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

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                   FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2001
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                         COMMISSION FILE NUMBER: 1-10767

                       VALUE CITY DEPARTMENT STORES, INC.
             (Exact name of registrant as specified in its charter)

              OHIO                                  NO. 31-1322832
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)

  3241 WESTERVILLE ROAD, COLUMBUS, OHIO                 43224
 (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:  (614) 471-4722

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:                Name of each exchange on which registered:
Common Shares, without par value    New York Stock Exchange

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

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 the filing
requirements for at least the past 90 days. YES X NO
                                               ---  ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of voting stock held by non-affiliates of the registrant,
12,490,447 Common Shares, based on the $7.69 closing sale price on April 16,
2001, was $96,051,537.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 34,338,212 Common Shares were
outstanding at April 16, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III - Proxy Statement for Annual Meeting of Shareholders to be held in July
2001 in part, as indicated.





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                                TABLE OF CONTENTS
                                                                         FORM
                                                                         10-K
                                                                        REPORT
ITEM NO.                                                                 PAGE
--------                                                                 ----

<TABLE>

                                                     PART I

<S>      <C>                                                                                               <C>
1.       Business............................................................................................3
2.       Properties.........................................................................................16
3.       Legal Proceedings..................................................................................17
4.       Submission of Matters to a Vote of Security Holders................................................17


                                                    PART II

5.       Market for the Registrant's Common Equity and Related Stockholder Matters..........................18
6.       Selected Financial Data............................................................................19
7.       Management's Discussion and Analysis of Financial Condition and Results of Operations..............20
7A.      Quantitative and Qualitative Disclosures about Market Risk ........................................26
8.       Financial Statements and Supplementary Data........................................................27
9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............27


                                                    PART III

10.      Directors and Executive Officers of the Registrant.................................................28
11.      Executive Officer Compensation.....................................................................28
12.      Security Ownership of Certain Beneficial Owners and Management.....................................28
13.      Certain Relationships and Related Transactions.....................................................28


                                                    PART IV

14.      Exhibits, Financial Statement Schedule and Reports on Form 8-K.....................................29
         Signatures.........................................................................................30


                            TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULES

Independent Auditors' Report...............................................................................F-1
Consolidated Balance Sheets................................................................................F-2
Consolidated Statements of Operations......................................................................F-3
Consolidated Statements of Shareholders' Equity............................................................F-4
Consolidated Statements of Cash Flows......................................................................F-5
Notes to Consolidated Financial Statements.................................................................F-6

SCHEDULES
---------
II - Valuation and Qualifying Accounts.....................................................................S-1
Index to Exhibits..........................................................................................E-1
</TABLE>


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                                     PART I

ITEM 1.  BUSINESS.

GENERAL

         Value City Department Stores, Inc. currently operates a chain of 119
department stores located in Ohio, Pennsylvania and 13 other Midwestern, Eastern
and Southern states, principally under the name Value City, as well as 81 DSW
Shoe Warehouse Stores located throughout the United States. In addition, we
operate 19 Filene's Basement stores ("Filene's") located principally in the New
England states. For over 80 years, our strategy has been to provide exceptional
value by offering a broad selection of brand name merchandise at prices
substantially below conventional retail prices. Our department stores carry
men's, women's and children's apparel, housewares, giftware, home furnishings,
toys, sporting goods, jewelry, shoes and health and beauty care items, with
apparel comprising over 60% of total sales. Our department stores average 87,000
square feet which allow us to offer over 100,000 different items of merchandise
similar to the items found in traditional department, specialty and discount
stores. Our DSW stores are a chain of upscale shoe stores offering a wide
selection of dress and casual footwear below traditional retail prices. These
stores average 25,000 square feet with up to 45,000 pairs of women's and men's
designer brand shoes and athletic footwear per store. Our Filene's stores
average 27,000 square feet and specialize in high-end brand name merchandise of
men's and women's apparel, accessories and home goods.

         Our pricing strategy is supported by our ability to purchase large
quantities of goods in a variety of special buying opportunities. For many
years, we have had a reputation in the marketplace as a purchaser of buy-outs
and manufacturers' closeouts.

HISTORY OF OUR BUSINESS

         We opened our first department store in Columbus, Ohio in 1917. The
Value City department stores operated as a division of Schottenstein Stores
Corporation ("SSC") until we went public on June 18, 1991. SSC still owns 53.0%
of our stock. We have a number of ongoing related party agreements with SSC that
are described in Item 13 of this report.

         In July 1997, we entered into agreements with Mazel Stores, Inc. to
create VCM, Ltd., a 50/50 joint venture. VCM operates the health and beauty
care, toy and sporting goods departments and; beginning in fiscal 2000, the food
department, as licensed departments. We account for our fifty percent interest
in the joint venture under the equity method. See "Licensed Departments."

         Effective May 3, 1998, we purchased 99.9% of the common stock of Shonac
Corporation from Nacht Management, Inc. and SSC. In September 2000, we purchased
the remaining 0.1% to give us 100% ownership. Shonac had been the shoe licensee
in all of the Value City stores since its inception in 1969 and also operated
the DSW chain of retail shoe stores. Also effective May 3, 1998, we acquired the
store operations of Valley Fair Corporation from SSC. Valley Fair operated two
department stores located in New Jersey. Prior to their acquisition, we had been
a licensee of certain departments in these two stores for eighteen years.


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         On November 19, 1999, we purchased 100% of the common stock of Gramex
Retail Stores, Inc. ("Gramex") from Gramex Corporation pursuant to a Stock
Purchase Agreement, dated as of November 8, 1999. Gramex operated a chain of 15
discount stores under the name "Grandpa's" in the greater St. Louis metropolitan
area. Of the 15 stores acquired and after liquidation of the existing Grandpa's
inventory, 13 stores were converted to the Value City format. Six stores
received only minor improvements and were reopened in March 2000. The other 7
stores were remodeled based on our current Value City format and were reopened
in April 2000.

         On March 17, 2000, we completed the acquisition of substantially all of
the assets and the assumption of certain liabilities of Filene's Basement Corp.,
a Massachusetts corporation, and Filene's Basement, Inc., a wholly owned
subsidiary of Filene's Basement Corp. through our wholly owned subsidiary, Base
Acquisition Corp., pursuant to the closing of an asset purchase agreement, dated
February 2, 2000. Filene's was operating as debtor-in-possession under Chapter
11 of the Bankruptcy Code. We continue to operate the 14 Filene's stores
acquired on March 17 and have reopened 3 other Filene's stores in the Washington
D.C. area. During fiscal 2000, 2 new Filene's stores were opened.

         We and our wholly owned subsidiaries are sometimes referred to
collectively in this report as the "Company" or as "VCDS."

CHANGE IN FISCAL YEAR-END

         On June 10, 1998, we determined to change our fiscal year from a 52/53
week year that ended on the Saturday nearest to July 31 to a 52/53 week year
that ends on the Saturday nearest to January 31. The six-month transition period
of August 2, 1998 through January 30, 1999 (the "Transition Period") preceded
the start of the 1999 fiscal year which ended January 29, 2000. Fiscal 2000
contains 53 weeks.

OPERATING SEGMENTS

         See Note 12 of Notes to Consolidated Financial Statements beginning on
page F-21 of this annual report for information regarding our Company's
segments.

BUSINESS STRATEGIES

         Our strategy is to provide brand name merchandise substantially below
conventional retail prices. The strategy is reflected in our name, "Value City,"
and our motto, "It's your money, get more for it." We believe that the size of
our Value City department stores facilitates a full-line merchandise offering
and range of brands that differentiates us from other off-price retailers.

         Our DSW stores' mission is to be each customers' favorite retailer of
branded footwear by satisfying customer expectations for selection, convenience
and value.

         Filene's strategy is similar to Value City's focus on providing the
best brand names at everyday low prices for men's and women's apparel,
accessories and home goods. The principal elements of Value City's, DSW's and
Filene's business strategies are discussed below.


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MERCHANDISING

Selection

         Value City is a full-line, off-price retailer carrying men's, women's
and children's apparel, housewares, giftware, home furnishings, toys, sporting
goods, jewelry, shoes and health and beauty care items. Off-price retailing, as
distinguished from traditional full-price retailing and discount or off-brand
merchandising, is characterized by the purchase of primarily high quality brand
name merchandise, at prices below normal cost to most retailers. A portion of
the cost savings is then passed on to customers through lower prices. Our Value
City stores strive to offer customers one-stop-shopping in terms of categories
of merchandise carried. The large size of our stores facilitates the offering of
a wide range of merchandise categories with broad, deep selections of goods
within each category. Our stores carry over 100,000 different items of
merchandise similar to the items found in traditional department, specialty and
discount stores. To improve store profitability and meet the changing needs of
our customers, we continually refine the Value City merchandise mix eliminating
less productive departments and introducing new merchandise categories.

         We believe customers are attracted to Value City stores because of
continuous new offerings of value-priced merchandise acquired in special
purchases. At the same time, Value City maintains a broad and consistent range
of goods, it purchases continuing lines of merchandise and draws upon its vendor
contacts to ensure constant availability of certain basic categories of
merchandise as well as current fashion trends.

         DSW stores attract customers because of their wide assortment of top
quality name brand dress, casual and athletic footwear for men and women
together with a regularly changing selection of more fashion-oriented footwear.
Our DSW stores are large, contemporary, upscale warehouses, averaging 25,000
square feet and allow us to sell a large selection of branded footwear in a
clean and simple environment.

         Filene's stores average 27,000 square feet and offer branded apparel,
home goods, accessories and retail stocks purchased directly from major upscale
retailers. The branded merchandise represents a focused assortment of
fashionable, nationally-recognized men's and women's apparel, accessories and
home goods bearing prominent designers' and manufacturers' names. Branded
merchandise constitutes most of the product line and is obtained through
opportunistic purchases from a diverse group of quality manufacturers and
vendors.




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         The following table sets forth relative contributions of each major
merchandise category to total sales.

<TABLE>
<CAPTION>
                                                                             Fiscal Year    Fiscal Year    6 Months      Fiscal Year
                                                                                Ended          Ended         Ended          Ended
                                                                               2/3/01         1/29/00       1/30/99        8/1/98
                                                                               ------         -------       -------        ------
<S>                                                                            <C>             <C>            <C>         <C>
Apparel and Ready-to-Wear - Includes: Men's, Women's
   and Children's outerwear, suits, dresses, sportswear,
   sleepwear, underwear and accessories; and department
   store shoe sales from May 3, 1998 to February 3, 2001...................     61.9%           62.7%          62.8%       62.2%

Hard goods and Home Furnishings - Includes: domestics;
   jewelry; housewares; giftware; and small appliances ....................     14.7            17.2           18.8        19.0

Licensed Departments - Includes: shoes through May 2, 1998;
   health and beauty care; food; toys and sporting goods and
   other incidental departments............................................      6.0             6.3            7.5        15.2

DSW Stores.................................................................     17.4            13.8           10.9         3.6
                                                                              ------          ------         ------      ------

                                                                               100.0%          100.0%         100.0%      100.0%
                                                                               =====           =====          =====       =====
</TABLE>

Value Pricing

         Value City stores offer quality brand name merchandise at prices
typically 50% to 70% below prices charged by traditional department stores for
similar items and at prices comparable to or lower than prices charged by other
off-price retailers. We can offer exceptional values because our buyers purchase
merchandise directly from manufacturers and other vendors generally at prices
substantially below those paid by conventional retailers. This allows us to pass
on the savings directly to our customers. See "Supplier Relationships and
Purchasing."

         DSW price points are targeted to be up to 50% lower than the regular
prices of other specialty retailers and traditional department stores. DSW
continually strives to improve its merchandise sourcing to maintain quality,
lower costs and shortened delivery cycles. Identifying and building
relationships with cost-efficient manufacturers and suppliers of quality
merchandise is essential to DSW's merchandising strategy.

         Well known designer labels, brand names and original retailer names are
prominently displayed throughout our Value City and Filene's stores. Many items
carry labels and/or original price tags showing brand names identifiable with
major designers, manufacturers and retail stores, as well as tags showing
original retail, comparable or "nationally advertised" prices. In certain cases
suppliers may require removal of labels or original retail price tags as a
condition to a special purchase arrangement. See "Supplier Relationships and
Purchasing."

         Our Filene's stores' merchandise assortment is typically priced at
levels 30%-60% below regular prices at traditional department and specialty
stores. These discounts are achieved by buying in-season


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overruns and end-of-season surplus at advantageous prices and offering them for
sale at lower markups than those of traditional department stores. We are also
able to keep the cost of merchandise low because we do not require markdown or
advertisement allowances, or anticipation of returns from vendors, all of which
are typical in the department store industry.

Licensed Departments

         We operate all departments in the Value City stores except for the
health and beauty care, toy and sporting goods, food and certain other
incidental departments. These departments are licensed to others, including
affiliated parties, for a percentage of net sales, generally ranging from 5% to
11%, for initial periods of up to 10 years with, in some instances, an option to
renew. In addition, we receive a fee from some licensees for general and
administrative expenses. The aggregate annual license fees received from
licensees for fiscal year ended February 3, 2001 were $11,323,000.

         SSC owned a controlling interest in L. F. Widmann, Inc., the licensee
that operated the health and beauty care departments in our stores. In July
1997, we entered into agreements with Mazel to create VCM, a 50/50 joint
venture. Effective August 3, 1997, VCM purchased 100% of Widmann's capital stock
and purchased the assets of Value City's toys and sporting goods departments.
VCM operates the health and beauty care and toys and sporting goods departments
in our stores as licensed departments. The license agreements provide for fees
based on a percentage of sales, as defined, for license fees, advertising fees
and credit and administrative charges. We provide certain personnel,
administrative and service functions for which we receive a monthly fee from VCM
to cover the related costs. The license and joint venture agreements are for a
term of ten years ending in 2007 and contain certain provisions whereby either
business partner can initiate renegotiation of terms if certain minimum
requirements are not met.

         SSC also owned 49.9% of the outstanding stock of Shonac, the licensee
that operated the shoe departments in all of the Value City stores until May
1998 when we purchased 99.9% of the common stock of Shonac.

         Licensees supply their own merchandise and generally supply their own
store fixtures but in most instances utilize our associates to operate their
departments. The licensees reimburse us for all costs associated with such
associates. Licensees operate their departments under our general supervision
and are required to abide by our policies with regard to pricing, quality of
merchandise, refunds and store hours. Licensed departments complement the
operations of our stores and are considered an integral part of our store
operations. The common ownership interest in licensees facilitates the
uniformity of merchandising strategy in the stores, including the overall
emphasis on values resulting from special purchase opportunities.

SUPPLIER RELATIONSHIPS AND PURCHASING

         An important factor in our growth has been our many years of experience
in purchasing merchandise directly from manufacturers and other vendors at
prices substantially below those generally paid by conventional retailers. We
believe that over the years our buyers have established excellent relationships
with suppliers and have established a reputation for our willingness and ability
to purchase entire lots of merchandise and make prompt payment. We continuously
seek to find and negotiate special purchase opportunities. As a result of our
relationships, experience and reputation for prompt payment,


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many suppliers offer us special purchase opportunities prior to attempting to
dispose of merchandise through other channels. Many manufacturers of brand name
merchandise are reluctant to sell merchandise for resale at discounted prices
through their normal channels of distribution or to retailers which may be
considered competitors in their regular distribution channels. By selling such
merchandise through our own retail stores, we are able to assure suppliers that
the merchandise will be sold without disturbing the suppliers' regular channels
of distribution.

         Although we cannot quantify the amount by which the prices we pay for
special purchases are lower, if any, than the prices paid by our competitors for
similar purchases, we believe that such special purchases are made at prices
sufficiently favorable to enable us to offer merchandise to our customers at
prices significantly lower than those prices offered by many of our competitors.

         We purchase merchandise from more than 4,700 suppliers, none of which
accounted for a material percentage of purchases during the past fiscal year. We
do not maintain any long-term or exclusive commitments to purchase merchandise
from any one supplier. We regularly purchase overstocked or overproduced items
from manufacturers and other retailers, including end-of-season, out-of-season
and end-of-run merchandise and manufacturers' slight irregulars. From time to
time, we purchase all or substantially all of the inventories of financially
distressed retailers and make other special purchases. Also, we have started to
more aggressively seek advantageous buying opportunities overseas, particularly
in non-apparel categories.

         Our distribution facilities are designed to enable us to prioritize the
processing of merchandise on short notice and to deliver merchandise to stores
within days of receipt. This allows our buyers to purchase merchandise very late
in the season, when prices tend to be more favorable, and still deliver the
merchandise to stores before the end of the season. At the same time, we have
devoted warehouse space to out-of-season goods for our department stores. We
strive to hold this merchandise until the most opportune time to offer it in the
Value City stores, which in most cases is the next season. This ability to
purchase and quickly distribute or hold merchandise in substantial quantities
has enabled us to offer high-quality merchandise to customers at prices
significantly below usual retail prices. We believe that this ability
distinguishes us from the typical discount or department store and provides us
with a competitive advantage in making purchases as favorable opportunities
arise.

         The relatively large size of the Value City stores provides us with the
flexibility to purchase full lots of merchandise that may not be available to
other off-price retailers with smaller stores requiring more targeted purchases.
Although there is growing competition for the kinds of special purchases that we
seek, we believe that, because of the factors discussed above, we will be able
to obtain sufficient supplies of desirable merchandise at favorable prices in
the future.

         DSW's merchandising group constantly monitors current fashion trends as
well as historical sales trends to identify popular styles and styles that may
become popular in the upcoming season. Once our buyer determines the styles and
merchandise mix for any upcoming season, they focus on purchasing the
appropriate quantities of each category at the lowest cost and the highest
quality available.

         DSW believes it has good relationships with its vendors. Merchandise is
purchased from both domestic and foreign suppliers directly or through agents.
Vendors include suppliers who either manufacture their own merchandise or supply
merchandise manufactured by others, or both. DSW believes


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that, consistent with the retail footwear industry as a whole, most of its
domestic vendors import a large portion of their merchandise from abroad. We
have implemented quality control programs under which buyers inspect incoming
merchandise for fit, color and material, as well as for overall quality of
manufacturing. As the number of DSW locations increase, we believe there will be
adequate sources available to acquire and/or produce a sufficient supply of
quality goods in a timely manner and on satisfactory economic terms.

         We believe that the acquisition of Filene's, a well-known institution
in Boston since 1908, is a good fit with our `deal driven' merchandise strategy.
Because of the longstanding relationships Filene's has with vendors, it receives
quality buying opportunities at competitive prices. These longstanding
relationships make Filene's a prime choice for vendors with overruns, department
store cancellations and unmet volume objectives. From time to time, Filene's
commits to the future purchase of branded merchandise from vendors at
advantageous prices. These forward purchases allow for timely, fashionable
assortments. Based on our experience, we believe that the current supply of
branded merchandise is adequate for our needs.

DISTRIBUTION

         We use a regionalized distribution strategy with 11 distribution
centers located in Columbus, Ohio, a distribution facility in St. Louis,
Missouri and one distribution facility in Auburn, Massachusetts. The aggregate
area of the distribution facilities is approximately 3,000,000 square feet;
however, use of multi-tier processing levels in some of the distribution centers
substantially increases their operating capacity. In addition, to expedite the
flow of merchandise to certain clusters of stores, we use third party processors
located in New Jersey, Chicago and Detroit.

         Our distribution facilities utilize material handling equipment,
including mechanized conveyor systems to separate and collate shipments to the
stores. Our distribution facilities are designed to allow priority delivery of
late season purchases and fast-moving merchandise to have it in our stores
quickly to take full advantage of the remaining selling season. We continue to
focus on improving inventory turns by implementing changes which will expedite
the flow of merchandise to our selling floors.

         Merchandise is processed, ticketed and consolidated prior to shipment
to the stores to ensure full-truck loads to minimize shipping costs. We lease
our fleet of road tractors and approximately 70% of our semi-rig trailers with
the remainder being owned. Our fleet makes the majority of all deliveries to the
stores.

         To support the planned growth of our DSW Shoe Warehouse operation, we
recently consolidated and relocated DSW's principal offices and distribution
center operations to a new 625,000 square feet facility located in Columbus,
Ohio. We have entered into a 15-year lease with three five-year option periods
with an affiliate of SSC.

         Our new distribution center facility uses a warehouse management system
by Retek and modern material handling equipment, including new Rapistan/Demag
conveyor systems, to separate and collate shipments to our stores. The design of
the distribution center facilitates the prompt delivery of priority purchases
and fast selling footwear to stores so that we can take full advantage of each
selling season. We continue to focus on improving inventory controls and turns
by implementing changes which will expedite the flow of footwear and related
accessories to our stores.


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         For Filene's merchandise we currently lease a 457,000 square foot
distribution facility situated on 32.8 acres with adjacent rail service in
Auburn, Massachusetts.

ADVERTISING AND PROMOTION

         We commit substantial resources to advertising and believe that our
marketing strategy is one of the keys to our success. Value City advertises
frequently in print, including newspapers, circulars and flyers, and on
television and radio. The promotional strategy is carefully planned and budgeted
to include not only institutional and seasonal promotions, but also weekly
storewide sales events highlighting recent buy-outs and other specially
purchased brand name merchandise designed to maximize customer interest. In some
cases, a supplier may prohibit the advertising or non-store promotion of its
brand name.

         Our DSW stores currently use a broadcast campaign, primarily radio,
focusing on the slogan "The Shoes of the Moment. The Deal of a Lifetime." This
campaign is supplemented by print promotions and, increasingly, television. In
addition, a valuable marketing tool for DSW is the "Reward Your Style" loyal
customer program. Customers are asked to join the program during the checkout
procedure. By analyzing the member database, as well as the sales transactions
of those members, we are able to direct the advertising to encourage repeat
shopping and to reach targeted customers.

         Filene's employs a multi-media approach, using print, broadcast and
direct mail. The communication strategy is designed to target customer segments
and generate increased store trips and cross shopping opportunities.

STORES

Store Location and Design

         Our Value City stores average approximately 87,000 square feet, with
approximately 70% of the total area of each store representing selling space.
The stores are generally laid out on a single level, with central traffic aisles
providing access to major departments. Each department strives to display and
stock large quantities and assortments of merchandise, giving the store a full
appearance. The stores are generally open from 9:30 am until 9:30 pm Monday
through Saturday and 11:00 am until 6:00 pm on Sunday. All of the stores are
located in leased facilities.

         We believe that customers are attracted to our stores principally by
the wide assortment of quality items at substantial savings. Of the 119
department stores open as of April 16, 2001, 27 are free-standing and 92 are in
shopping centers, 25 of which are enclosed malls in which they serve as an
anchor. Of the 81 shoe stores open as of April 17, 2001, 11 are free-standing
and 70 are in shopping centers. Most of our stores are located in suburban
areas, near large residential neighborhoods and away from downtown commercial
centers.

         Our DSW stores average approximately 25,000 square feet, with about 87%
of the total area of each store representing selling space. The stores'
exteriors feature black and white color schemes and in many cases, windows with
striped awnings. The store interiors are well lit and feature a unique display
concept, a simple case presentation which groups the shoes together by style.
Interior signage is tasteful and kept to a


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minimum. The shoe stores are generally laid out on a single level, with the
cases of shoes forming the aisles in the stores. This allows customers to view
the entire store when they enter. The stores are generally open from 10:00 a.m.
until 9:00 p.m. Monday through Saturday and 12:00 p.m. until 6:00 p.m. on
Sunday. The stores are located in leased facilities.

         The Filene's Boston store is a landmark institution recognized by
generations of New England families and visitors as a source of quality
off-price men's and women's merchandise. The downtown location is famous for a
unique marketing concept - the Automatic Markdown Plan - whereby certain
merchandise is automatically discounted based on the number of days the
merchandise has been on the sales floor. Filene's believes that the Automatic
Markdown Plan generates a sense of shopping urgency and creates customer
excitement and loyalty. Filene's subleases 178,000 square feet (approximately
65,300 square feet of selling space) on four floors. The sublease terminates in
2009 with rights on behalf of Filene's to extend until 2024. The Boston store
generated over $1,061 in sales per square foot of selling space during fiscal
2000.

         In addition to the downtown Boston store, Filene's operates 18 branch
stores in four states and Washington, D.C. with an average of approximately
27,000 square feet of selling space per store. Generally, the branch store's
selling space is on a single level and uses a prototypical "racetrack" aisle
layout for merchandise presentation. The branch stores are designed to be
convenient and attractive in their merchandise presentation, dressing rooms,
checkouts and customer service areas. Filene's branch stores that were opened
from the date of acquisition generated $463 in sales per square foot of selling
space.

         The branch stores that were opened from the date of acquisition
averaged $12,827 million in sales volume per store in fiscal 2000. Their
merchandise mix is similar to that of the Boston flagship store. Because of the
operational complexities associated with transferring the Automatic Markdown
Plan to the branch stores, the branch stores do not operate under the Automatic
Markdown Plan, although markdowns are taken as required.

Store Operations

         We are committed to offering customers a convenient, pleasurable
shopping experience and a high level of satisfaction. At Value City, a training
program is utilized to assure that every associate maintains the highest level
of professionalism and places customer service at the forefront. At DSW, all
associates receive Retail Results University training in both product knowledge
and sales/service. This in-house training program emphasizes acknowledgment of
all customers, customized levels of service, and realization of sales
opportunities at all moments of customer contact.

         Our stores are designed for self-service shopping, although sales
personnel are available to help customers locate merchandise and to assist in
the selection and fitting of apparel and footwear. In all stores, a customer
service desk is conveniently located generally adjacent to the central check-out
area. We pride ourselves on ease of checkout and have invested in point of sale
scanning systems which expedite the checkout process by providing automated
check and credit approval and price lookup. Sales associates are trained to
create a "customer-friendly" environment. We accept all major credit cards, and
also provide a private label credit card program at the department stores.
Private label and other credit card sales are nonrecourse to us, with the
servicing agent assuming all of the credit risk. Value City offers a convenient
layaway program in its department stores and maintains a liberal return policy.


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<PAGE>   12

         Our stores are organized into separate geographic regions and
districts, each with a regional or district manager. Regional and district
managers are headquartered in their region and spend the majority of their time
in their stores to ensure adherence to merchandising, operational and personnel
standards. The typical staff for a Value City store consists of a store manager,
an operations manager, two assistant managers, a human resource administrator, a
customer service manager, a receiving manager, and full and part-time hourly
associates. Each store manager reports directly to one of the regional or
district managers, and each of the regional or district managers reports to a
Regional Vice President who in turn reports to the Vice President of Operations.

         The typical staff for a DSW store consists of a store manager and two
assistant managers who supervise 20 to 25 full and part-time hourly associates.
Each store manager reports directly to one of 13 district managers who in turn
report to a regional manager who in turn report to the Vice President of
Operations.

         Our Filene's stores' typical staff consists of a general manager, an
assistant store manager, merchandising group managers and full and part-time
associates. Each general manager reports to the group store manager who in turn
reports to the Senior Vice President, Director of Stores.

         Our store managers function both as administrators and merchants. All
managers are responsible on a day-to-day basis for maintenance of displays and
inventories in all departments, for the overall condition of their stores, for
customer relations, personnel hiring and scheduling, and for all other
operational matters arising in the stores. Each store manager is compensated, in
part, based on the performance of his or her store. Our store managers are an
important source of information concerning local market conditions, trends and
customer preferences.

         We prefer to fill management positions through promotion of existing
associates. A store management training program is maintained to develop the
management skills of associates and to provide a source of management personnel
for future store expansion.

Expansion

         We have increased our department store base from 74 stores at the start
of fiscal 1994 to 119 stores at the end of fiscal 2000. We have expanded both by
leasing newly constructed locations and by acquiring existing locations from
other retailers. No new stores are planned for fiscal 2001.

         We plan to open 25 to 30 new DSW shoe stores during fiscal 2001. We
intend to open new DSW stores in both existing and new markets with an emphasis
on locating stores in highly visible sites on high traffic streets in relatively
affluent trade areas. Factors considered in evaluating new store sites include
store size, configuration, demographics and lease terms. We seek to cluster
stores in targeted metropolitan areas to enhance name recognition, share
advertising costs and achieve economies of scale in management and distribution.




                                       12
<PAGE>   13


         The table below sets forth certain information relating to the
Company's stores during each of the last five fiscal years:

<TABLE>
<CAPTION>

                                     Fiscal Year Ended     6 Months          Fiscal Year Ended
                                   --------------------      Ended     -----------------------------
                                   2/3/01       1/29/00     1/30/99    8/1/98      8/2/97     8/3/96
                                   ------       -------     -------    ------      ------     ------

<S>                                  <C>         <C>         <C>        <C>          <C>        <C>
Beginning of Year(1) ........        167         145         142        95           86         79
  Opened(2)..................         55          22           4        49            9          7
  Closed ...................           1           -           1         2            0          0
                                    ----        ----        ----      ----          ---        ---
End of Year .................        221         167         145       142           95         86
                                     ===         ===         ===       ===           ==         ==
</TABLE>

(1)  Excludes apparel, domestics and housewares departments operated by the
     Company in two Valley Fair department stores prior to May 3, 1998.
(2)  Fiscal year ended February 3, 2001 includes 14 Filene's Basement stores
     acquired on March 17, 2000. Fiscal year ended August 1, 1998 includes 2
     department stores obtained in the purchase of Valley Fair and the 43 shoe
     stores obtained in the purchase of Shonac.


         Based upon our experience, we estimate that the average cost of opening
a new department store ranges from approximately $4.5 million to $6.5 million
and the cost of opening a new DSW shoe store ranges from approximately $1.0
million to $2.0 million, including leasehold improvements, fixtures, inventory,
pre-opening expenses and other costs. Similar costs for a Filene's store are in
the $2.5 million to $3.5 million range. Preparations for opening a department
store generally take eight to twelve weeks and preparations for opening a DSW
shoe store or a Filene's store generally take eight to ten weeks. We charge
pre-opening expenses to operations as incurred. It has been our experience that
new stores generally achieve profitability and contribute to net income
following the first year of operations.

         We continually refurbish our stores by updating the merchandise
displays and in-store signage. The costs of refurbishing on a per store basis
are generally not substantial. On an annual basis, we select stores to be
remodeled, which generally involves more significant changes to the interior or
exterior of the store. We maintain our own architectural design staff,
construction crews and carpentry shop to assist in refurbishing and remodeling
store interiors and to build in-store display tables and racks.

MANAGEMENT INFORMATION AND CONTROL SYSTEMS

         We believe that a high level of automation is essential to maintaining
and improving our competitive position. We rely upon computerized data systems
to provide information at all levels, including warehouse operations, store
billing, inventory control, merchandising and automated accounting. Value City
utilizes two IBM AS/400 computer systems, and Shonac utilizes one additional
AS400 computer system.

         We utilize point of sale ("POS") registers with full scanning
capabilities to increase speed and accuracy at customer check-outs and
facilitate inventory restocking. Since layaways represent an important part of
our department store business, an automated system to capture and control
layaways is integrated into the POS system.




                                       13
<PAGE>   14


ASSOCIATES

         As of April 2001, we had approximately 19,300 associates of which 9,900
were full-time and 9,400 were part-time. Approximately 1,400 of these associates
in 21 stores are covered by collective bargaining agreements.

         Group hospitalization, surgical, medical, vision, dental, disability
and life insurance benefits and a 401(k) plan are provided to full-time
non-union associates. The Company is a co-sponsor with SSC in these plans. The
Company also sponsors an associate stock purchase plan and a stock option plan
for salaried associates.

         We believe that, in general, we have satisfactory relations with all of
our associates.

COMPETITION

         The retail industry is highly competitive. We compete with a variety of
conventional and discount retail stores, including national, regional and local
independent department and specialty stores, as well as with catalog operations,
on-line providers, factory outlet stores and other off-price stores.

         In the discount or off-price retailing segment, we differentiate
ourselves through our store format and breadth of product offering. Our large
stores differ from most other off-price retailers which tend to operate
substantially smaller stores focusing predominantly on either hard or soft
goods. Our large stores facilitate our merchandise offering and broad range of
brands and products.

         In addition, because we purchase much of our inventory
opportunistically, we compete for merchandise with other national and regional
off-price apparel and discount outlets. Many of our competitors handle identical
or similar lines of merchandise and have comparable locations, and some have
greater financial resources than we do.

         Competitive factors important to our customers include fashion, value,
merchandise selection, brand name recognition and, to a lesser degree, store
location. We compete primarily on the basis of value, merchandise quality and
selection. We believe our competitive advantages include our reputation in the
marketplace for being able to purchase and promptly pay for entire lots of
merchandise, together with our ability to either quickly distribute or hold the
merchandise for sale at the most opportune time, as well as our full-line
merchandise offering and range of brand names.

SERVICE MARKS, TRADEMARKS AND TRADENAMES

         The service mark "Value City" has been registered by SSC in the U.S.
Patent and Trademark Office. Our four department stores in Columbus operate
under the tradename "Schottenstein's," which has been registered in the State of
Ohio. We are entitled to use such names for the sole purpose of operating
department stores on an exclusive basis pursuant to a perpetual license from
SSC. SSC also operates a chain of furniture stores under the name "Value City
Furniture." We have also registered in the U.S. Patent and Trademark Office
various trademarks used in our marketing program.


                                       14
<PAGE>   15

         Through the acquisition of Shonac, we registered in the U.S. Patent and
Trademark Office a number of trademarks and service marks, including: DSW; DSW
Shoe Warehouse; Coach and Four; Crown Shoes; Reward Your Style; Flites; Jonathan
Victor; Kristi G; Lakota Trail; Landmarks; Sandler; Shoes by Kari; and Sylvia
Cristie.

         Filene's has an exclusive, perpetual, world-wide, royalty-free license
to use the name Filene's Basement and Filene's Basement of Boston trademark and
service mark registrations as well as certain other tradenames. Filene's
Basement's exclusive licensee status with respect to these registered marks has
been recorded with the United States Patent and Trademark Office and relevant
state offices.






                                       15
<PAGE>   16


ITEM 2.  PROPERTIES.

         Set forth in the following table are the locations of stores operated
by the Company as of February 3, 2001:

<TABLE>
<CAPTION>
                                                                                                        VCDS,
                                                                                                         DSW
                                   Value City                DSW                                          &
                                   Department               Shoe                                      Filene's
                                     Stores               Warehouse                 Filene's            Total
                                  -----------           ------------             -------------       -----------
<S>                                  <C>                   <C>                       <C>                 <C>
Arizona                                -                     1                         -                  1
California                             -                     3                         -                  3
Colorado                               -                     2                         -                  2
Delaware                               3                     -                         -                  3
Florida                                -                     4                         -                  4
Georgia                                4                     2                         -                  6
Illinois                              16                     6                         2                 24
Indiana                                7                     2                         -                  9
Kansas                                 -                     2                         -                  2
Kentucky                               4                     -                         -                  4
Maryland                               7                     3                         -                 10
Massachusetts                          -                     3                         9                 12
Michigan                               9                     4                         -                 13
Minnesota                              -                     2                         -                  2
Missouri                               9                     1                         -                 10
New Hampshire                          -                     1                         -                  1
New Jersey                             7                     2                         -                  9
New York                               -                    10                         4                 14
North Carolina                         1                     1                         -                  2
Ohio                                  23                     7                         1                 31
Oklahoma                               -                     1                         -                  1
Pennsylvania                          19                     5                         -                 24
Tennessee                              1                     2                         -                  3
Texas                                  -                     9                         -                  9
Virginia                               4                     4                         -                  8
Washington D.C.                        1                     -                         3                  4
West Virginia                          4                     -                         -                  4
Wisconsin                              -                     1                         -                  1
                                    ----                   ---                       ---               ----
                                     119                    78                        19                216
</TABLE>

         We maintain buying offices in Columbus, Ohio; Boston, Massachusetts;
and Los Angeles, California. We operate 11 warehouse/distribution complexes
located in Columbus, Ohio, a distribution facility in St. Louis, Missouri and a
distribution facility in Auburn, Massachusetts. In addition, to expedite the
flow of merchandise to certain clusters of stores, we use third party processors
located in New Jersey, Chicago and Detroit. Our executive offices occupy
approximately 45,000 square feet in a building which


                                       16
<PAGE>   17
includes a store and also serves as one of our apparel distribution centers.
Shonac occupies approximately 70,000 square feet in a building which also serves
as the shoe division's distribution center.

         The stores and all of the warehouse, buying and executive office
facilities are leased or subleased except for one owned shoe store location. As
of February 3, 2001 we leased or subleased 22 stores and 3 warehouse facilities
from SSC or entities affiliated with SSC. The remaining stores and warehouses
are leased from unrelated entities. Most of the store leases provide for an
annual rent based upon a percentage of gross sales, with a specified minimum
rent.

         Our office, warehouse and distribution facilities for our department
store business are adequate for our current needs and we believe that such
facilities, with certain modifications and additional equipment will be adequate
for our foreseeable future demands.

         To support the planned growth of our DSW shoe warehouse business, we
have consolidated and relocated the related back office and distribution
operations of our shoe business to a new 625,000 square foot facility located in
Columbus, Ohio. We recently entered into a 15 year lease with 3 five-year option
periods. The lease is with an affiliate of SSC and is at current market rate
rents.


ITEM 3.  LEGAL PROCEEDINGS.

         We are involved in various legal proceedings that are incidental to the
conduct of our business. In the opinion of management, the amount of any
liability with respect to these proceedings individually or in the aggregate,
will not be material.


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

         Not applicable.






                                       17
<PAGE>   18


                                     PART II

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

The following table sets forth the high and low sales prices of the Common
Shares as reported on the NYSE Composite Tape during the periods indicated. As
of April 25, 2001, there were 540 shareholders of record.

<TABLE>
                                                              HIGH              LOW
<S>                                                          <C>              <C>
Six Months Ended January 30, 1999:
First Quarter     .....................................      $19.25           $7.75
Second Quarter    .....................................       14.375           8.25

Fiscal 1999:
First Quarter     .....................................      $12.00           $8.625
Second Quarter    .....................................       15.375           8.3125
Third Quarter     .....................................       15.9375         12.0625
Fourth Quarter    .....................................       19.50           13.875

Fiscal 2000:
First Quarter     .....................................      $16.50           $9.375
Second Quarter    .....................................       11.375           8.00
Third Quarter     .....................................        9.9375          6.875
Fourth Quarter    .....................................        8.125           4.625

Fiscal 2001:
First Quarter (through April 25, 2001) ................       $9.03           $6.85
</TABLE>


We have paid no dividends and presently anticipate that all of our future
earnings will be retained for development of our businesses and we do not
anticipate paying cash dividends on our common shares during fiscal 2001. The
payment of any future dividends will be at the discretion of our board of
directors and will depend upon, among other things, future earnings, operations,
capital requirements, our general financial condition and general business
conditions. The payment of dividends under our long-term credit facility is
restricted to the greater of $5.0 million or 10% of consolidated net income.








                                       18
<PAGE>   19


ITEM 6.  SELECTED FINANCIAL DATA.
         (dollars in thousands, except per share and per square foot amounts)

The following table sets forth for the periods indicated selected financial data
included in our consolidated financial statements and our underlying books and
records. The 12 month period ended January 30, 1999 is presented for comparative
purposes.

<TABLE>
<CAPTION>
                                                                               Transition
                                                                  12 Months      Period
                                    For the Fiscal Year Ended       Ended       6 Months              For the Year Ended
                                    -------------------------      1/30/99        Ended       ------------------------------------
                                     2/3/01(1)        1/29/00    (unaudited)  1/30/99(1)(2)   8/1/98(2)     8/2/97    8/3/96(1)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>           <C>             <C>         <C>           <C>           <C>
Net Sales(3)                        $2,213,017     $1,670,176    $1,364,030      $780,263    $1,161,379    $1,073,399    $954,308
Operating (Loss) Profit              $(135,585)       $65,642       $51,226       $40,799       $36,921       $10,513     $36,213
Net (Loss) Income                    $(101,791)       $33,468       $24,871       $20,256       $20,359        $3,951     $21,718
Basic (Loss) Earnings per Share         $(3.03)         $1.03         $0.77         $0.63         $0.64         $0.12       $0.68
Diluted (Loss) Earnings per Share       $(3.03)         $1.02         $0.76         $0.62         $0.63         $0.12       $0.68
Total Assets                          $908,009       $744,181      $574,427      $574,427      $684,078      $457,973    $437,010
Working Capital                       $211,402       $205,011      $165,527      $165,527      $204,784      $158,476    $161,397
Current Ratio                             1.66           1.82          1.98          1.98          1.88          2.14        2.21
Long-term Obligations                 $326,449       $144,168      $101,447      $101,447      $165,648       $57,763     $46,942
Number of(4):
   Department Stores                       119            105            97            97            95            95          86
   Shoe Stores                              78             58            44            44            43             -           -
   Filene's Basement Stores                 19              -             -             -             -             -           -
Net Sales per
   Selling Sq. Ft.(5)                     $256           $249          $235          $126          $229          $217        $221
Comp Sales Change(6)                      (1.1)%         7.2%          6.0%          3.3%          5.9%           0.1%       (0.1)%
</TABLE>


(1)      Fiscal 2000 and 1996 include 53 weeks; all other years contain 52
         weeks. The six month period includes 26 weeks.
(2)      The operations of Shonac and Valley Fair are included from the date of
         acquisition, May 3, 1998.
(3)      Excludes sales of licensed departments. Prior to fiscal 1998, sales
         from our toys and sporting goods departments were included in Net
         Sales. At the start of fiscal 1998 these departments became licensed
         departments operated by VCM, Ltd., a 50/50 joint venture with Mazel
         Stores, Inc.
(4)      Includes all stores operating at the end of the fiscal year. Years
         prior to 1998 exclude the apparel, domestic and housewares departments
         operated by us in two affiliated department stores which were acquired
         effective May 3, 1998.
(5)      Excludes licensed departments and stores not operated during the entire
         fiscal period.
(6)      Comparable Store Sales Change excludes licensed departments. A store is
         considered to be comparable in its second full fiscal year of
         operation. For fiscal years 2000 and 1996, comparable store sales are
         computed using like 52-week periods.






                                       19
<PAGE>   20



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

RESULTS OF OPERATIONS

       The following table sets forth, for the periods indicated, the percentage
relationships to net sales of the listed items included in our Consolidated
Statements of Operations, except for the 12 month period ended January 30, 1999,
which is presented here for comparative purposes.


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                      For the Year       For the Year     For the 12 Months    For the 6 Months  For the Year
                                          Ended              Ended              Ended                Ended           Ended
                                         2/3/01             1/29/00            1/30/99              1/30/99         8/1/98
                                        53 Weeks           52 Weeks           52 Weeks             26 Weeks        52 Weeks
---------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                 <C>                  <C>                 <C>          <C>
Net sales, excluding sales
    licensed departments                 100.0%              100.0%                100.0%              100.0%       100.0%

Cost of sales                            (67.5)              (62.2)               ( 62.2)              (62.0)      ( 63.1)
                                         -----               -----                ------               -----       ------

Gross profit                              32.5                37.8                  37.8                38.0         36.9

Selling, general and
    administrative expenses              (39.3)              (34.7)                (35.2)              (33.9)       (35.8)

License fees from affiliates
    and other operating income             0.7                 0.8                   1.2                 1.1          2.1
                                       -------             -------               -------             -------      -------


Operating (loss) profit                   (6.1)                3.9                   3.8                 5.2          3.2

Gain on disposal of assets                 -                   -                     -                   -            0.1

Interest expense, net                     (1.3)               (0.6)                 (0.8)               (0.8)        (0.5)


Amortization of excess
    net assets over cost                   -                   -                     -                   -            0.1

Equity in (loss) income
    of joint venture                      (0.1)                0.1                   -                   -           (0.1)
                                        ------              ------               -------             -------         ----

(Loss) income before income taxes         (7.5)                3.4                   3.0                 4.4          2.8

Benefit (provision) for income taxes       2.9                (1.4)                 (1.2)               (1.8)        (1.0)
                                        ------             -------               -------             -------      -------

Net (loss) income                         (4.6)%               2.0%                  1.8%                2.6%         1.8%
                                        ======             =======               =======             =======      =======
</TABLE>






                                       20
<PAGE>   21


FISCAL YEAR ENDED FEBRUARY 3, 2001 COMPARED TO FISCAL YEAR ENDED JANUARY 29,
2000

       Our net sales increased $542.8 million, or 32.5%, from $1,670.2 million
to $2,213.0 million. Fiscal 2000's sales included $249.1 million net owned sales
of the Filene's stores acquired effective March 17, 2000. Comparable store sales
decreased 1.1%. Net sales for the department stores ("Value City") increased
$130.3 million, or 9.2%, from $1,423.6 million to $1,553.9 million. Value City's
comparable store sales decreased 4.3%, or $60.7 million. Non-apparel sales
increased 7.2% and apparel sales increased 6.4%. On a comparable store basis,
apparel and non-apparel sales decreased 5.1% and 5.4%, respectively. DSW Shoe
Warehouse achieved sales of $410.0 million with a 19.1% comparable stores sales
increase.

       Gross profit increased $89.1 million from $631.0 million to $720.1
million, and decreased to 32.5% as a percentage of net sales, compared to 37.8%
as a percentage of net sales in the prior year. The decrease in the gross margin
percentage is due primarily to a $105.4 million charge for the realignment of
excess inventory quantities.

       Selling, general and administrative expenses ("SG&A") increased $290.7
million from $579.5 million to $870.2 million, and increased as a percentage of
net sales from 34.7% to 39.3%, an increase of 4.6%. New DSW and Value City
stores accounted for $102.5 million of the SG&A increase; the Filene's stores
added $84.8 million. Comparable store SG&A increased $37.0 million, primarily in
the areas of payroll, benefits and occupancy costs. Distribution and
transportation costs were up $41.1 million. Overhead increased $14.1 million to
support expansion of our shoe business and the relocation of its distribution
complex. SG&A also includes $4.6 million of non-recurring severance and asset
impairment charges. All other expenses as a group were up approximately $6.6
million.

       Based upon our experience, we estimate the average cost of opening a new
department store to range from approximately $4.5 million to $6.5 million and
the cost of opening a new shoe store to range from approximately $1.0 million to
$2.0 million including leasehold improvements, fixtures, inventory, pre-opening
expense and other costs. Similar costs for a Filene's store are in the $2.5
million to $3.5 million range. Preparations for opening a department store
generally take between 8 and 12 weeks and preparations for a shoe store or a
Filene's store generally take 8 to 10 weeks. Pre-opening costs are expensed as
incurred. It has been our experience that new stores generally achieve
profitability and contribute to net income after the first full year of
operations. Twenty-three department stores opened less than 12 months as of the
beginning of fiscal 2000 had a pre-tax net operating loss of $22.8 million,
including $4.5 million of pre-opening expense amortization. Ten department
stores opened less than 12 months during fiscal 1999 had pre-tax operating
losses of $1.6 million in 1999, including $3.8 million of pre-opening expense.
Twenty DSW stores opened less than 12 months in fiscal 2000 had a pre-tax net
operating loss of $6.5 million, including $4.6 million of pre-opening expenses.
Twenty-two DSW stores opened less than 12 months during fiscal 1999 had a
pre-tax net operating loss of $3.7 million after recognizing $3.3 million of
pre-opening expenses.

       License fees from affiliates increased $2.9 million, or 34.0%, from $8.5
million to $11.3 million, and remained at 0.5% as a percentage of net sales.

       Other operating income decreased $2.4 million, or 42.0%, from $5.6
million to $3.3 million and decreased as a percentage of net sales from 0.34% to
0.15%.

       Operating (loss) profit decreased $201.2 million from $65.6 million to a
loss of $135.6 million, and decreased as a percentage of net sales from 3.9% to
a 6.1% loss as a result of the above factors.


                                       21
<PAGE>   22

       Interest expense, net of interest income, increased from $10.7 million to
$30.5 million due to increased borrowing.

       Equity in income (loss) of joint venture decreased $2.7 million from
income of $1.3 million to a loss of $1.3 million due primarily to markdowns
taken to liquidate inventory.

       Income (loss) before provision for income taxes decreased $223.8 million
from income of $56.4 million to a loss of $167.4 million, and decreased as a
percentage of sales from 3.4% to a 7.5% loss as a result of the above factors.

FISCAL YEAR ENDED JANUARY 29, 2000 COMPARED TO THE TWELVE MONTH PERIOD ENDED
JANUARY 30, 1999

       Our net sales increased $306.2 million, or 22.4%, from $1,364.0 million
to $1,670.2 million. Comparable store sales increased 7.2%. Net sales for the
department stores increased $148.3 million, or 13.5%, from $1,106.8 million to
$1,255.1 million. Value City's comparable store sales increased 6.5%, or $69.7
million. The shoe departments in Value City's stores contributed net sales of
$168.5 million. Non-apparel sales increased 9.0% and apparel sales increased
15.0%. On a comparable store basis, apparel and non-apparel sales increased 7.9%
and 2.1%, respectively. DSW achieved sales of $246.6 million with a 19.5%
comparable stores sales increase.

       Gross profit increased $115.9 million from $515.1 million to $631.0
million, and remained at 37.8% as a percentage of net sales.

       SG&A increased $98.9 million from $480.6 million to $579.5 million, but
decreased as a percentage of net sales from 35.2% to 34.7%, a reduction of 0.5%,
due primarily to the leveraging effect of higher sales volume partially offset
by increased pre-opening costs in fiscal 1999 of approximately $7.6 million.

       Ten department stores opened less than 12 months as of the beginning of
fiscal 1999 had a pre-tax net operating loss of $1.6 million, including $3.8
million of pre-opening expense amortization. Four department stores opened less
than 12 months during fiscal 1998 had pre-tax operating losses of $2.0 million
in 1998, including $1.5 million of pre-opening expense. 22 DSW stores opened
less than 12 months in fiscal 1999 had a pre-tax net operating loss of $3.7
million, including $3.3 million of pre-opening expenses. 12 DSW stores opened
less than 12 months during fiscal 1998 had a pre-tax net operating loss of $0.4
million after recognizing $0.9 million of pre-opening expenses.

       License fees from affiliates decreased $3.5 million, or 29.2%, from $12.0
million to $8.5 million, and decreased as a percentage of net sales from 0.9% to
0.5%. The decrease is attributable to the consolidation of Shonac, which was
previously treated as a licensee.

       Other operating income increased $0.9 million, or 18.1%, from $4.8
million to $5.6 million and remained at 0.3% as a percentage of net sales.

       Operating profit increased $14.4 million from $51.2 million to $65.6
million, and increased as a percentage of net sales from 3.8% to 3.9% as a
result of the above factors.

       Interest expense, net of interest income, increased from $10.5 million to
$10.7 million.

       Equity in income of joint venture increased $1.8 million from a loss of
$0.5 million to income of $1.3 million.


                                       22
<PAGE>   23

       Income before provision for income taxes increased $16.1 million from
$40.3 million to $56.4 million, and increased as a percentage of sales from 3.0%
to 3.4% as a result of the above factors.

SEASONALITY

       Our business is affected by the pattern of seasonality common to most
retail businesses. Historically, the majority of our sales and operating profit
have been generated during the back-to-school and Christmas selling seasons.

FISCAL YEAR

       In June 1998, we decided to change our fiscal year to a 52/53 week year
that ends on the Saturday nearest to January 31. This change was made to reflect
the reporting period common to most retailers. Fiscal 2000 contained 53 weeks.

INCOME TAXES

       The effective tax rate for fiscal 2000 was 39.2% versus 40.7% for fiscal
1999.

       The effective tax rate for fiscal 2001 is expected to be approximately
41.5% due primarily to the effect of non-deductible goodwill amortization
related to the Shonac acquisition.

ADOPTION OF ACCOUNTING STANDARDS

       The Financial Accounting Standards Board (FASB) periodically issues
Statements of Financial Accounting Standards ("SFAS"), some of which require
implementation by a date falling within or after the close of our fiscal year.

       Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities, is effective for all fiscal
years beginning after June 15, 2000. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Under SFAS 133, certain contracts that were not formerly considered derivatives
may now meet the definition of a derivative. The Company will adopt SFAS 133
effective February 4, 2001. Management does not expect the adoption of SFAS 133
to have a significant impact on the financial position, results of operations,
or cash flows of the Company.



                                       23
<PAGE>   24


INFLATION

       The results of operations and financial condition are presented based
upon historical cost. While it is difficult to accurately measure the impact of
inflation because of the nature of the estimates required, management believes
that the effect of inflation, if any, on the results of operations and financial
condition has been minor.

LIQUIDITY AND CAPITAL RESOURCES

       Net working capital was $211.4 million and $205.0 million at February 3,
2001 and January 29, 2000, respectively. Current ratios at those dates were 1.7
and 1.8, respectively.

       Net cash used in operating activities totaled $114.7 million in fiscal
2000. Net cash provided by operating activities was $27.5 million, $93.2 million
and $43.3 million for the fiscal year 1999, the Transition Period 1998 and
fiscal 1998, respectively. Net loss, adjusted for depreciation and amortization,
used $54.3 million of operating cash flow for the fiscal year 2000. This was
reduced by $54.1 million representing a decrease in inventories and an increase
in accounts payable. Increases in accounts receivable, deferred income taxes and
prepaid expenses and other assets used $89.4 million. Other changes in working
capital assets and liabilities used $25.1 million.

       During the twelve months ended January 29, 2000, net income adjusted for
depreciation and amortization, provided $67.7 million of operating cash flow.
This was decreased by $67.0 million representing an increase in inventories net
of a decrease in accounts payable. Other changes in working capital assets and
liabilities provided $26.8 million.

       Net cash used for investing activities totaled $70.1 million, $49.7
million, $18.2 million and $127.5 million for fiscal years 2000, 1999,
Transition 1998 and fiscal 1998, respectively.

       Net cash used for capital expenditures was $70.2 million, $37.3 million,
$17.3 million and $27.2 million for fiscal years 2000, 1999, Transition 1998 and
fiscal 1998, respectively. During fiscal 2000, capital expenditures included
$30.5 million for new stores, $10.8 million for improvements in existing stores,
$16.7 million for relocation of office, warehousing and operations of our shoe
business, $5.9 million for MIS equipment upgrades and new systems. All other
capital expenditures aggregated $6.3 million.

       At February 3, 2001, we had a $300 million Amended and Restated Credit
Agreement (Credit Agreement), dated as of March 15, 2000. The Credit Agreement,
which expires on March 15, 2003, provides for revolving and overnight loans and
issuance of letters of credit. Outstanding advances are secured by a lien on
assets and are subject to a monthly borrowing base of eligible inventories and
receivables, as defined. Terms of the Credit Agreement require compliance with
certain restrictive covenants, including limitations on dividends, the
incurrence of additional debt and financial ratio tests. Additionally, the
Company has provided an unconditional guarantee of 50% of amounts outstanding on
VCM's $25.0 million revolving line of credit. At February 3, 2001, $77.7 million
was available under the Credit Agreement. Borrowings aggregated $200.0 million,
plus $16.0 million of letters of credit were issued and outstanding and the VCM
loan guarantee totaled $6.2 million. The Credit Agreement provides for various
borrowing rates, currently equal to 275 basis points over LIBOR. The LIBOR rate
on $40.0 million has been locked in at a fixed annual rate of 5.895% through May
2001 under a swap agreement. In addition, the LIBOR rate on $35 million has been
locked in at a fixed annual rate of 6.99% through April 2002 under a swap
agreement.




                                       24
<PAGE>   25

       To supplement operating cash requirements the Company has a $50.0 million
subordinated secured credit facility with SSC. Outstanding advances under the
agreement are subordinated to the bank credit facility and are subject to a
junior lien on assets securing the bank credit facility. At February 3, 2001,
$20.0 million was outstanding. The interest rate and terms of the $50.0 million
facility are generally the same as the Credit Agreement.

       The Company entered into a $75.0 million Senior Subordinated Convertible
Loan Agreement (Senior Facility), dated as of March 15, 2000. The Senior
Facility bears interest at various rates, currently equal to 250 basis points
over LIBOR. The interest rate increases an additional 50 basis points every 90
days after the first anniversary date. The Senior Facility is due in September
2003. In December 2000, pursuant to terms of the Senior Facility, SSC purchased
the outstanding balance under the same continuing terms. The terms provide that
if prior to March 17, 2001, the balance outstanding thereunder is not repaid
from the proceeds of an equity offering or other subordinated debt acceptable to
lenders under the Credit Agreement, then after that date SSC, as the lender, has
the right to convert the debt into our common stock at a price equal to 95% of
the 20-day average of high and low sales prices reported on the New York Stock
Exchange at the time of conversion. As of March 17, 2001, the Senior Facility
was not repaid. We paid SSC a one time fee of 200 basis points, or $1.5 million,
at the initial closing in consideration for entering into a Put Agreement
associated with the Senior Facility.

       Although we believe that cash generated by operations, along with the
available proceeds from the Credit Agreement, SSC subordinated secured credit
facility and other sources of financing will be sufficient to meet our
obligations for working capital, capital expenditures, and debt service
requirements there is no assurance that we will be able to meet our
projections. Further, there is no assurance that extended financing will be
available to us in the future if we fail to meet our projections.

       Our sales results in the first two fiscal months of 2001 were below
plan, we believe principally as a result of severe weather in many of our
markets. This condition, along with the effect of increased heating and fuel
prices affected the retail industry in general. Achievement of expected cash
flows from operations and compliance with our Credit Agreement covenants (see
Note 5 to the Consolidated Financial Statements) are dependent upon a number of
factors, including the attainment of sales, gross profit, expense levels,
vendor relations, and flow of merchandise that are consistent with our
financial projections, particularly for the balance of the Spring season.

       A recent discussion with a major factor indicated they intend to reduce
our future availability of credit and that we need to strengthen our liquidity
and increase our credit availability from other sources.

       ACQUISITION

       On March 17, 2000, we, through our wholly-owned subsidiary, Base
Acquisition Corp, completed the acquisition of substantially all of the assets
and assumed certain liabilities of Filene's Basement Corp., a Massachusetts
corporation, and Filene's Basement Inc., a wholly owned subsidiary of Filene's
Basement Corp. pursuant to the closing of the asset purchase agreement, dated
February 2, 2000.

       The purchase price included cash of $3.5 million paid at closing, $1.2
million to be paid over a period not to exceed three years, 403,208 shares of
our common stock with an agreed value of $5.5 million and the assumption of
specified liabilities. The assumed liabilities included the payment of amounts
outstanding under Filene's debtor-in-possession financing facility of
approximately $22.5 million and certain trade payable and other obligations
which will be paid in the ordinary course. Allocation of the purchase price has
been determined based on fair market valuation of the net assets acquired
subject to resolution of several outstanding matters.

       The acquisition was funded by cash from operations and a portion of the
proceeds from the Credit Agreement.



                                       25
<PAGE>   26


RISK FACTORS AND SAFE HARBOR STATEMENT

       We caution that any forward-looking statements (as such term is defined
in the Private Securities Litigation Reform Act of 1995) contained in this
Report, other filings with the Securities and Exchange Commission or made by our
management involve risks and uncertainties, and are subject to change based on
various important factors. The following factors, among others, in some cases
have affected and in the future could affect our financial performance and
actual results and could cause actual results for 2001 and beyond to differ
materially from those expressed or implied in any such forward-looking
statements: decline in demand for our merchandise, the ability to repay the
$75.0 million Senior Facility through an equity offering or refinancing, our
ability to attain our fiscal 2001 business plan, expected cash flows from
operations, vendor and their factor relations, flow of merchandise,
compliance with the credit agreement, our ability to strengthen our liquidity
and increase our credit availability, the availability of desirable store
locations on suitable terms, changes in consumer spending patterns, consumer
preferences and overall economic conditions, the impact of competition and
pricing, changes in weather patterns, changes in existing or potential duties,
tariffs or quotas, paper and printing costs, and the ability to hire and train
associates.

       Historically, our operations have been seasonal, with a disproportionate
amount of sales and a majority of net income occurring in the back-to-school and
Christmas selling seasons. As a result of this seasonality, any factors
negatively affecting us during this period, including adverse weather, the
timing and level of markdowns or unfavorable economic conditions, could have a
material adverse effect on our financial condition and results of operations for
the entire year.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         We are exposed to market risk from changes in interest rates which may
adversely affect our financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, we manage
exposures through our regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. We do
not use financial instruments for trading or other speculative purposes and are
not party to any leveraged financial instruments.

         We are exposed to interest rate risk primarily through our borrowings
under our revolving credit facility. At February 3, 2001, direct borrowings
aggregated $200.0 million. The facility, as amended and restated effective March
17, 2000, permits debt commitments up to $300.0 million, has a March 15, 2003
maturity date and generally bears interest at a floating rate of LIBOR plus
2.0%. We have swap agreements to help manage the exposure to interest rate
movements and reduce borrowing costs. As of February 3, 2001 the interest rate
on $40.0 million has been locked in at a fixed rate of 7.395% until May 2001 and
has a fair market value of $402,000. After January 29, 2000 the interest rate on
an additional $35.0 million was locked in at a fixed rate of 8.99% until April
2003.

         At February 3, 2001, we performed a sensitivity analysis assuming an
average outstanding principal amount of $247.6 million subject to variable
interest rates. A 10% increase in LIBOR would result in approximately $1.0
million of additional interest expense annually.



                                       26
<PAGE>   27


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         Our financial statements and financial statement schedule and the
Independent Auditors' Report thereon are filed pursuant to this Item 8 and are
included in this report beginning on page F-1.


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

         None.




                                       27
<PAGE>   28




                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required by this item appears under the captions
"Nominees for Election as Directors," "Officers and Key Employees," and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in our
Proxy Statement relating to our Annual Meeting of Shareholders to be held in
July 2001 and is incorporated herein by reference.


ITEM 11. EXECUTIVE OFFICER COMPENSATION.

         The information required by this item appears under the captions
"Executive Officer Compensation," "Information Concerning Board of Directors,"
and "Compensation Committee Interlocks and Insider Participation" in our Proxy
Statement relating to our Annual Meeting of Shareholders to be held in July 2001
and is incorporated herein by reference.


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

         The information required by this item appears under the caption
"Security Ownership of Certain Beneficial Owners and Management" in our Proxy
Statement relating to our Annual Meeting of Shareholders to be held in July 2001
and is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item appears under the caption
"Relationship with SSC and its Affiliates" in our Proxy Statement relating to
our Annual Meeting of Shareholders to be held in July 2001 and is incorporated
herein by reference.





                                       28
<PAGE>   29


                                     PART IV

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

14(a)(1) FINANCIAL STATEMENTS
         The documents listed below are filed as part of this Form 10-K:

<TABLE>
<CAPTION>
                                                                                               Form 10-K
                                                                                               ---------

<S>                                                                                             <C>
         Independent Auditors' Report                                                            F - 1
         Consolidated Balance Sheets at February 3, 2001
              and January 29, 2000                                                               F - 2
         Consolidated Statements of Operations for the years ended
              February 3, 2001, January 29, 2000, 12 months ended January
              30, 1999 (unaudited), 6 months ended
              January 30, 1999 and for the year ended August 1, 1998                             F - 3
         Consolidated Statements of Shareholders' Equity for the years
              ended February 3, 2001, January 29, 2000, 6 months ended
              January 30, 1999 and for the year ended August 1, 1998                             F - 4
         Consolidated Statements of Cash Flows for the years ended
              February 3, 2001, January 29, 2000, 12 months ended January
              30, 1999 (unaudited), for 6 months ended
              January 30, 1999 and for the year ended August 1, 1998                             F - 5
         Notes to Consolidated Financial Statements                                              F - 6


14(a)(2) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES:
    The schedule listed below is filed as part of this Form 10-K:

       Schedule II.        Valuation and Qualifying Accounts                                     S - 1

     Schedules not listed above are omitted because of the absence of the
     conditions under which they are required or because the required
     information is included in the financial statements or the notes thereto.
</TABLE>

14(a)(3) EXHIBITS:

    See Index to Exhibits which begins on Page E-1.

14(b) REPORTS ON FORM 8-K

    During the fourth quarter, we filed a Form 8-K on January 8, 2001, Item 5 -
    "Other Items" relating to the Amendment No. 2 and Waiver to Credit Agreement
    for our $300 million bank credit facility with its existing lenders.




                                       29
<PAGE>   30


                                   SIGNATURES

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



                                        VALUE CITY DEPARTMENT STORES, INC.
Date: April 27, 2001                    By:                   *
                                           ---------------------------
                                           (George Kolber, Vice Chairman and
                                           Chief Executive Officer)

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

<TABLE>
<CAPTION>
              SIGNATURE                             TITLE                                          DATE
              ---------                             -----                                          ----

<S>                                     <C>                                                      <C>
                  *                     Chairman of the Board of Directors                       4/27/01
---------------------------------       and Chief Executive Officer
(Jay L. Schottenstein)

                  *                     Vice Chairman and                                        4/27/01
---------------------------------       Chief Executive Officer
(George Kolber)                         (Principal Executive Officer)


                  *                     Vice Chairman of the Board of Directors                  4/27/01
---------------------------------
(Saul Schottenstein)

                  *                     Vice Chairman of the Board of Directors                  4/27/01
---------------------------------
(Martin P. Doolan)

                  *                     Chief Financial Officer and Treasurer                    4/27/01
---------------------------------       (Principal Financial and Accounting Officer)
(James A. McGrady)

                  *                     Director                                                 4/27/01
---------------------------------
(Henry L. Aaron)

                  *                     Director                                                 4/27/01
---------------------------------
(Ari Deshe)

                  *                     Director                                                 4/27/01
---------------------------------
(Jon P. Diamond)

                  *                     Director                                                 4/27/01
---------------------------------
(Richard Gurian)

                  *                     Director                                                 4/27/01
---------------------------------
(Norman Lamm)

                  *                     Director                                                 4/27/01
---------------------------------
(Geraldine Schottenstein)

                  *                     Director                                                 4/27/01
---------------------------------
(Robert L. Shook)

*By:/s/ George Kolber
    -----------------
     George Kolber, (Attorney-in-Fact)
</TABLE>



                                       30
<PAGE>   31



                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and
Shareholders of Value City
Department Stores, Inc.:


                  We have audited the accompanying consolidated balance sheets
of Value City Department Stores, Inc. (a majority owned subsidiary of
Schottenstein Stores Corporation) and its wholly owned subsidiaries (the
"Company") as of February 3, 2001 and January 29, 2000 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years ended February 3, 2001, January 29, 2000 and August 1, 1998
and the six months ended January 30, 1999. Our audits also included the
financial statement schedule listed in the Index as Item 14(a)(2). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

                  We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

                  In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Value City
Department Stores, Inc. and its wholly owned subsidiaries as of February 3, 2001
and January 29, 2000, and the results of their operations and cash flows for the
years ended February 3, 2001, January 29, 2000, August 1, 1998 and the six
months ended January 30, 1999 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP


Columbus, Ohio
April 30, 2001





                                      F-1
<PAGE>   32


                       VALUE CITY DEPARTMENT STORES, INC.
                           CONSOLIDATED BALANCE SHEETS
                    at February 3, 2001 and January 29, 2000
                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                                     ASSETS

                                                                    2/3/01                 1/29/00
--------------------------------------------------------------------------------------------------
<S>                                                              <C>                     <C>
CURRENT ASSETS:
    Cash and equivalents                                          $10,562                  $6,027
    Accounts receivable, net                                       44,927                  10,131
    Receivables from affiliates                                     9,452                     299
    Inventories                                                   393,577                 412,479
    Prepaid expenses and other assets                              22,290                   8,544
    Deferred income taxes                                          51,732                  18,052
                                                                 --------                --------
         TOTAL CURRENT ASSETS                                     532,540                 455,532

PROPERTY AND EQUIPMENT, AT COST:
    Furniture, fixtures and equipment                             223,675                 192,207
    Leasehold improvements                                        176,318                 142,066
    Land and building                                                 801                     801
    Capital leases                                                 38,348                  42,328
                                                                 --------                --------
                                                                  439,142                 377,402
    Accumulated depreciation and amortization                    (190,103)               (169,907)
                                                                 --------                --------
         PROPERTY AND EQUIPMENT, NET                              249,039                 207,495

INVESTMENT IN JOINT VENTURE                                         8,292                   9,679
GOODWILL AND TRADENAMES, NET                                       67,056                  45,566
OTHER ASSETS                                                       51,082                  25,909
                                                                 --------                --------
         TOTAL ASSETS                                            $908,009                $744,181
                                                                 ========                ========

<CAPTION>
--------------------------------------------------------------------------------------------------
                      LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------------------------------------------------------------------
<S>                                                              <C>                     <C>
CURRENT LIABILITIES:
    Accounts payable                                             $180,736                $164,196
    Accounts payable to affiliates                                 13,655                   4,532
    Accrued expenses:
        Compensation                                               19,662                  17,118
        Taxes                                                      31,255                  22,604
        Other                                                      75,227                  41,611
    Current maturities of long-term obligations                       603                     460
                                                                 --------                --------
         TOTAL CURRENT LIABILITIES                                321,138                 250,521

LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES                  326,449                 144,168
DEFERRED INCOME TAXES AND
   OTHER NONCURRENT LIABILITIES                                    10,115                   7,131

COMMITMENTS AND CONTINGENCIES                                         -                       -

SHAREHOLDERS' EQUITY:
    Common shares, without par value;
        80,000,000 authorized; issued, including
        treasury shares, 34,330,863 shares and
        32,992,122 shares, respectively                           145,659                 132,601
    Retained earnings                                             111,155                 212,946
    Deferred compensation expense, net                             (6,448)                 (2,513)
    Treasury shares, at cost, 7,651 and 87,651, respectively          (59)                   (673)
                                                                 --------                --------
         TOTAL SHAREHOLDERS' EQUITY                               250,307                 342,361
                                                                 --------                --------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $908,009                $744,181
                                                                 ========                ========
--------------------------------------------------------------------------------------------------
</TABLE>



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


                                      F-2
<PAGE>   33


                       VALUE CITY DEPARTMENT STORES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               Years Ended February 3, 2001 and January 29, 2000,
                Twelve Months Ended January 30, 1999 (Unaudited),
         Six Months Ended January 30, 1999 and Year Ended August 1, 1998
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                      For
                                                  For              For           the 12 Months        For            For
                                               the Year          the Year            Ended        the 6 Months    the Year
                                                 Ended             Ended            1/30/99           Ended         Ended
                                                2/3/01            1/29/00         (Unaudited)        1/30/99       8/1/98
                                               53 Weeks          52 Weeks          52 Weeks         26 Weeks      52 Weeks
--------------------------------------------------------------------------------------------------------------------------

<S>                                          <C>               <C>                <C>               <C>         <C>
Net sales, excluding sales of
    licensed departments                     $2,213,017        $1,670,176         $1,364,030        $780,263    $1,161,379
Cost of sales                                (1,492,947)       (1,039,145)          (848,964)       (483,502)     (732,902)
                                            -----------      ------------       ------------       ---------     ---------
    GROSS PROFIT                                720,070           631,031            515,066         296,761       428,477

Selling, general and
    administrative expenses                    (870,237)         (579,460)          (480,584)       (264,590)     (416,218)
License fees from affiliates                     11,323             8,451             11,987           4,880        20,674
Other operating income                            3,259             5,620              4,757           3,748         3,988
                                            -----------      ------------       ------------       ---------     ---------
    OPERATING (LOSS) PROFIT                    (135,585)           65,642             51,226          40,799        36,921

Interest expense, net                           (30,480)          (10,728)           (10,532)         (6,702)       (5,267)
(Loss) gain on disposal of assets, net              (16)              146                 40              16         1,623
                                            -----------      ------------       ------------       ---------     ---------
(LOSS) INCOME BEFORE EQUITY IN (LOSS)
      INCOME OF JOINT VENTURE AND BENEFIT
      (PROVISION) FOR INCOME TAXES             (166,081)           55,060             40,734          34,113        33,277
Equity in (loss) income of joint venture         (1,340)            1,340               (464)            131        (1,377)
                                            -----------      ------------       ------------       ---------     ---------
    (LOSS) INCOME BEFORE BENEFIT
      (PROVISION) FOR INCOME TAXES             (167,421)           56,400             40,270          34,244        31,900

Benefit (provision) for income taxes             65,630           (22,932)           (15,399)        (13,988)      (11,541)
                                            -----------      ------------       ------------       ---------     ---------

      NET (LOSS) INCOME                       $(101,791)          $33,468            $24,871         $20,256       $20,359
                                            ===========      ============       ============       =========     =========


BASIC (LOSS) EARNINGS PER SHARE                  $(3.03)            $1.03              $0.77           $0.63         $0.64
                                            ===========      ============       ============       =========     =========


DILUTED (LOSS) EARNINGS PER SHARE                $(3.03)            $1.02              $0.76           $0.62         $0.63
                                            ===========      ============       ============       =========     =========
</TABLE>










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




                                      F-3
<PAGE>   34


                       VALUE CITY DEPARTMENT STORES, INC.
                           CONSOLIDATED STATEMENTS OF
                              SHAREHOLDERS' EQUITY
                  Years Ended February 3, 2001 and January 29,
              2000, Six Months Ended January 30, 1999 and the Year
                              Ended August 1, 1998
                                 (in thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                     NUMBER OF SHARES
                                   --------------------
                                               Common                             Deferred
                                   Common      Shares    Common     Retained    Compensation   Treasury
                                   Shares   in Treasury  Shares     Earnings       Expense      Shares      Total
----------------------------------------------------------------------------------------------------------------------------------

<S>                                <C>         <C>      <C>            <C>         <C>           <C>        <C>
BALANCE AT AUGUST 2, 1997          32,259       369      120,796       138,863       (982)       (2,829)    255,848

  Net income                                                            20,359                               20,359
  Exercise of stock options           331                  3,602                                              3,602
  Tax benefit realized on
    vested restricted shares                                 120                                                120
  Grant of restricted shares           30                    328                      (328)
  Amortization of deferred
    compensation expense                                                               230                      230
                             -----------------------------------------------------------------------------------------------------
BALANCE, AUGUST 1, 1998            32,620       369      124,846        159,222     (1,080)      (2,829)    280,159

  Net income                                                             20,256                               20,256
  Sale of treasury shares                       (25)         119                                    192          311
  Exercise of stock options            41                    324                                                 324
  Tax benefit realized on
    vested restricted shares                                 145                                                 145
  Forfeiture of restricted shares     (23)                  (278)                       278
  Amortization of deferred
    compensation expense                                                                131                      131
                             -----------------------------------------------------------------------------------------------------
BALANCE, JANUARY 30, 1999          32,638       344      125,156        179,478        (671)     (2,637)     301,326

  Net income                                                             33,468                               33,468
  Exercise of stock options           198                  1,660                                               1,660
  Tax benefit on stock options
    and restricted shares                                  1,548                                               1,548
  Grant of restricted shares          156                  2,201                     (2,201)
  Amortization of deferred                                                              359                      359
    compensation expense
  Acquisitions                                 (256)       2,036                                  1,964        4,000
                             -----------------------------------------------------------------------------------------------------
BALANCE, JANUARY 29, 2000          32,992        88      132,601        212,946      (2,513)       (673)     342,361

  Net loss                                                             (101,791)                            (101,791)
  Sales of treasury shares                      (80)         466                                    614        1,080
  Exercise of stock options           182                  1,431                                               1,431
  Tax benefit on stock options
    and restricted shares                                    228                                                 228
  Grant of restricted shares,
    net of forfeitures                754                  5,433                     (4,703)                     730
  Amortization of deferred
    compensation expense                                                                768                      768
  Acquisitions                        403                  5,500                                               5,500
                             -----------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 3, 2001          34,331         8     $145,659       $111,155     $(6,448)       $(59)    $250,307
                             =====================================================================================================
</TABLE>


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






                                      F-4
<PAGE>   35
                       VALUE CITY DEPARTMENT STORES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               Years Ended February 3, 2001 and January 29, 2000,
                Twelve Months Ended January 30, 1999 (Unaudited),
         Six Months Ended January 30, 1999 and Year ended August 1, 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                 12 Months
                                                                            Year         Year      Ended     6 Months       Year
                                                                           Ended        Ended     1/30/99     Ended        Ended
                                                                          2/3/01       1/29/00  (Unaudited)  1/30/99      8/1/98
                                                                         53 Weeks     52 Weeks   52 Weeks    26 Weeks     52 Weeks
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                                                      <C>           <C>         <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net (loss) income                                                    $(101,791)    $33,468     $24,871     $20,256     $20,359
    Adjustments to reconcile net (loss) income to
      net cash (used in) provided by operating activities:
        Depreciation and amortization                                       47,495      34,230      31,012      16,299      27,773
        Deferred income taxes and other noncurrent liabilities             (35,058)        (68)       (696)      1,990      (1,920)
        Equity in (income) loss of joint venture                             1,340      (1,340)        464        (131)      1,377
        Loss (gain) on disposal of assets                                       16        (146)        (39)        (16)     (1,623)
        Change in working capital, assets and liabilities,
           excluding effects of acquisitions:
          Receivables                                                      (42,657)      4,317         669      (1,490)      1,504
          Inventories                                                       44,194    (126,284)     11,027      87,146     (39,223)
          Prepaid expenses and other assets                                (11,675)     (3,178)      2,028       3,808       6,383
          Accounts payable                                                   7,271      59,265      (1,425)    (26,775)     16,269
          Accrued expenses                                                 (23,852)     27,263       3,884      (7,908)     12,358
                                                                         ---------   ---------   ---------   ---------   ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                       (114,717)     27,527      71,795      93,179      43,257
                                                                         ---------   ---------   ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                                   (70,226)    (37,317)    (36,889)    (17,305)    (27,165)
    Investment in joint venture                                                  -           -           -           -      (9,637)
    Proceeds from sale of assets                                               326         167          60          24      22,388
    Acquisitions                                                            (3,506)     (8,000)   (108,473)          -    (108,473)
    Notes receivable                                                             -           -           -           -       1,906
    Other assets                                                             3,355      (4,580)     (7,301)       (963)     (6,532)
                                                                         ---------   ---------   ---------   ---------   ---------
NET CASH USED IN INVESTING ACTIVITIES                                      (70,051)    (49,730)   (152,603)    (18,244)   (127,513)
                                                                         ---------   ---------   ---------   ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common shares                                  1,431       1,660       2,912         324       2,681
    Net payments under demand note facility                                      -           -           -           -     (12,000)
    Net proceeds from issuance of debt                                     187,872      15,000     137,225           -     137,225
    Net principal payments under long-term obligations                           -      (9,325)   (107,402)    (87,166)    (22,462)
                                                                         ---------   ---------   ---------   ---------   ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                        189,303       7,335      32,735     (86,842)    105,444
                                                                         ---------   ---------   ---------   ---------   ---------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                              4,535     (14,868)    (48,073)    (11,907)     21,188
CASH AND EQUIVALENTS, BEGINNING OF YEAR                                      6,027      20,895      68,968      32,802      11,614
                                                                         ---------   ---------   ---------   ---------   ---------
CASH AND EQUIVALENTS, END OF YEAR                                          $10,562      $6,027     $20,895     $20,895     $32,802
                                                                         =========   =========   =========   =========   =========
</TABLE>



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




                                      F-5
<PAGE>   36

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.       BUSINESS OPERATIONS AND BASIS OF PRESENTATION

         The accompanying consolidated financial statements include the accounts
         of Value City Department Stores, Inc. (VCDS) and its wholly owned
         subsidiaries. These entities are herein referred to collectively as the
         Company. The Company operates a chain of full-line, off-price
         department stores, principally under the name Value City, as well as
         better-branded off-price shoe stores, under the name "DSW Shoe
         Warehouse." As of February 3, 2001 a total of 216 stores were open,
         including 119 Value City stores located principally in Ohio (23 stores)
         and Pennsylvania (19 stores) with the remaining stores dispersed
         throughout the Midwest, East and South and 78 shoe stores located
         throughout the United States and 19 Filene's Basement stores
         ("Filene's") located principally in the New England states.

         To facilitate comparisons with the current year, certain amounts in
         prior years' and interim period financial statements have been
         reclassified to conform to the current year presentation.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         FISCAL YEAR
         On June 10, 1998, the Company determined to change its fiscal year from
         a 52/53 week year that ends on the Saturday nearest to July 31 to a
         52/53 week year that ends on the Saturday nearest to January 31. The
         six-month transition period of August 3, 1998 through January 30, 1999
         (the "Transition Period") contains 26 weeks and precedes the start of
         the new fiscal year. Fiscal 2000 contains 53 weeks.

         An unaudited consolidated statement of income and an unaudited
         consolidated statement of cash flows for the twelve months ended
         January 30, 1999 is presented for comparative purposes. All necessary
         adjustments for fair presentation have been made.

         CONSOLIDATION
         The consolidated financial statements include the accounts of the
         Company after elimination of significant intercompany transactions and
         balances.

         CASH AND EQUIVALENTS
         Cash and equivalents represent cash and highly liquid investments with
         maturities when purchased of three months or less.

         INVENTORIES
         Merchandise inventories are stated at the lower of cost or market using
         the retail method.

         PRE-OPENING EXPENSES
         Pre-opening expenses are expensed as incurred. Pre-opening costs
         expensed were $10,902,000, $7,563,000, $1,308,000 and $1,434,000 for
         fiscal 2000, 1999, the Transition Period and for fiscal year 1998,
         respectively.



                                      F-6
<PAGE>   37


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


         INVESTMENT IN JOINT VENTURE
         VCM, Ltd. ("VCM") operates the health and beauty care, food and toy and
         sporting goods departments in the Company's stores as licensed
         departments. VCM is a 50/50 joint venture with Mazel Stores, Inc.
         ("Mazel"). The Company accounts for its fifty percent interest in the
         joint venture under the equity method. (See Note 3, Related Party
         Transactions.)

         PROPERTY AND EQUIPMENT
         Property and equipment are stated at cost. Depreciation and
         amortization are recognized principally on the straight-line method in
         amounts adequate to amortize costs over the estimated useful lives of
         the respective assets. Leasehold improvements are amortized over the
         shorter of their useful lives or lease term. The estimated useful lives
         by class of asset are:

            Buildings                                      31 years
            Furniture, fixtures and equipment              3 to 10 years
            Leasehold improvements                         10 years

         LONG-LIVED ASSETS
         Long-lived assets and certain identifiable intangibles are reviewed for
         impairment whenever events or changes in circumstances indicate that
         full recoverability is questionable.

         GOODWILL AND TRADENAMES
         Goodwill represents the excess cost over the estimated fair values of
         net assets and identifiable intangible assets of businesses acquired
         and is being amortized over 15 years. Tradenames represent the values
         assigned to names that the Company acquired and is being amortized over
         15 years. The accumulated amortization for these assets was $10,638,000
         and $5,631,000 at February 3, 2001 and January 29, 2000, respectively.

         REVENUE RECOGNITION
         Sales of merchandise and services are net of returns and allowances and
         exclude sales tax. Layaway sales are recognized when the merchandise
         has been paid for in full.

         ADVERTISING EXPENSE
         The cost of advertising is expensed as incurred. During fiscal year
         2000, 1999, the Transition Period and during fiscal year 1998,
         advertising expense was $78,224,000, $59,194,000, $29,741,000 and
         $38,245,000, respectively.

         INTEREST RATE SWAP AGREEMENT
         The Company utilizes interest rate swap agreements to manage the
         interest rate risk associated with a portion of its borrowings. The
         counterparty to this instrument is a major financial institution. These
         agreements are used to reduce the potential impact of increases in
         interest rates on variable rate long-term debt. The differential to be
         paid or received is accrued as interest rates change and is recognized
         as an adjustment to interest expense.

         EARNINGS PER SHARE
         Basic earnings per share is based on a simple weighted average of
         common shares outstanding. Diluted earnings per share reflects the
         potential dilution of common shares, related to outstanding


                                      F-7
<PAGE>   38

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

         stock options, calculated using the treasury stock method. The
         numerator for the calculation of basic and diluted earnings per
         share is net income. The denominator is summarized as follows
         (in thousands):


<TABLE>
<CAPTION>
                                                                                         6 Months
                                                    Year Ended         Year Ended          Ended        Year Ended
                                                      2/3/01            1/29/00           1/30/99         8/1/98
        -----------------------------------------------------------------------------------------------------------
        <S>                                            <C>                <C>              <C>              <C>
        Weighted average shares outstanding            33,567             32,495           32,285           31,997
        Assumed exercise of dilutive stock
           options                                       -                   366              350              364
                                                       ------             ------           ------           ------

        Number of shares for computation of
           diluted earnings per share                  33,567             32,861           32,635           32,361
                                                       ======             ======           ======           ======
        -----------------------------------------------------------------------------------------------------------
</TABLE>


         Options to purchase 2,615,550 shares of stock at prices ranging from
         $5.56 to $21.44 per share were outstanding during the year ended
         February 3, 2001 but were not included in the computation of diluted
         loss per share. Options to purchase 16,000 shares of stock at prices
         ranging from $16.56 to $21.44 per share were outstanding during the
         year ended January 29, 2000 but were not included in the computation of
         diluted earnings per share because the options' exercise prices were
         greater than the average market price of the stock.

         USE OF ESTIMATES
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the amounts reported in the financial
         statements and accompanying notes. Although these estimates are based
         on management's knowledge of current events and actions it may
         undertake in the future, actual results could differ from these
         estimates.

         RECENT ACCOUNTING PRONOUNCEMENTS
         Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
         for Derivative Instruments and Hedging Activities, is effective for all
         fiscal years beginning after June 15, 2000. SFAS 133, as amended,
         establishes accounting and reporting standards for derivative
         instruments, including certain derivative instruments embedded in other
         contracts, and for hedging activities. Under SFAS 133, certain
         contracts that were not formerly considered derivatives may now meet
         the definition of a derivative. The Company will adopt SFAS 133
         effective February 4, 2001. Management has concluded that the adoption
         of SFAS 133 will not have a significant impact on the financial
         position, results of operations, or cash flows of the Company.





                                      F-8
<PAGE>   39

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

3.       RELATED PARTY TRANSACTIONS

         The Company purchases merchandise from and sells merchandise to
         affiliates of Schottenstein Stores Corporation ("SSC"), direct owner of
         approximately 53.0% of the Company's common shares, and VCM. The
         related party transactions are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     Year Ended        Year Ended        6 Months Ended      Year Ended
                                                       2/3/01            1/29/00             1/30/99           8/1/98
         ----------------------------------------------------------------------------------------------------------------

         <S>                                            <C>               <C>                <C>                 <C>
         Purchases of merchandise
          from affiliates                               $24,787           $7,228             $1,471              $4,898
         Merchandise sold to affiliates at cost,
          including handling charges                     14,300             -                  -                    333
         Merchandise purchased on behalf of
          and shipped directly to affiliates, at
          cost plus delivery charges                       -                -                  -                  3,935
         ----------------------------------------------------------------------------------------------------------------
</TABLE>


         The Company had license agreements with Shonac prior to its
         acquisition. The license agreement was for the operation of shoe
         departments in all of the Company's stores and provided for fees based
         on a percentage of sales, as defined.


         Sales by licensed departments and the related license fees earned are
         as follows (in thousands):

<TABLE>
<CAPTION>
                              Year Ended              Year Ended            6 Months Ended          Year Ended
                                2/3/01                  1/29/00                 1/30/99               8/1/98
         -------------------------------------------------------------------------------------------------------

         <S>                   <C>                       <C>                     <C>                   <C>
         VCM
           Sales               $140,240                  $112,333                $63,480               $87,651
           License fees           9,144                     8,451                  4,880                 7,540

         Shonac
           Sales                   -                        -                      -                   119,319
           License fees            -                        -                      -                    13,134
         -------------------------------------------------------------------------------------------------------
</TABLE>

         The Company also leases certain store and warehouse locations owned by
         SSC as described in Note 4.


                                      F-9
<PAGE>   40
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

         Accounts receivable from and payable to affiliates principally result
         from commercial transactions with entities owned or controlled by SSC
         or intercompany transactions with SSC.

         The Company shares certain personnel, administrative and service costs
         with SSC and its affiliates. The costs of providing these services are
         allocated among the Company, SSC and its affiliates without a premium.
         The allocated amounts are not significant. SSC does not charge the
         Company for general corporate management services. In the opinion of
         the Company and SSC management, the aforementioned charges are
         reasonable.

         The Company participates in SSC's self insurance program for general
         liability, casualty loss and Ohio workers' compensation. The Company
         expensed $16,550,000, $9,564,000, $4,001,000 and $7,265,000 in fiscal
         years 2000, 1999, the Transition Period and 1998, respectively, for
         such coverage.

         In July 2000, the Company assigned to SSC the future proceeds from a
         lease termination agreement with a lessor in exchange for $13.5
         million. This agreement was subsequently canceled in November 2000 and
         the proceeds were returned to SSC. No gain or loss was recorded on the
         transaction. During the Transition Period and fiscal year 1998, the
         Company contributed $1,120,000 each period to a private charitable
         foundation controlled by the Schottenstein family. The fiscal 1999
         contribution was made in March 2000 by utilizing 80,000 common shares
         of the Company held in Treasury. During fiscal 2000, $2.2 million of
         contributions were expensed.

         See Footnote 5 Long-Term Obligations and Notes Payable.

4.       LEASES

         The Company operates stores and warehouses under various arrangements
         with related and unrelated parties. Such leases expire through 2019 and
         in most cases provide for renewal options. Generally, the Company is
         required to pay real estate taxes, maintenance, insurance and
         contingent rentals based on sales in excess of specified levels.

         The Company has entered into several leasing agreements with SSC and
         affiliates. Under a Master Lease Agreement, as amended, the Company
         leases five store locations owned by SSC for an annual minimum rent of
         $1,314,000 and additional contingent rents based on aggregate sales in
         excess of specified sales levels for the store locations. The Company
         also leased or subleased from SSC and affiliates fourteen store
         locations, three warehouse facilities and a parcel of land for
         specified minimum rentals, plus contingent rents based on sales in
         excess of specified sales levels for the store locations. Leases and
         subleases with related parties are for initial periods generally
         ranging from five to twenty years, provide for renewal options and
         require the Company to pay real estate taxes, maintenance and
         insurance.

         On August 12, 1997, seventeen related party leases (thirteen stores and
         four other facilities) were renegotiated and became unrelated party
         leases pursuant to a sale-leaseback transaction between SSC and a third
         party. All of the new leases for the thirteen stores covered by the SSC
         sale-leaseback transaction eliminated percentage rents and provided for
         increased fixed rents for an initial twenty year term.

         The Company incurred new capital lease obligations, including one with
         a related party, aggregating $27,100,000 and $9,400,000 in 1999 and
         1997, respectively, to obtain store facilities. The total cost of
         capital leases at February 3, 2001 and January 29, 2000 were
         $36,186,000 and $42,328,000, respectively. Assets held under capital
         leases are amortized over the terms of the related leases. The



                                      F-10
<PAGE>   41
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

         accumulated amortization for these assets was $2,595,000 and $1,988,000
         at February 3, 2001 and January 29, 2000, respectively.

         Future minimum lease payments required under the aforementioned leases,
         exclusive of real estate taxes, insurance and maintenance costs, at
         February 3, 2001 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                     Operating Leases
         Fiscal                    ---------------------------------------------------
         Year                                         Unrelated             Related            Capital
         Ending                     Total              Party                 Party             Leases
         -----------------------------------------------------------------------------        --------
         <S>                        <C>                 <C>                 <C>                 <C>
         2002                      $90,502             $76,065             $14,437              $3,774
         2003                       87,915              74,466              13,449               3,693
         2004                       83,447              70,466              12,981               3,589
         2005                       77,587              64,760              12,827               3,465
         2006                       75,056              62,153              12,903               3,541
         Future Years              523,027             402,693             120,334              57,464
                                                                                               -------
                      Total minimum lease payments                                              75,526
                      Less amount representing interest                                        (44,279)
                                                                                               -------
                      Present value of minimum lease payments                                   31,247
                                Less current portion                                              (171)
                                                                                               -------
                             Total long-term portion                                           $31,076
                                                                                               =======
</TABLE>

         The composition of rental expense (in thousands):

<TABLE>
<CAPTION>

                                Year Ended Year Ended 6 Months Ended Year Ended
                                  2/3/01     1/29/00      1/30/99      8/1/98
         ----------------------------------------------------------------------
<S>                              <C>         <C>         <C>         <C>
         Minimum rentals:
            Unrelated parties    $47,203     $47,562     $20,421     $27,618
            Related parties       11,265       8,361       4,093       8,307

         Contingent rentals:
            Unrelated parties      3,981       5,648       1,585       2,681
            Related parties        2,195       2,289         357       1,556
                                 -------     -------     -------     -------

            Total                $64,644     $63,860     $26,456     $40,162
                                 =======     =======     =======     =======
         ----------------------------------------------------------------------
</TABLE>


         Many of the Company's leases contain fixed escalations of the minimum
         annual lease payments during the original term of the lease. For these
         leases, the Company recognizes rental expense on a straight-line basis
         and records the difference between the average rental amount charged to
         expense and the amount payable under the lease as deferred rent. At the
         end of fiscal 2000 and fiscal 1999, the balance of deferred rent was
         $6,721,000 and $3,863,000, respectively, and is included in other
         noncurrent liabilities.




                                      F-11
<PAGE>   42

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


5.       LONG-TERM OBLIGATIONS AND NOTES PAYABLE

         Long-term obligations consist of the following (in thousands):

                                       2/3/01                 1/29/00
         ----------------------------------------------------------------------

         Senior unsecured notes           -                   $36,571
         Credit facilities             $295,000                70,000
         Capital lease obligations       31,247                37,042
         Other                              805                 1,015
                                       --------              --------
                                        327,052               144,628
         Less current maturities           (603)                 (460)
                                       --------              --------
                                       $326,449              $144,168
                                       ========              ========
         ----------------------------------------------------------------------

         The senior unsecured notes were retired in March 2000.

         At February 3, 2001, the Company had a $300 million Amended and
         Restated Credit Agreement (Credit Agreement), dated as of March 15,
         2000. The Credit Agreement, which expires on March 15, 2003, provides
         for revolving and overnight loans and issuance of letters of credit.
         Outstanding advances are secured by a lien on assets and are subject to
         a monthly borrowing base of eligible inventories and receivables, as
         defined. Terms of the Credit Agreement require compliance with certain
         restrictive covenants, including limitations on dividends, the
         incurrence of additional debt and financial ratio tests. Additionally,
         the Company has provided an unconditional guarantee of 50% of amounts
         outstanding on VCM's $25.0 million revolving line of credit. At
         February 3, 2001, $77.7 million was available under the Credit
         Agreement. Borrowings aggregated $200.0 million, plus $16.1 million of
         letters of credit were issued and outstanding and the VCM loan
         guarantee totaled $6.2 million. The Credit Agreement provides for
         various borrowing rates, currently equal to 275 basis points over
         LIBOR.

         The LIBOR rate on $40.0 million has been locked in at a fixed annual
         rate of 5.895% through May 2001 under a swap agreement. The fair market
         value of the swap agreement at February 3, 2001 and January 29, 2000
         was $(59,496) and $402,000, respectively. In addition, the LIBOR rate
         on $35 million has been locked in at fixed annual rate of 6.99% through
         April 2002 under a swap agreement. The fair market value of this swap
         agreement at February 3, 2001 was $(2,700,359).

         The Company entered into a $75.0 million Senior Subordinated
         Convertible Loan Agreement (Senior Facility), dated as of March 15,
         2000. The Senior Facility bears interest at various rates, currently
         equal to 250 basis points over LIBOR. The interest rate increases an
         additional 50 basis points every 90 days after the first anniversary
         date. The Senior Facility is due in September 2003. In December 2000,
         pursuant to terms of the Senior Facility, SSC purchased the outstanding
         balance under the same continuing terms. The terms provide that if
         prior to March 17, 2001, the balance outstanding thereunder is not
         repaid from the proceeds of an equity offering or other subordinated
         debt acceptable to lenders under the Credit Agreement, then after that
         date SSC, as the lender, has the right to convert the debt into our
         common stock at a price equal to 95% of the 20-day average of high and
         low sales prices reported on the New York Stock Exchange at the time of
         conversion. As of March 17, 2001, the Senior Facility was not repaid.
         We paid SSC a one time fee of 200 basis points, or $1.5 million, at the
         initial closing in consideration for entering into a Put Agreement
         associated with the Senior Facility.



                                      F-12
<PAGE>   43
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


         To supplement operating cash requirements the Company has a $50.0
         million subordinated secured credit facility with SSC. Outstanding
         advances under the agreement are subordinated to the Credit Agreement
         and are subject to a junior lien on assets securing the Credit
         Agreement. At February 3, 2001, $20.0 million was outstanding. The
         interest rate and terms of the $50.0 million facility are generally the
         same as the Credit Agreement.

         The weighted average interest rate on borrowings under the Company's
         credit facilities during fiscal year 2001, 1999, the Transition Period
         and fiscal year 1998 was 10.7%, 8.8%, 8.3% and 8.56%, respectively.

         The book value of notes payable and long-term debt approximates fair
         value at February 3, 2001.

         The Company believes that the availability under the Credit Agreements
         along with its current available cash plus expected cash flows from its
         operations, will enable the Company to fund its expected needs for
         working capital, capital expenditures, and debt service requirements.
         Achievement of expected cash flows from operations, vender  and their
         factor relations, flow of merchandise, and compliance with the Credit
         Agreements' covenants are dependent upon the Company's attainment of
         its Fiscal 2001 business plan.

6.       BENEFIT PLANS

         The Company participates in the SSC sponsored 401(k) savings plan (the
         "401(k) Plan"). Employees who attained twenty and one-half years of age
         and completed one year of service could contribute up to twenty percent
         of their salaries to the 401(k) Plan on a pre-tax basis, subject to IRS
         limitations. The Company matched up to three percent of participants'
         eligible compensation. Effective January 1, 2001, the Company matches
         up to four and one-half percent of participants' eligible compensation.
         Effective as of April 1, 1999 employees who work 20 or more hours per
         week are eligible to participate in the 401K Plan after 60 days of
         service, with the Company matching contributions beginning after one
         full year of service. Employees who work less than 20 hours per week
         continue to participate under the pre-April 1999 rules. Additionally,
         the Company has contributed a discretionary profit sharing amount to
         the 401(k) Plan each year. The Company incurred costs associated with
         the 401(k) Plan of $4,684,000, $4,696,000, $1,591,000 and $3,907,000
         for fiscal year 2000, 1999, the Transition Period and for fiscal year
         1998, respectively. In 1998, the Company recognized the benefit of
         approximately $1,639,000 of forfeitures attributable to employer
         contributions pursuant to an amendment to the plan.

         The Company provides an Associate Stock Purchase Plan. Eligibility
         requirements are similar to the 401(k) Plan. Eligible employees can
         purchase common shares of the Company through payroll deductions. The
         Company will match 15% of employee investments up to a maximum
         investment level. Plan costs to the Company for all fiscal periods
         presented are not material to the consolidated financial statements.

         Certain employees of the Company are covered by union-sponsored,
         collectively bargained, multi-employer pension plans, the costs of
         which are not material to the consolidated financial statements.

         Certain employees of the Company participate in the Schottenstein
         Stores Corporation Deferred Compensation Plan which is a non-qualified,
         pre-tax, income deferral plan. The cost of the plan is not material to
         the consolidated financial statements.




                                      F-13
<PAGE>   44
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

7.       SHAREHOLDERS' EQUITY

         During fiscal years 1999 and 1997, the Company issued common shares to
         certain key employees pursuant to individual employment agreements. The
         agreements and grants were approved by the Board of Directors and each
         consists of a one time grant of restricted shares. As a result, the
         Company recorded the market value of the shares at the date of grant of
         $5,433,000 and $2,201,000 in fiscal 2000 and 1999, respectively, as
         deferred compensation expense. The agreements condition the vesting of
         the shares upon continued employment with the Company with such
         restrictions expiring as to 20% of the shares on each of the five
         anniversary dates of the grants. Deferred compensation is charged to
         income on a straight-line basis over the period during which the
         restrictions lapse.

8.       STOCK OPTION PLANS

         The Company has a Non-employee Director Stock Option Plan (the
         "Non-employee Director Plan") which provides for the issuance of
         options to purchase up to 130,000 common shares. An option to purchase
         1,000 common shares is automatically granted to each non-employee
         director on the first New York Stock Exchange ("NYSE") trading day in
         each calendar quarter. The exercise price for each option is the fair
         market value of the common shares on the date of grant. All options
         become exercisable one year after the grant date and remain exercisable
         for a period of ten years from the grant date, subject to continuation
         of the option-holders' service as directors of the Company.

         The Company has a 1991 Stock Option Plan which provides for the grant
         of options to purchase up to 4,000,000 common shares. Such options are
         exercisable 20% per year on a cumulative basis and remain exercisable
         for a period of ten years from the date of grant.

         In December 2000, the Board of Directors approved the 2000 Stock
         Incentive Plan (the "2000 Stock Plan"). The 2000 Stock Plan is subject
         to shareholder approval. The 2000 Stock Plan provides for the grant of
         up to 3,000,000 options to purchase shares of common stock or the
         issuance of restricted stock.

         Such options and restricted stock generally vest 20% per year on a
         cumulative basis. Options granted under the 2000 Stock Plan remain
         exercisable for a period of ten years from the date of grant.




                                      F-14
<PAGE>   45

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


The following table summarizes the Company's stock option plans and related
Weighted Average Exercise Prices ("WAEP") (shares in thousands):

<TABLE>
<CAPTION>
                                                   Fiscal Years Ended
                                        --------------------------------------     6 Months Ended         Fiscal Year Ended
                                             2/3/01                1/29/00             1/30/99                 8/1/98
                                        ---------------       ----------------     ---------------        -----------------
                                        Shares    WAEP        Shares    WAEP        Shares     WAEP       Shares     WAEP
----------------------------------------------------------------------------------------------------------------------------

<S>                                     <C>       <C>         <C>        <C>        <C>        <C>        <C>        <C>
Outstanding beginning of year           2,460     $10.12      2,296      $9.31      2,331      $9.27      2,398      $8.90
Granted                                   961       9.24        526       9.56         48      11.56        357      10.71
Exercised                                (176)      8.12       (201)      8.14        (41)      8.05       (331)      8.12
Canceled                                 (629)      9.83       (161)      9.07        (42)     11.08        (93)      9.40
                                        -----                ------                 -----                 -----
Outstanding end of year                 2,616       9.32      2,460      10.12      2,296       9.31      2,331       9.27
                                        =====                ======                 =====                 =====

Options exercisable end of year         1,100      $9.63      1,171      $9.08      1,028      $8.77        885      $8.61
                                        =====                ======                 =====                 =====

Shares available for additional grants  1,233                   443                   310                   316
                                        =====                ======                 =====                 =====
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


The following table summarizes information about stock options outstanding as of
February 3, 2001 (shares in thousands):

<TABLE>
<CAPTION>
                                           Options Outstanding                                   Options Exercisable
                        -----------------------------------------------------------            --------------------------
                                             Weighted                   Weighted                               Weighted
         Range of                            Average                    Average                                Average
         exercise                            Remaining                  Exercise                               Exercise
         prices         Shares               Contract Life              Price                  Shares          Price
-------------------------------------------------------------------------------------------------------------------------

<S>                       <C>                     <C>                     <C>                     <C>              <C>
         $5.56-
            $7.94         826                     9 yrs                   $7.07                   105              $6.76

         $8.06-
            $12.69      1,380                     6 yrs                   $9.12                   789              $8.71

         $13.25-
            $21.44        410                     7 yrs                  $14.49                   206             $14.64
-------------------------------------------------------------------------------------------------------------------------

</TABLE>








                                      F-15
<PAGE>   46

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


         The Company has adopted the disclosure provisions of SFAS No. 123,
         "Accounting for Stock-Based Compensation," and accordingly has elected
         to retain the intrinsic value method of accounting for stock-based
         compensation. Had the compensation cost for the Company's stock-option
         plans been determined based on the fair value at the grant dates for
         awards under those plans consistent with the methods of SFAS No. 123,
         the Company's net income and earnings per share would have been reduced
         to the pro forma amounts indicated below (in thousands, except per
         share data):

<TABLE>
<CAPTION>
                                                   Year Ended         Year Ended          6 Months Ended       Year Ended
                                                    2/3/01              1/29/00               1/30/99              8/1/98
         -------------------------------------------------------------------------------------------------------------------

<S>                                                <C>                  <C>                   <C>                  <C>
         Net (loss) income:
              As reported                          $(101,791)           $33,468               $20,256              $20,359
              Pro forma                            $(101,953)           $31,877               $19,519              $18,817

         Basic (loss) earnings per share:
              As reported                             $(3.03)             $1.03                 $0.63                $0.64
              Pro forma                               $(3.04)             $0.98                 $0.61                $0.59

         Diluted (loss) earnings per share
              As reported                             $(3.03)             $1.02                 $0.62                $0.63
              Pro forma                               $(3.04)             $0.97                 $0.60                $0.58
         -------------------------------------------------------------------------------------------------------------------
</TABLE>


         To determine the pro forma amounts, the fair value of each stock option
         has been estimated on the date of grant using the Black-Scholes
         option-pricing model with the following weighted average assumptions
         used for grants in the fiscal year 2000, 1999, Transition Period, and
         fiscal 1998, respectively: expected volatility of 55.4%, 48.9%, 67.8%
         and 38.6%; dividend yield of 0%; risk-free interest rates of 4.8%,
         6.7%, 4.9% and 5.6%; and, expected lives of 6.5, 6.8, 5.8 and 5.1
         years. The weighted average fair value of options granted in the fiscal
         year 2000, 1999 and the Transition Period was $4.91, $7.25 and $7.43,
         respectively.

         Consistent with SFAS No. 123, pro-forma net (loss) income and (loss)
         earnings per share have not been calculated for options granted prior
         to July 30, 1995. Pro forma disclosures may not be representative of
         that to be expected in future years.

9.       COMMITMENTS AND CONTINGENCIES

         The Company is involved in various legal proceedings that are
         incidental to the conduct of its business. In the opinion of
         management, the amount of any liability with respect to these
         proceedings will not be material.





                                      F-16
<PAGE>   47
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------

10.               INCOME TAXES

The (benefit) provision for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                  Year Ended     Year Ended     6 Months Ended     Year Ended
                                    2/3/01         1/29/00          1/30/99          8/1/98
 --------------------------------------------------------------------------------------------
<S>                                 <C>              <C>             <C>             <C>
 Current:
   Federal                          $(29,092)        $22,852         $10,323         $12,174
   State and local                    (5,847)          4,071           2,510           1,912
                                    --------        --------        --------        --------
                                     (34,939)         26,923          12,833          14,086
                                    --------        --------        --------        --------
 Deferred:
   Federal                           (25,818)         (3,492)          1,015          (2,227)
   State and local                    (4,873)           (499)            140            (318)
                                    --------        --------        --------        --------
                                     (30,691)         (3,991)          1,155          (2,545)
                                    --------        --------        --------        --------
 Income tax (benefit) expense       $(65,630)        $22,932         $13,988         $11,541
                                    ========        ========        ========        ========
 --------------------------------------------------------------------------------------------
</TABLE>


The provision (benefit) for deferred income taxes includes the following amounts
(in thousands):

<TABLE>
<CAPTION>
                                                Year Ended      Year Ended    6 Months Ended     Year Ended
                                                  2/3/01         1/29/00          1/30/99         8/1/98
 ----------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>              <C>              <C>
 Type of temporary differences:
   Basis differences in inventory                $(19,106)        $(4,707)         $2,778           $(586)
   Depreciation                                     3,669            (142)         (1,376)         (1,003)
   Deferred bonus                                  (1,151)           (168)          1,107          (1,030)
   Net operating loss carry forward               (10,321)          1,026          (1,354)             74
   Federal income tax credit carry forward         (5,645)              -               -               -
   Other                                            1,863               -               -               -
                                                 --------        --------        --------        --------
                                                 $(30,691)        $(3,991)         $1,155         $(2,545)
                                                 ========        ========        ========        ========
 ----------------------------------------------------------------------------------------------------------
</TABLE>


A reconciliation of the expected income taxes based upon the statutory federal
rate are as follows (in thousands):

<TABLE>
<CAPTION>
                                       Year Ended    Year Ended    6 Months Ended    Year Ended
                                        2/3/01         1/29/00         1/30/99         8/1/98
 ------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>             <C>             <C>
 Income tax (benefit) expense at
    federal statutory rate             $(58,597)        $19,740         $11,986         $11,165
 Jobs credit                               (822)           (712)           (235)           (164)
 State and local taxes, net              (7,668)          2,843           1,753           1,548

 Resolution of income tax issues              -            (269)              -          (1,410)
 Non-deductible goodwill                  1,080           1,080             388             273
 Other                                      377             250              96             129
                                       --------        --------        --------        --------
                                       $(65,630)        $22,932         $13,988         $11,541
                                       ========        ========        ========        ========
 ------------------------------------------------------------------------------------------------
</TABLE>


                                      F-17
<PAGE>   48
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


The components of the net deferred tax asset as of February 3, 2001 and January
29, 2000 are (in thousands):

<TABLE>
<CAPTION>
                                                   2/3/01         1/29/00
 -------------------------------------------------------------------------
<S>                                              <C>             <C>
 Deferred tax assets:
    Basis differences in inventory                 $31,558         $15,565
    Basis differences in fixed assets                3,454           2,416
    State and local taxes                            1,580           1,085
    Deferred compensation                            1,151              39
    Amortization of lease acquisition costs          1,395           1,415
    Net operating loss carry forward                10,320               -
    Federal tax credit carry forward                 5,645               -
    Other                                            7,143           4,362
                                                  --------        --------
                                                    62,246          24,882
                                                  --------        --------

 Deferred tax liabilities:
    Depreciation                                    (5,779)         (5,730)
    Capital leases                                  (2,995)         (2,173)
                                                  --------        --------
                                                    (8,774)         (7,903)
                                                  --------        --------
 Total net                                         $53,472         $16,979
                                                  ========        ========
 -------------------------------------------------------------------------
</TABLE>

The net deferred tax asset is recorded in the Company's consolidated balance
sheet as follows (in thousands):

<TABLE>
<CAPTION>
                                                           2/3/01                           1/29/00
---------------------------------------------------------------------------------------------------

<S>                                                        <C>                              <C>
Current deferred tax asset                                 $51,732                          $18,052

Non-current deferred tax asset (liability)                   1,740                           (1,073)
                                                         ---------                        ---------

Net deferred tax asset                                     $53,472                          $16,979
                                                           =======                          =======
---------------------------------------------------------------------------------------------------
</TABLE>


11. ACQUISITIONS

    Effective May 3, 1998, the Company purchased 99.9% of the common stock of
    Shonac from Nacht Management, Inc. and SSC (in September 2000 the remaining
    0.1% was acquired). SSC owned approximately 60% of the Company's outstanding
    common shares at the time of the acquisition. The Company also acquired the
    store operations of Valley Fair from SSC. Shonac had operated, as licensee,
    the shoe departments in the Company's department stores since Shonac's
    inception in 1969. Shonac also operated a chain of retail shoe outlets
    located throughout the United States, principally under the name DSW Shoe
    Warehouse. Valley Fair operated two department stores located in Irvington
    and Little Ferry, New Jersey. The Company had been a licensee of certain
    departments in these two stores for 18 years. The negotiated purchase price
    for Shonac and Valley Fair was

                                      F-18
<PAGE>   49
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


         $108,473,000. The acquisitions were funded by cash provided by
         operations and approximately $88,000,000 of borrowings.

         The acquisitions have been accounted for using the purchase method of
         accounting and accordingly, the purchase price has been allocated to
         the net assets and identifiable intangible assets acquired based upon
         their estimated fair values at the date of acquisition. The aggregate
         amount of goodwill recorded was $35,218,000.

         On November 19, 1999, the Company purchased 100% of the common stock of
         Gramex Retail Stores, Inc. ("Gramex") from Gramex Corporation pursuant
         to a Stock Purchase Agreement, dated as of November 8, 1999. Gramex
         operated a chain of fifteen discount stores under the name "Grandpa's"
         in the greater St. Louis metropolitan area.

         The purchase price for Gramex was $13.1 million including cash of $8.0
         million, 255,949 shares of the Company's common stock with an agreed
         value of $4.0 million and an unsecured, 5-year note of $1.1 million. In
         conjunction with the acquisition, the Company satisfied approximately
         $37 million of Gramex bank debt at closing and assumed certain trade
         payable and other obligations which were satisfied from the proceeds
         from liquidation of inventory and certain other assets. The transaction
         was funded by cash from operations and a $25 million 180 day bank loan
         bearing interest at 8.0925%. The acquisition was accounted for as a
         purchase. Allocation of the purchase price was based on fair market
         valuation of the net assets acquired.

         Of the 15 stores acquired and after liquidation of the existing
         Grandpa's inventory, 13 stores were converted to the Value City format.
         Six stores received only minor improvements and were reopened in March
         2000. Seven stores were remodeled based on the current Value City
         format and were reopened in April 2000. The lease for one store with
         terms consistent with current market conditions is located near an
         existing store in St. Louis. This location was assigned without payment
         of additional consideration to the Value City Furniture Division of SSC
         after completion of liquidation of the store inventory and fixtures.

         The operating results of Grandpa's have been included in the
         consolidated results of the Company from the date of acquisition. The
         following unaudited pro forma consolidated financial results for the
         fiscal year ended January 29, 2000 are presented as if the acquisition
         had taken place at the beginning of fiscal 1999. The proforma results
         are not indicative of results of operations in future periods or in the
         period presented below. Included in the proforma results are the
         adjustments to depreciation and amortization based on the purchase
         price allocation, the effects of the issuance of additional common
         shares and interest on acquisition related borrowings (in thousands,
         except per share amounts):





                                      F-19
<PAGE>   50

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


                                                     1/29/00
         ----------------------------------------------------------------------

         Net Sales                                  $1,818,008
         Net Income                                    $31,799

         Basic earnings per share                        $0.98
         Diluted earnings per share                      $0.97
         ----------------------------------------------------------------------

         On March 17, 2000, the Company completed through its wholly owned
         subsidiary, Base Acquisition Corp. ("Base Acquisition"), the
         acquisition of substantially all of the assets and assumed certain
         liabilities of Filene's Basement Corp., a Massachusetts corporation,
         and Filene's Basement, Inc., a wholly owned subsidiary of Filene's
         Basement Corp. (collectively, "Filene's") pursuant to the closing of an
         asset purchase agreement, dated February 2, 2000.

         The operating results of Filene's have been included in the
         consolidated results of the Company from the date of acquisition. The
         following unaudited proforma consolidated financial results for the
         fiscal year ended February 3, 2001 are presented as if the acquisition
         had taken place at the beginning of fiscal 2000 (in thousands, except
         per share amounts):

                                                2/3/01               1/29/00
         ----------------------------------------------------------------------
         Net sales                             $2,248,605           $2,140,966
         Net (loss) income                      $(108,888)            $(20,678)
         Basic loss per share                      $(3.24)              $(0.64)
         Diluted loss per share                    $(3.24)              $(0.63)
         ----------------------------------------------------------------------


         The purchase price included cash of $3.5 million paid at closing, $1.2
         million to be paid over a period not to exceed three years, 403,208
         shares of the Company's common stock with an agreed value of $5.5
         million and the assumption of specified liabilities. The assumed
         liabilities included the payment of amounts outstanding under Filene's
         debtor-in-possession financing facility of approximately $22.5 million
         and certain trade payable and other obligations which will be paid in
         the ordinary course. The acquisition will be accounted for as a
         purchase. Allocation of the purchase price has been determined based on
         fair market valuation of the net assets acquired subject to resolution
         of several outstanding matters.

         The acquisition was funded by cash from operations and a portion of the
         proceeds from the Credit Agreement. See Note 5 for further discussion.





                                      F-20
<PAGE>   51

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


12.      SEGMENT REPORTING

         The Company has adopted FASB Statement No. 131, "Disclosure about
         Segments of a Business Enterprise and Related Information." The Company
         is managed in three operating segments: Value City Department Stores,
         DSW Stores and Filene's Basement Stores. All of the operations are
         located in the United States. The Company has identified such segments
         based on the management responsibility and measures segment profit as
         operating profit which is defined as income before interest expense and
         income taxes. Corporate assets include goodwill and loan costs related
         to the Shonac acquisition.

         YEAR ENDED FEBRUARY 3, 2001 (in thousands):
<TABLE>
<CAPTION>
                                               Value City          DSW        Filene's         Corporate         Total
                                               ----------          ---        --------         ---------         -----

<S>                                            <C>             <C>             <C>              <C>            <C>
          Net sales                             $1,553,902      $409,968        $249,147            -           $2,213,017
          Operating (loss) profit                 (150,530)       13,368           1,577            -             (135,585)
          Identifiable assets                      688,308       104,172          87,304         $28,225           908,009
          Capital expenditures                      51,829        12,649           5,748            -               70,226
          Depreciation and amortization             35,658         2,914           5,175           3,748            47,495
</TABLE>

         YEAR ENDED JANUARY 29, 2000 (in thousands):
<TABLE>
<CAPTION>
                                                      Value City             DSW         Corporate           Total
                                                      ----------             ---          --------         ---------
<S>                                                  <C>                 <C>              <C>               <C>
          Net sales                                   $1,423,581          $246,595           -            $1,670,176
          Operating profit                                57,982             7,660           -                65,642
          Identifiable assets                            656,758            56,893         $30,530           744,181
          Capital expenditures                            32,293             5,024           -                37,317
          Depreciation and amortization                   28,308             2,216           3,706            34,230
</TABLE>

         SIX MONTH PERIOD ENDED JANUARY 30, 1999 (in thousands):

<TABLE>
<CAPTION>
                                                     Value City              DSW         Corporate           Total
                                                      ----------             ---          --------          ---------
<S>                                                     <C>               <C>            <C>               <C>
          Net sales                                      $688,103          $92,160           -              $780,263
          Operating profit                                 35,380            5,419           -                40,799
          Identifiable assets                             486,242           54,473         $33,712           574,427
          Capital expenditures                             16,377              928           -                17,305
          Depreciation and amortization                    13,655              942           1,702            16,299
</TABLE>




                                      F-21
<PAGE>   52

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
            ------------------------------------------

YEAR ENDED AUGUST 1, 1998 (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                     Value City              DSW         Corporate           Total
                                                     ----------              ---         ---------           -----

<S>                                                    <C>                 <C>                            <C>
              Net Sales                                $1,113,894          $47,485              -        $1,161,379
              Operating profit                             35,173            1,748              -            36,921
              Identifiable assets                         608,185           39,556         36,337           684,078
              Capital expenditures                         26,501              664              -            27,165
              Depreciation and amortization                24,641              444          2,688            27,773
</TABLE>

The following sets forth sales by each major merchandise category (in
thousands):

<TABLE>
<CAPTION>
                                                Fiscal Year         12 Months       6 Months          Fiscal Year
                                                  Ended               Ended           Ended              Ended
                                                  2/3/01             1/29/00         1/30/99            8/1/98
                                                  ------             -------         -------            ------

<S>                                              <C>                <C>               <C>                <C>
Apparel and ready to wear                        $1,266,479         $943,798          $444,759           $814,599
Hard goods and home furnishings                     332,039          305,694           158,702            260,436
Shoes and other footwear                            614,499          420,684           176,802             86,344
                                                 ----------       ----------          --------         ----------
        Total                                    $2,213,017       $1,670,176          $780,263         $1,161,379
                                                 ==========       ==========          ========         ==========
</TABLE>





                                      F-22
<PAGE>   53
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------


13.     QUARTERLY FINANCIAL DATA (UNAUDITED)

                 QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                    (in thousands, except per share amounts)

FISCAL YEAR ENDED FEBRUARY 3, 2001

<TABLE>
<CAPTION>
                                             1st Qtr.         2nd Qtr.          3rd Qtr.         4th Qtr.
                                             04/29/00         07/29/00          10/28/00         02/03/01
                                             13 Weeks         13 Weeks         13 Weeks(1)      14 Weeks(1)
----------------------------------------------------------------------------------------------------------
<S>                                          <C>               <C>              <C>              <C>
Net sales                                    $462,053          $528,246         $559,820         $662,898
Cost of sales                                (284,322)         (327,958)        (446,973)        (433,694)
                                          -----------       -----------      -----------     ------------
    GROSS PROFIT                              177,731           200,288          112,847          229,204
Selling, general and
    administrative expenses                  (174,192)         (197,063)        (235,835)        (263,147)
License fees                                    1,919             2,731            1,599            5,074
Other operating income                            277             1,156              614            1,212
                                          -----------       -----------      -----------     ------------
    OPERATING PROFIT (LOSS)                     5,735             7,112         (120,775)         (27,657)
Interest expense, net                          (5,354)           (7,963)          (7,873)          (9,290)
(Loss) gain on sale of assets, net                (20)              861             (597)            (260)
                                          -----------       -----------      -----------     ------------
    INCOME (LOSS) BEFORE EQUITY IN INCOME
        (LOSS) OF JOINT VENTURE AND
        PROVISION FOR INCOME TAXES                361                10         (129,245)         (37,207)
Equity in (loss) income of
    joint venture                                (269)              107             (551)            (627)
                                          -----------       -----------      -----------     ------------
  INCOME (LOSS) BEFORE (PROVISION)
    BENEFIT FOR INCOME TAXES                       92               117         (129,796)         (37,834)
(Provision) benefit for income taxes              (37)              (49)          50,781           14,935
                                          -----------       -----------      -----------     ------------
    NET INCOME (LOSS)                             $55               $68         $(79,015)        $(22,899)
                                          ===========       ===========      ===========    =============
BASIC AND DILUTED LOSS PER SHARE                $0.00             $0.00           $(2.35)         $(0.67)
                                          ===========       ===========      ===========    =============
</TABLE>


FISCAL YEAR ENDED JANUARY 30, 2000

<TABLE>
<CAPTION>
                                             1st Qtr.         2nd Qtr.          3rd Qtr.         4th Qtr.
                                             05/01/99         07/31/99          10/30/99        01/29/00(2)
                                             13 Weeks         13 Weeks          13 Weeks         13 Weeks
---------------------------------------------------------------------------------------------------------
<S>                                          <C>               <C>              <C>              <C>
Net sales                                    $344,481          $372,812         $441,281         $511,602
Cost of sales                                (214,859)         (232,543)        (272,109)        (319,634)
                                           ----------        ----------       ----------        ---------
    GROSS PROFIT                              129,622           140,269          169,172          191,968
Selling, general and
    administrative expenses                  (126,820)         (133,731)        (155,558)        (163,351)
License fees                                    1,523             1,832            1,640            3,456
Other operating income                            933             1,097            1,372            2,218
                                           ----------        ----------       ----------        ---------
    OPERATING PROFIT                            5,258             9,467           16,626           34,291
Interest expense, net                          (2,480)           (2,424)          (3,288)          (2,536)
Gain on sale of assets, net                        13                34               32               67
                                           ----------        ----------       ----------        ---------
    INCOME BEFORE EQUITY IN INCOME
        (LOSS) OF JOINT VENTURE AND
        PROVISION FOR INCOME TAXES              2,791             7,077           13,370           31,822
Equity in (loss) income of
    joint venture                                (111)             (245)            (168)           1,864
                                           ----------        ----------       ----------        ---------
  INCOME BEFORE PROVISION
    FOR INCOME TAXES                            2,680             6,832           13,202           33,686
Provision for income taxes                     (1,118)           (2,870)          (5,504)         (13,440)
                                           ----------        ----------       ----------        ---------
    NET INCOME                                 $1,562            $3,962           $7,698          $20,246
                                           ==========        ==========       ==========        =========
BASIC EARNINGS PER SHARE                        $0.05             $0.12            $0.24            $0.62
                                           ==========        ==========       ==========        =========
DILUTED EARNINGS PER SHARE                      $0.05             $0.12            $0.23            $0.61
                                           ==========        ==========       ==========        =========
</TABLE>


                                      F-23
<PAGE>   54

(1)      The results of operations for the quarters ended 10/28/00 and
         2/3/01include non-recurring pretax charges for inventory realignment,
         asset impairment and severance costs of $90.4 million and $19.6
         million, respectively.

(2)      The results of operations for the quarter ended 1/29/00 include a
         reduction of $3.1 million to cost of sales representing the annual book
         to physical adjustment for the physical inventory.


14.      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (IN THOUSANDS):

<TABLE>
<CAPTION>
                                              Year Ended   Year Ended   6 Months Ended  Year Ended
                                                2/3/01       1/29/00        1/30/99       8/1/98
          -----------------------------------------------------------------------------------------

<S>                                            <C>           <C>            <C>           <C>
          Cash paid during the year for:
              Interest                         $29,723       $11,756        $7,586        $5,911
                                               =======       =======       =======       =======


              Income taxes                      $4,700       $17,101       $15,465        $9,018
                                               =======       =======       =======       =======
</TABLE>

         Supplemental schedule of non-cash investing and financing activities:

         In December 1998, the Company exchanged 25,000 of its treasury shares
         with a fair market value of $311,000 for the right to acquire several
         leases.

         During 1999 the Company incurred capital lease obligations to obtain
         new store facilities. Non-cash amounts of $27,100,000 were capitalized
         as of January 29, 2000 under the captions of property and equipment and
         long-term obligations in relation to these leases.

         In March 2000, the Company issued 403,208 common shares with a market
         value of $4.0 million for the acquisition of Filene's. Also in March
         2000, the Company contributed 80,000 common shares with a market value
         of $1.1 million to a private charitable foundation controlled by the
         Schottenstein family.

         Amounts of $779,000, $756,000, $490,000 and $2,126,000 were recorded
         under the captions of property and equipment and accounts payable for
         real estate improvements and construction at new stores as of February
         3, 2001, January 29, 2000, January 30, 1999 and August 1, 1998,
         respectively.

         In November 1999, the Company exchanged 255,959 of its treasury shares
         with a fair market value of $4.0 million as part of its acquisition of
         Gramex. See Note 11.



                                      F-24
<PAGE>   55


                       VALUE CITY DEPARTMENT STORES, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (dollars in thousands)


<TABLE>
<CAPTION>
COLUMN A                            COLUMN B                  COLUMN C              COLUMN D          COLUMN E
--------                            --------         -------------------------      --------          --------
                                   Balance at        Charge to     Charges to                        Balance at
                                    Beginning        Costs and        Other                              End
Description                         Of Period        Expenses      Accounts(1)     Deductions(2)      Of Period
---------------------------------------------------------------------------------------------------------------

<S>                                  <C>             <C>             <C>                <C>            <C>
Allowance deducted
   from asset to which
   it applies:
     Allowance for doubtful
         accounts:
     Period Ended:
       12 Months, 8/1/98                363              716            95                 832            342
        6 Months, 1/30/99               342              195             0                 227            310
       12 Months, 1/29/00               310            3,742           442               3,469          1,025
       12 Months, 2/3/01              1,025              341             1                 385            982

     Allowance for Markdowns:
     Period Ended:
       12 Months, 8/1/98              4,311            2,828         8,893               4,203         11,829
        6 Months, 1/30/99            11,829            4,460             0               5,897         10,392
       12 Months, 1/29/00            10,392           13,745             0               6,908         17,229
       12 Months, 2/3/01             17,229          125,348         2,941              93,431         52,087

     Allowance for Sales Returns:
     Period Ended:
       12 Months, 8/1/98                968                0           645                   0          1,613
        6 Months, 1/30/99             1,613                0             0                   0          1,613
       12 Months, 1/29/00             1,613                0             0                 227          1,386
       12 Months, 2/3/01              1,386              521           127                 168          1,866
Reserves
     Store Closing
     Reserve:

     Year ended:
       12 Months, 8/1/98                395              511           721                 722            905
        6 Months, 1/30/99               905              145             0                 973             77
       12 Months, 1/29/00                77                0             0                   4             73
       12 Months, 2/3/01                 73                0           970                   0          1,043
</TABLE>

(1)  The charges to other accounts represent balances resulting from the
     acquisition of Shonac in 1998 and Gramex Retail Stores, Inc. in 1999.

(2)  The deductions in Column D are amounts written off against the respective
     reserve.






                                      S-1
<PAGE>   56


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
   No.   Description                                 Exhibit Page No.
-------- -----------                                 ----------------

<S>                                                  <C>
    3.1  First Amended and Restated Articles         Previously filed as Exhibit 3.2 to Registration
         of Incorporation of the Company.            Statement on Form S-1 (file no. 33-40214)
                                                     filed April 29, 1991, and incorporated herein
                                                     by reference.

    3.2  Code of Regulations of the                  Previously filed as Exhibit 3.3 to Registration
         Company.                                    Statement on Form S-1 (file no. 33-40214)
                                                     filed April 29, 1991, and incorporated herein
                                                     by reference.

 10.1.1  Corporate Services Agreement, dated         Previously filed on Exhibit 10.1.1 to Form
         October 12, 1994, between the Company       10-Q (file no. 1-10767) filed December 12,
         and Schottenstein Stores Corporation.       1994, and incorporated herein by reference.

 10.1.2  Corporate Services Agreement, dated         Previously filed as Exhibit 10.1.2 to
         September 27, 1995, between                 Form 10-K (file no. 1-10767) filed
         the Company and SSC.                        October 27, 1995, and incorporated
                                                     herein by reference.

 10.1.3  Corporate Services Agreement, dated         Previously filed as Exhibit 10.1.3 to
         October 1996, between the Company           Form 10-K (file no. 1-10767) filed
         and SSC.                                    November 1, 1996, and incorporated
                                                     herein by reference.

 10.1.4  Corporate Services Agreement, dated         Previously filed as Exhibit 10.1.4 to Form 10-Q
         October 13, 1997, between the Company       (file no. 1-10767) filed December 16, 1997, and
         and SSC.                                    incorporated herein by reference.

   10.2  License Agreement, dated June 5, 1991,      Previously filed as Exhibit 10.2 to
         between the Company and SSC                 Amendment No. 1 to Form S-1 Registration
         re Service Marks.                           Statement (file no. 33-40214) filed June 6, 1991,
                                                     and incorporated herein by reference.

   10.7  Form of Indemnification Agreement,          Previously filed as Exhibit 10.7 to
         dated 1991, between the Company             Amendment No. 1 to Form S-1 Registration
         and its directors and executive officers.   Statement (file no. 33-40214) filed June 6, 1991,
                                                     and incorporated herein by reference.
</TABLE>





                                      E-1
<PAGE>   57

<TABLE>


<S>                                                  <C>
   10.8  Form of Company's 1991 Stock                Previously filed as Exhibit 10.8 to
         Option Plan.                                Amendment No. 1 to Form S-1
                                                     Registration Statement (file no. 33-40214)
                                                     filed June 6, 1991, and incorporated herein
                                                     by reference.

   10.9  Master Store Lease, dated April 25, 1991,   Previously filed as Exhibit 10.9 to
         between the Company, as lessee, and SSC,    Form S-1 Registration Statement (file no.
         as lessor, re fourteen stores.              33-40214) filed April 29, 1991, and
                                                     incorporated herein by reference.

 10.9.1  First Amendment to Master Store Lease,      Previously filed as Exhibit 10.9.1 to
         dated February 1991, between the            Form S-1 Registration Statement (file no.
         Company, as lessee, and SSC,                33-47252) filed April 16, 1992, and
         as lessor, re fourteen stores.              incorporated herein by reference.

 10.9.2  Lease Modification Agreement to Master      Previously filed as Exhibit 10.9.2 to
         Store Lease, dated June 5, 1995, between    Form 10-K (file no. 1-10767) filed
         the Company, as lessee, and SSC,            October 27, 1995, and incorporated
         as lessor, re Beckley, West Virginia.       herein by reference.

 10.9.3  Exercise of the first five-year renewal     Previously filed as Exhibit 10.9.3 to
         option commencing August 1, 1996            Form 10-Q (file no. 1-10767) filed
         under Master Store Lease, dated             March 19, 1996, and incorporated
         June 5, 1995, as amended, between           herein by reference.
         the Company, as lessee, and SSC, as
         lessor, re fourteen stores.

  10.10  Master Warehouse Lease, dated April 25,     Previously filed as Exhibit 10.10 to
         1991, between the Company, as lessee,       Form S-1 Registration Statement (file no.
         and SSC, as lessor, re three warehouses,    33-40214) filed April 29, 1991, and
         office, and shop locations.                 incorporated herein by reference.

10.10.1  First Amendment to Master Warehouse         Previously filed as Exhibit 10.10.1 to
         Lease, dated February 1992, between the     Form S-1 Registration Statement (file no.
         Company, as lessee, and SSC, as lessor, re  33-47252) filed April 16, 1992, and
         three warehouse, office, and shop.          incorporated herein by reference.
         locations.

10.10.2  Second Amendment to Master Warehouse        Previously filed as Exhibit 10.10.2 to
         Lease, dated June 1993, between             the Form 10-K (file no. 1-10767) filed
         Company, as lessee, and SSC, as lessor, re  October 26, 1993, and incorporated
         three warehouse, office, and shop           herein by reference.
         locations.
</TABLE>


                                      E-2
<PAGE>   58

<TABLE>

<S>                                                  <C>
10.10.3  Exercise of the first five-year renewal     Previously filed as Exhibit 10.10.3 to
         option commencing August 1, 1996            Form 10-Q (filed no. 1-10767) filed
         under Master Store Lease, dated             March 19, 1996, and incorporated
         April 25, 1991, as amended, between         herein by reference.
         the Company, as lessee and SSC, as
         lessor, re three warehouse
         locations.

  10.11  Master Sublease, dated April 25, 1991,      Previously filed as Exhibit 10.11 to
         between the Company, as sublessee, and      Form S-1 Registration Statement (file no.
         SSC, as sublessor, re three stores.         33-40214) filed April 29, 1991, and
                                                     incorporated herein by reference.

  10.12  Sublease, dated April 25, 1991, between     Previously filed as Exhibit 10.12 to
         the Company, as sublessor, and SSC, as      Form S-1 Registration Statement (file no.
         sublessee, re one warehouse, with           33-40214) filed April 29, 1991 and
         underlying Lease, dated July 15, 1981,      incorporated herein by reference.
         between SSC, as lessee, and J.A.L. Realty
         Co., an affiliate of SSC, as lessor.

10.12.1  Exercise of five-year renewal option        Previously filed as Exhibit 10.12.1 to
         commencing July 16, 1996 under              Form 10-Q (file no. 1-10767) filed
         Sublease, dated April 25, 1991 between      March 19, 1996, and incorporated
         the Company, as sublessee, and SSC, as      herein by reference.
         sublessor, re 3681 Westerville
         Road warehouse.

  10.13  Lease, dated July 7, 1987, between the      Previously filed as Exhibit 10.13 to
         Company, by assignment from SSC, as         Amendment No. 1 to Form S-1
         lessee, and Schottenstein Trustees, an      Registration Statement (file no.
         affiliate of SSC, as lessor, re one store.  33-40214) filed June 6, 1991, and
                                                     incorporated herein by reference.

10.14.1  Lease, dated June 28, 1989, between         Previously filed as Exhibit 10.14.1 to
         the Company, by assignment from SSC,        Form S-1 Registration Statement (file no.
         as lessor, re one warehouse.                33-40214) filed April 29, 1991, and
                                                     incorporated herein by reference.

10.14.2  Lease, dated October 27, 1989, between      Previously filed as Exhibit 10.14.2 to
         the Company, by assignment from SSC,        Form S-1 Registration Statement (file no.
         as lessee, and Southeast Industrial         33-40214) filed April 29, 1991, and
         Park Realty Company, an affiliate of        incorporated herein by reference.
         SSC, as lessor, re one warehouse.
</TABLE>


                                      E-3
<PAGE>   59

<TABLE>

<S>                                                  <C>
10.14.3  Lease, dated March 7, 1989, between         Previously filed as Exhibit 10.14.3 to
         the Company, by assignment from SSC,        Form S-1 Registration Statement (file no.
         as lessee, and Southeast Industrial Park    33-40214) filed April 29, 1991, and
         Realty Company, an affiliate of SSC,        incorporated herein by reference.
         as lessor, re one warehouse.

10.15.1  Sublease, dated April 25, 1991, between     Previously filed as Exhibit 10.15.1 to
         the Company, as sublessor, and SSC, as      Form S-1 Registration Statement (file no.
         sublessee, re Baltimore, MD (Eastpoint)     33-40214) filed April 29, 1991, and
         furniture store location.                   incorporated herein by reference.

10.15.2  Sublease, dated April 25, 1991, between     Previously filed as Exhibit 10.15.2 to
         the Company, as sublessor, and SSC, as      Form S-1 Registration Statement (file no.
         sublessee, re Baltimore, MD (Westview)      33-40214) filed April 29, 1991, and
         furniture store location.                   incorporated herein by reference.

10.15.3  Sublease, dated April 25, 1991, between     Previously filed as Exhibit 10.15.3 to
         the Company, as sublessor, and SSC, as      Form S-1 Registration Statement (file no.
         sublessee, re Lansing, MI furniture         33-40214) filed April 29, 1991, and
         store location.                             incorporated herein by reference.

10.15.4  Sublease, dated April 25, 1991, between     Previously filed as Exhibit 10.15.4 to
         the Company, as sublessor, and SSC, as      Form S-1 Registration Statement (file no.
         sublessee, re Louisville, KY (Preston       33-40214) filed April 29, 1991, and
         Highway) furniture store location.          incorporated herein by reference.

  10.16  Form of Assignment and Assumption           Previously filed as Exhibit 10.16 to
         Agreement between the Company, as           Form S-1 Registration Statement (file no.
         assignee, and SSC, as assignor, re          33-40214) filed April 29, 1991, and
         separate assignments of leases              incorporated herein by reference.
         for 31 stores.

  10.17  Form of Restricted Stock Agreement,         Previously filed as Exhibit 10.17 to
         dated 1991, among SSC, the                  Amendment No. 1 to Form S-1 Registration
         Company and certain officers.               Statement (file no. 33-40214) filed June 6,
                                                     1991, and incorporated herein by reference.

  10.19  Lease Agreement, dated as of July 1,        Previously filed as Exhibit 10.19 to
         1988, between SSC as sublessor and the      Form 10-K (file no.1-10767) filed
         Company as sublessee, by assignment         October 24, 1991, and incorporated
         dated April 25, 1991, re Benwood, W.V.      herein by reference.
         store location.
</TABLE>




                                      E-4
<PAGE>   60


<TABLE>


<S>                                                  <C>
  10.20  Lease, dated July 2, 1991, between the      Previously filed as Exhibit 10.20 to
         Company as lessee and Allied Company/       Form 10-K (file no.1-10767) filed
         Saul Schottenstein Realty Company           October 24, 1991, and incorporated
         as lessor re Springfield, Ohio store.       herein by reference.

10.20.1  Exercise of the first five-year renewal     Previously filed as Exhibit 10.20.1 to
         option commencing November 1, 1996          Form 10-Q (file no. 1-10767) filed
         under Lease dated July 2, 1991              March 19, 1996, and incorporated
         between the Company, as lessee, and         herein by reference.
         Allied Company/Saul Schottenstein
         Realty Company, as lessor, re
         Springfield, Ohio store.

  10.21  Form of Restricted Stock Agreement,         Previously filed as Exhibit 10.27 to
         dated 1992, between the Company             Amendment No. 1 to Form S-1 Registration
         and certain employees.                      Statement (file no. 33-47252) filed April 27,
                                                     1992, and incorporated herein by reference.

  10.22  The Company's Non-employee Director         Previously filed as Exhibit 10.28 to
         Stock Option Plan.                          Form 10-K (file no.1-10767) filed
                                                     October 22, 1992, and incorporated
                                                     herein by reference.

  10.23  Lease, dated September 1, 1992, between     Previously filed as Exhibit 10.29 to
         the Company, as lessee, and SSC, as         Form 10-K (file no.1-10767) filed
         lessor, re South Bend, IN store.            October 22, 1992, and incorporated
                                                     herein by reference.

  10.24  Lease, dated January 27, 1992, between      Previously filed as Exhibit 10.30 to
         the Company, as lessee, and J.A.L. Realty   Form 10-K (file no.1-10767) filed
         Company, as lessor, as amended on July      October 22, 1992, and incorporated
         29, 1992, re 3080 Alum Creek warehouse.     herein by reference.

10.24.1  Exercise of the first five-year renewal     Previously filed as Exhibit 10.30.1 to
         option commencing February 1, 1997          Form 10-Q (file no. 1-10767) filed
         under lease, dated January 27, 1992,        March 19, 1996, and incorporated
         as amended, between the Company, as         herein by reference.
         lessee, and J.A.L. Realty Company, as
         lessor, re 3080 Alum Creek warehouse.

  10.25  Lease, dated July 29, 1992, between the     Previously filed as Exhibit 10.31 to
         Company, as lessee, and J.A.L. Realty       Form 10-K (file no.1-10767) filed
         Company, as lessor, re 3232 Alum Creek      October 22, 1992, and incorporated
         warehouse.                                  herein by reference.
</TABLE>





                                      E-5
<PAGE>   61

<TABLE>


<S>                                                  <C>
  10.26  Lease, dated October 26, 1993 between       Previously filed as Exhibit 10.33 to
         the Company, as lessee, and J.A.L. Realty   Form 10-Q (file no. 1-10767) filed
         Company, as lessor. re 2560 Valueway,       March 14, 1994, and incorporated
         Columbus, OH 43224.                         herein by reference.

10.26.1  Lease Modification Agreement dated          Previously filed as Exhibit 10.33.1
         to June 16, 1995 to Lease, dated October    Form 10-K (file no.1-10767)
         filed 26, 1993, between the Company, as     October 27, 1995, and incorporated
         lessee, and J.A.L. Realty Company,          herein by reference.
         as lessor, re 2560 Valueway, Columbus,
         Ohio 43224.

  10.27  License Agreement dated as of January       Previously filed as Exhibit 10.34 to
         12, 1994 between the Company, as            Form 10-K (file no. 1-10767) filed
         licensee, and  Valley Fair Corporation,     October 26, 1994, and incorporated
         as licensor, re Housewares Depts.           herein by reference.

  10.28  Ground lease, dated April 15, 1994,         Previously filed as Exhibit 10.35 to
         between the Company, as lessee, and         Form 10-K (file no 1-10767) filed
         J.A.L. Realty Company, as lessor, re        October 26, 1994, and incorporated
         19 acres.                                   herein by reference.

  10.29  Agreement of Lease dated September 1,       Previously filed as Exhibit 10.36 to Form 10-Q
         1994, between Company, as tenant, and       (file no. 1-10767) filed December 12, 1994,
         Jubilee Limited Partnership, as landlord,   and incorporated herein by reference.
         re Carol Stream, IL store.

  10.30  Agreement of Lease, dated March 1, 1994,    Previously filed as Exhibit 10.37 to Form 10-Q
         between the Company, as tenant, and         (file no. 1-10767) filed December 12, 1994,
         Jubilee Limited Partnership, as landlord,   and incorporated herein by reference.
         re Hobart, IN store.

  10.31  Agreement of Lease, date February 10,       Previously filed as Exhibit 10.38 to Form 10-Q
         1995, between the Company, as tenant,       (file no. 1-10767) filed March 14, 1995 and
         and Jubilee Limited Partnership, as         incorporated herein by reference.
         landlord, re Gurnee Mills, IL store.

  10.32  Agreement of Lease, dated January 13,       Previously filed as Exhibit 10.39 to Form 10-Q
         1995, between the Company, as tenant,       (file no. 1-10767) filed March 14, 1995 and
         and Westland Partners, as landlord, re      incorporated herein by reference.
         Westland, MI store.

  10.33  Agreement of Lease, dated January 31,       Previously filed as Exhibit 10.40 to Form 10-Q
         1995, between the Company, as tenant,       (file no. 1-10767) filed March 14, 1995 and
         and Taylor Partners, as landlord, re        incorporated herein by reference.
         Taylor, MI store.
</TABLE>

                                      E-6
<PAGE>   62

<TABLE>

<S>                                                  <C>
  10.34  Sublease, dated December 28, 1994,          Previously filed as Exhibit 10.41 to Form 10-Q
         between the Company, as subtenant, and      (file no. 1-10767) filed March 14, 1995 and
         Shonac Corporation, as sublandlord, re      incorporated herein by reference.
         Alum Creek Drive warehouse space.

  10.35  Analysis sheet for Lease re Ft. Wayne,      Previously filed as Exhibit 10.43 to
         Indiana acquired by SSC pursuant to         Form 10-K (file no. 1-10767) filed
         Assignment and Assumption Agreement         October 27, 1995, and incorporated
         dated July 21, 1995.                        herein by reference.

  10.36  Merchandise Royalty Agreement, dated        Previously filed as Exhibit 10.44  to
         July 15, 1995, between American Eagle       Form 10-Q (file no. 1-10767) filed
         Outfitters, Inc., and the Company           December 12, 1995, and incorporated
         re American Eagle merchandise sold          herein by reference.
         to Value City Department Stores, Inc.

  10.37  Agreement of Lease, dated April 10, 1995,   Previously filed as Exhibit 10.45  to
         between the Company as tenant, and          Form 10-Q (file no. 1-10767) filed
         Independence Limited Liability Company,     December 12, 1995, and incorporated
         as landlord, re Charlotte, North Carolina   herein by reference.
         Store.

  10.38  Sublease and Occupancy Agreement,           Previously filed as Exhibit 10.46 to
         dated December 15, 1995, between the        Form 10-Q (file no. 1-10767) filed
         Company, SSC and SSC dba Value City         March 19, 1996, and incorporated
         Furniture, re Louisville, Kentucky          herein by reference.
         (Preston Highway) store.

  10.39  Agreement of Lease, dated March 13,         Previously filed as Exhibit 10.47
         to 1996, between the Company as tenant,     Form 10-Q (file no. 1-10767) filed
         and Jubilee Limited Partnership, as         March 19, 1996, and incorporated
         landlord, re Saginaw, Michigan              herein by reference.
         store.

  10.40  Agreement of lease, dated 1996              Previously filed as Exhibit 10.49 to
         between the Company, as tenant,             Form 10-K (file no. 1-10767) filed
         and SSC, as landlord, re the Melrose        November 1, 1997 and incorporated
         Park, IL store.                             herein by reference.

  10.41  Agreement of Lease, dated October 4,        Previously filed as Exhibit 10.50 to
         1996, between the Company, as tenant,       Form 10-K (file no. 1-10767) filed
         and Hickory Ridge Pavilion, Ltd., as        November 1, 1997 and incorporated
         landlord, re the Memphis, TN store.         herein by reference.

  10.42  Restricted Stock Agreement dated            Previously filed as Exhibit 10.53 to
         July 14, 1997 between Martin P.             Form 10-K (file no. 1-10767) filed
         Doolan and the Company.                     October 31, 1997, and incorporated
                                                     herein by reference.
</TABLE>

                                      E-7
<PAGE>   63

<TABLE>

<S>                                                    <C>
  10.43  Lease, dated October 30, 1998 between the     Previously filed as Exhibit 10.56 to
         Company, as tenant, and Jubilee Limited       Form 10-K (file no. 1-10767) filed
         Partnership, as landlord, re River Oaks West  April 30, 1999, and incorporated
         Shopping Center, Calumet City, Illinois.      herein by reference.

  10.44  Lease, dated May 3, 1998 between the          Previously filed as Exhibit 10.57 to
         Company, as tenant, and Valley Fair           Form 10-K (file no. 1-10767) filed
         Corporation, as landlord, re Irvington, NJ.   April 30, 1999, and incorporated
                                                       herein by reference.

  10.45  Lease, dated March 22, 2000 between
         East Fifth Avenue, LLC, an affiliate of
         SSC, and Shonac Corporation.

  10.46  Employment Agreement dated
         June 21, 2000 between
         James A. McGrady and the Company.

  10.47  Employment Agreement dated
         December 4, 2000 between
         George Kolber and the Company.

     21  List of Subsidiaries                           Page E-9.
     23  Consent of Deloitte & Touche LLP               Page E-10.
     24  Power of Attorney                              Page E-11.
</TABLE>






                                      E-8