C>
Other income, net                      $(1,163)  $(1,590)     $(427)
</TABLE>

     Other income, net decreased by $427, or 26.9%, as compared to the first
three quarters of 2004. This change was predominantly due to the $942 impairment
charge in the first quarter of 2005 on the East Butler, Pennsylvania facility
that was sold on April 20, 2005.

<TABLE>
<CAPTION>
                                        2005      2004     $ Expense Increase
                                       -------   -------   ------------------
<S>                                    <C>       <C>       <C>
Third-party interest expense           $6,523    $5,797           $726
</TABLE>


                                       15

<PAGE>

     Third party interest expense increased by $726, or 12.5%, as compared to
the same period last year. This increase in expense is primarily due to higher
interest rates.

<TABLE>
<CAPTION>
                                         2005      2004    $(Decrease)
                                       -------   -------   -----------
<S>                                    <C>       <C>       <C>
Net margin                             $25,018   $32,440     $(7,422)
</TABLE>

The first three quarters of 2005 Net margin of $25,018 decreased from a Net
margin of $32,440 for the same period a year ago. The primary reason for the
$7,422 decrease in 2005 was the non-recurring arbitration provision of $18,200
partially offset by higher gross margins as discussed above. See "Results of
Operations - Net Revenue and Gross Margin."

LIQUIDITY AND CAPITAL RESOURCES:

     The information provided below, which should be read in conjunction with
the information in True Value's Annual Report on Form 10-K for the year ended
December 31, 2004, describes True Value's debt, credit facilities, guarantees
and future commitments, in order to facilitate a review of True Value's
liquidity.

     True Value used cash for operating activities for the first three quarters
ended October 1, 2005 of $19,423 while it generated cash of $45,318 during the
first three quarters ended October 2, 2004. True Value's major working capital
components individually move in the same direction with the seasonality of the
business. The spring and early fall are the most active periods for True Value
and require the highest levels of working capital. The low point for Accounts
receivable, Inventory and Accounts payable is usually at the end of the calendar
year. The increase in Accounts receivable from fiscal year-end is partially
matched by the increase in Accounts payable. The cash needed to meet the future
payments for Accounts payable will be provided by the increase in cash generated
from collections on Accounts receivable and from the future sale of inventory.

     The change in cash provided by operating activities in 2004 to cash used by
operating activities in 2005 was primarily in the working capital components and
was mainly due to an increase in inventory in order to reduce out-of-stock items
and to improve fill rates. In addition, inventory increased with the
establishment of two China warehousing operations in the third quarter of 2005
to handle increased importing activities. Inventory as of October 1, 2005 was
$335,801, up $71,566 since the beginning of the year. The increase in inventory
this year compares to an inventory decrease of $962 in the first three quarters
of 2004. Inventory, as compared to the same period last year, was up $60,038.

     True Value used cash for investing activities of $3,177 for the first three
quarters ended October 1, 2005 as compared to $7,651 for the same period last
year. This reduction in cash used for investing activities was predominately due
to the increase in proceeds from the sale of properties in the first three
quarters of 2005 which increased to $8,343 from $450 in the same period last
year. This increase in proceeds from the sale of properties in 2005 was
principally related to the sale of the East Butler, Pennsylvania facility on
April 20, 2005 and the sale leaseback of trailers in the third quarter of 2005.
This reduction in cash used for investing activities was partially offset by an
increase in additions to properties owned which increased to $11,520 from $8,101
in the same period last year. The additions to properties owned include the
purchase of trailers that were sold in the sale leaseback transaction. These
capital expenditures are comprised of various building improvements and
purchases of additional equipment and technology at True Value's distribution
centers and its corporate headquarters.

     True Value generated cash from its financing activities for the first three
quarters ended October 1, 2005 of $21,402 while it used cash for financing
activities of $39,904 for the first three quarters ended October 2, 2004. The
cash in the first three quarters of 2005 was generated from increased borrowings
from the Bank Facility in the amount of $56,000 and was used to fund True
Value's operating activities, as well as for payments of drafts payable and
patronage dividends. In 2004, True Value used cash generated from its operating
activities to fund its financing activities. The main use of cash in 2004 for
financing activities was the cash payment of patronage dividends, the reduction
of drafts payable, the purchase of common stock after True Value lifted its
stock moratorium and the reduction of the Bank Facility.

     Under the terms of the Bank Facility, the interest rate charged for
borrowings is variable at True Value's option at either LIBOR or prime, plus in
either case, an additional amount of interest determined by a performance-based


                                       16

<PAGE>

pricing grid. The performance grid is based upon True Value's fixed charge
coverage ratio, measured quarterly. The performance-based pricing grid was
amended in May 2005 to (1) lower the interest rate that is added to LIBOR or
prime borrowings and (2) decrease the fixed charge ratio needed to achieve
improved pricing. Based on this amended performance pricing grid, True Value
achieved 0.75% of improved variable pricing effective May 11, 2005. As of
October 1, 2005 and October 2, 2004, this interest rate was 5.44% and 3.84%,
respectively, as the decrease to interest cost resulting from the amended
performance grid was more than offset by an increase in the underlying LIBOR and
prime rates. The unused commitment fee is 0.375%. Letters of credit issued under
the Bank Facility have a fee based on the performance pricing grid and this fee
was 1.5% and 2.0% as of October 1, 2005 and October 2, 2004, respectively.

     True Value's availability at October 1, 2005 and October 2, 2004 was
$55,308 and $83,568, respectively. The decline in year-over-year availability
was primarily due to True Value increasing inventory levels.

     In the first three quarters ended October 1, 2005, True Value had a net
decrease in cash and cash equivalents of $1,198. At October 1, 2005, True
Value's working capital was $126,034 compared to $87,047 at December 31, 2004.
The current ratio of 1.27 at October 1, 2005 increased from 1.22 at December 31,
2004. Favorably impacting True Value's 2005 working capital and current ratio
were increased inventory levels and the early commitment for the renewal of
notes and was partially offset by the arbitration reserve of $18,200.

     True Value believes that its cash from operations and existing credit
facilities will provide sufficient liquidity to meet its working capital needs,
planned capital expenditures and debt obligations that are due to be repaid in
2005.

CASH REQUIREMENTS:

     Below is the current schedule of the expected cash outflows necessary to
meet financial commitments existing as of October 1, 2005 and thereafter:

<TABLE>
<CAPTION>
                                                          2006 &         2008 &
                                                2005       2007           2009         Thereafter     Total
                                              --------   --------   ----------------   ----------   --------
                                                                    ($ in thousands)
<S>                                           <C>        <C>        <C>                <C>          <C>
Bank Facility (1)                             $     --   $     --       $144,300        $     --    $144,300
Installment (subordinated) notes (2)             6,053     12,105          6,861              --      25,019

Promissory (subordinated) notes (3)              5,706     31,522         17,587              --      54,815

Interest on promissory & installment
   (subordinated) notes                          2,875      7,096          1,603              --      11,574

Accrued stock redemption liability (2)           1,251        800            800             614       3,465

Capital lease obligations                          902      1,017             25               8       1,952

Operating lease obligations                      8,035     59,992         51,373         220,840     340,240
Purchase obligations (4)                       120,243         --             --              --     120,243
Redeemable non-qualified Class B non-voting
   common stock                                     --         --             --          20,758      20,758
                                              --------   --------       --------        --------    --------
Total                                         $145,065   $112,532       $222,549        $242,220    $722,366
                                              ========   ========       ========        ========    ========
</TABLE>

(1)  Borrowings under the Bank Facility fluctuate with the seasonal needs of the
     business. There are no required payments until the maturity of the Bank
     Facility in August 2008. Interest on the Bank Facility is variable at
     either LIBOR or prime, plus in either case, an additional amount of
     interest determined based on a performance-based pricing grid.

(2)  In accordance with True Value's By-Laws, True Value satisfies stock
     redemption liability in cash and by issuing subordinated installment notes.
     As of October 1, 2005, True Value had shareholders that discontinued their
     purchasing activities with True Value and requested that their stock be
     redeemed but who had not completed the redemption procedures. True Value
     classified this $3,465 of stock redemption


                                       17

<PAGE>

     liability as $1,251 in Current maturities of long-term debt, notes and
     capital lease obligations, $1,600 in Long-term debt including notes and
     capital lease obligations, less current maturities and $614 in Other
     long-term liabilities representing True Value's redemption obligations to
     former members that management anticipates may not complete the redemption
     procedures for over a year.

(3)  The amounts shown are scheduled payments; however, historically a minimum
     of 50% of the promissory (subordinated) notes have been renewed, extending
     the maturity for an additional three years. True Value has received note
     renewal commitments for an additional three year term on approximately 75%
     of the notes scheduled to mature on December 31, 2005 and has classified
     these notes in long-term debt. In 2004, this renewal rate was approximately
     70%.

(4)  Purchase obligations represent commitments under open purchase orders, are
     typically short-term and fluctuate with the seasonality of True Value's
     business. Also, purchase obligations are part of a cycle where they are
     continuously converted into inventory and new purchase obligations are
     created.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
($ in thousands)

     True Value's operations are subject to certain market risks, primarily
interest rate risk and credit risk. Interest rate risk pertains to True Value's
variable rate debt, which had approximately $144,300 outstanding at October 1,
2005. A 50 basis point movement in interest rates would result in an approximate
$722 annualized increase or decrease in interest expense and cash flows based on
the outstanding balance at October 1, 2005.

     True Value manages interest rate risk through a combination of variable and
fixed-rate debt instruments with varying maturities. Interest rate hedges to a
minimum level of $25,000 are required by the Bank Facility. True Value has
purchased interest rate caps that limit its risk on $25,000 of variable rate
debt to maximum underlying LIBOR rates of 3.5% through August 2007 and 4.5% for
the remaining term which expires in August 2008. The three-month LIBOR at
October 1, 2005 was approximately 4.07%. True Value marks to market the interest
rate caps and both the 2005 third quarter and year-to-date gain of $137 and
$171, respectively, are reflected as a component of Third-party interest
expense. Credit risk pertains primarily to True Value's trade receivables. True
Value extends credit to its members as part of its day-to-day operations. True
Value's management believes that, as no specific receivable or group of
receivables comprises a significant percentage of total trade accounts, its risk
in respect to trade receivables is limited. Additionally, True Value's
management believes that its allowance for doubtful accounts is adequate with
respect to member credit risks. True Value performs no speculative hedging
activities. True Value does not have any interest in variable interest entities
and all related party transactions (i.e., transactions with members) are at
arm's length.

ITEM 4. CONTROLS AND PROCEDURES.

     True Value's Chief Executive Officer and Chief Financial Officer have
evaluated and concluded that as of October 1, 2005, True Value's disclosure
controls and procedures (as defined in Rule 13a-15(e)) are effective. There has
been no change in True Value's internal control over financial reporting
identified in connection with reaching the conclusion described above that
occurred during True Value's last fiscal quarter that has materially affected,
or is reasonably likely to materially affect, True Value's internal control over
financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     True Value is party, from time to time, to various legal proceedings.
Current material legal proceedings have been disclosed in True Value's Annual
Report on Form 10-K for the fiscal year ending December 31, 2004 and in True
Value's Quarterly Report on Form 10-Q for the quarters ended April 2, 2005 and
July 2, 2005 and the following material development has occurred to the
following previously disclosed legal proceeding:

ACTIVE LEGAL MATTER:

CLAIMS AGAINST ERNST & YOUNG LLP


                                       18

<PAGE>
     The following is a status update on an arbitration matter between True
Value and Ernst & Young LLP ("E&Y") relating to events dating back to 1999.

     On July 28, 2005, an arbitration panel denied True Value's claims against
E&Y in their entirety. This decision of the arbitration panel also requires True
Value to reimburse E&Y for reasonable attorneys' fees and expenses related to
this matter. On August 17, 2005, True Value filed a motion asking the panel to
reconsider its award of attorneys' fees and expenses. In its motion, True Value
claimed that the panel exceeded its authority when it awarded attorneys' fees
and expenses to E&Y. On October 19, 2005, the panel denied this motion.

     E&Y has requested attorneys' fees and expenses in this matter of
approximately $18,200. True Value is challenging the reasonableness of this
amount with the arbitration panel, but has recorded the requested amount as a
reserve in the third quarter 2005 results. It is expected that the panel will
make a final award of reasonable fees and expenses in the first half of 2006.
Any adjustment to the reserve resulting from the final award will be reflected
in the financial statements at that time.

     True Value will continue to explore all of its options to challenge both
the reasonableness of E&Y's attorneys' fees and expenses and the authority of
the panel to award attorneys' fees and expenses in any amount. As True Value
previously disclosed, the arbitration is subject to confidentiality
requirements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
($ in thousands - except per share information)

USE OF PROCEEDS

     True Value uses the proceeds from the offering of the Class A common stock
for general working capital, including the purchase of merchandise for resale to
its members.

ISSUER PURCHASES OF EQUITY SECURITIES

     The number of shares of True Value's Class A common stock redeemed and the
average price paid per share for each month in the third quarter ended October
1, 2005 are as follows:

<TABLE>
<CAPTION>
                                                 Average         Total Number       Approximate $
                              Total Number     Price Paid     of Shares as part    Value that May
                                of Shares       per Share        of Announced     Yet Be Purchased
                              Redeemed (1)   before offsets          Plan            under Plan
                              ------------   --------------   -----------------   ----------------
<S>                           <C>            <C>              <C>                 <C>
CLASS A COMMON STOCK
July 3 - July 30, 2005            1,920           $100                --                 $--
July 31 - August 27, 2005         3,960            100                --                  --
August 28 - October 1, 2005       2,040            100                --                  --
                                  -----                              ---                 ---
Total                             7,920                               --                 $--
                                  =====                              ===                 ===
</TABLE>

(1)  In accordance with True Value's By-Laws, True Value redeems former members'
     equity investments in Class A common stock and Redeemable non-qualified
     Class B common stock in cash at the time of redemption and equity
     investments of Redeemable qualified Class B common stock are paid with a
     subordinated installment note. The subordinated installment notes are
     payable in five equal annual installments and pay interest annually at a
     fixed rate. The interest rate on subordinated installment notes created
     during the year is determined annually on the first business day of the
     year based on the five-year U.S. Treasury bill rate plus 1.0%. For notes
     issued in 2004, the rate was 4.36% and for notes issued in 2005, the rate
     is 4.64%. In accordance with True Value's By-Laws, True Value first reduces
     its aggregate stock redemption obligation payable in both cash or
     subordinated installment notes by its right to legally offset any amounts
     the former members may owe True Value, including Accounts and notes
     receivable, Loss allocation and/or Accumulated deficit.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


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<PAGE>

     None

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

     None

ITEM 5. OTHER INFORMATION.

     None

ITEM 6. EXHIBITS.

     Exhibit 4-A Subordinated promissory installment note form

     Exhibit 4-B Subordinated promissory note form

     Exhibit 31-A Section 302 Certification (Chief Executive Officer)

     Exhibit 31-B Section 302 Certification (Chief Financial Officer)

     Exhibit 32-A Section 906 Certification (Chief Executive Officer and Chief
     Financial Officer)

                                   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.

                                        TRUE VALUE COMPANY


Date: November 14, 2005                 ----------------------------------------
                                        David A. Shadduck
                                        Senior Vice President and
                                        Chief Financial Officer


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