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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D. C. 20549

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FORM 10-K

(Mark One)

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
|- | ------------------------------------------------------------------------------------------------------

For the fiscal year ended December 29, 2001

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
|- | ----------------------------------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-9904

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ARDEN GROUP, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 95-3163136                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|2020 South Central Avenue, Compton, California                 |  | 90220                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrant's telephone number, including area code(310) 638-2842

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Securities registered pursuant to Section 12(b) of the Act:

|Title of Each Class |  | Name of Each Exchange on Which Registered
|------------------- |  | -----------------------------------------
|None                |  | None                                     

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock(Title of class)

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate
by a 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. o

The
aggregate market value of the voting stock held by non-affiliates of the registrant based on the closing price of such stock on March 1, 2002 was:

Class A
Common Stock $96,981,830

The
number of shares outstanding of the registrant's classes of common stock as of March 1, 2002 was:

1,982,985
of Class A Common Stock
1,364,584 of Class B Common Stock

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PART I

Item 1. Business;

Item 2. Properties; and

Item 3. Legal Proceedings

General

The Registrant, Arden Group, Inc. (the "Company"), is a holding company with certain real estate holdings which conducts other operations through its
wholly-owned subsidiary, Arden-Mayfair, Inc. ("Arden-Mayfair"). Arden-Mayfair's wholly-owned subsidiary, Gelson's Markets ("Gelson's"), operates supermarkets in Southern California.

Arden
Group, Inc. is headquartered at 2020 South Central Avenue, Compton, California 90220 and its telephone number is (310) 638-2842.

Business and Properties

Market Operations

Gelson's currently operates 18 supermarkets in the Southern California area; 16 under the name "Gelson's" and two under the name "Mayfair." Gelson's and Mayfair
are self-service cash-and-carry markets which offer a broad selection of local and national brands as well as a limited number of private label items. The Gelson's
supermarkets target the consumer who values superior customer service, merchandise presentation, selection and quality products.

Store Formats and Business Strategy

Gelson's business strategy is to offer a comfortable shopping experience which is superior to its competitors in terms of customer service and merchandise
selection and presentation. The goal of this strategy is to continue to develop and maintain Gelson's loyal base of customers. Central elements of this strategy are as follows:

MerchandiseThe merchandise offerings in the markets are tailored in response to Gelson's customer profile. Gelson's stores,
which range in size from approximately 18,000 to 40,000 square feet, typically carry a wide range of items, including all of the traditional grocery categories such as dry groceries, produce, meat,
seafood, bakery, dairy, wine and liquor, floral, sushi, vitamins, health and natural food products and health and beauty aids. Gelson's perishables are premium products, which are rigorously
maintained and culled as appropriate to assure quality and freshness. Gelson's merchandising emphasizes specialty items such as imported foods and unusual delicatessen items, and items found in
service departments such as seafood, sit-down coffee areas, bakeries and service deli. The two Mayfair stores are approximately 25,000 square feet in size and offer a merchandise selection
equal in quality to a Gelson's but generally less broad.

ServiceGelson's emphasizes customer service by offering a variety of service departments including seafood, delicatessen,
floral, sushi and bakery departments. Some Gelson's stores include additional service departments such as fresh pizza and coffee bars. Additionally, selected stores offer banking and pharmacy services
through third parties. Stores are staffed so that, even at peak times, customer checkout time is minimized. In addition to checkers, there are personnel assigned to bagging and carrying out purchases.
All employees are encouraged to know customers by name and assist them whenever possible. All stores offer Company credit cards to qualified customers as well as allowing customers the option of
paying for their purchases with cash, checks or credit and debit cards. Stores

2

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are typically open 14 to 17 hours per day, with hours of operation determined by local code or lease provisions, or as appropriate for the business characteristics of a specific area.

PresentationAll stores are maintained in accordance with extremely high standards. Personnel continuously fill and face
shelves with groceries. Produce and other perishables are aggressively trimmed and culled to maintain quality and appearance.

PricingThe pricing strategy at the stores is to be competitive within their market niches, ranging from the more traditional
to the more exotic, specialty or high-end retailers.

Expansion and Store DevelopmentManagement regularly evaluates the feasibility of opening new stores and remodels existing
stores in order to maximize the existing stores' appeal to consumers and their profit potential. In January and September 2001, the Company opened new stores in Dana Point and Pasadena,
California, respectively. Total 2001 capital expenditures, including new stores and remodels, were approximately $10,066,000.

Advertising and PromotionGelson's advertises in newspapers on a limited basis. Direct advertising is limited (primarily
newsletters and direct mail) and is typically event rather than price oriented, emphasizing, for example, special holiday selections, specialty items and services, recipes and new products.

Competition

The retail grocery business is very competitive. Competition in the supermarket business is based primarily upon price, merchandise variety and quality, service
and location. The number of stores, market share and availability of capital are also important competitive factors. Gelson's is in direct competition with numerous local outlets of regional and
national supermarket chains (most of which have greater resources and a larger market share than Gelson's), independent grocery stores, convenience stores, specialty and gourmet markets and food
departments in mass merchandise and club stores. Competition also exists from many other types of retailers with respect to particular products. Stores compete primarily by offering a combination of
high-quality products and superior customer service. The Company also believes that Gelson's prime store locations and long-standing reputation add to its competitive strength.

Certain
competitors of the Company have recently commenced offering home delivery as an addition to their existing retail store operations. The Company continues to monitor and evaluate
opportunities for home delivery, but has not made any commitments at this time.

Seasonality

Gelson's business is somewhat seasonal, with sales tending to increase during the last quarter of the year because of the holiday season.

Support and Other Services

Each store has an on-site stockroom, the size of which varies for each store. In addition, Gelson's operates an 89,000 square foot warehouse and an
adjacent 4,000 square foot truck service facility in the City of Commerce, California. The central warehouse distributes fresh produce, liquor, wine, floral and certain grocery items to the stores. On
a limited basis, the stores also receive meat, delicatessen, paper goods, health and beauty aids, hardware and supply items from the warehouse.

The
bulk of all merchandise purchasing takes place at Gelson's office in Encino, California. Approximately 40% of the purchases are distributed through the central warehouse; the
remainder are delivered directly to the stores from manufacturers or wholesalers. The central purchasing and

3

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distribution operations are conducted based on electronic in-store ordering systems. Stores place orders for merchandise up to six days per week, with perishables ordered more frequently
than other goods.

The
largest supplier for the stores is Unified Western Grocers, Inc. (formerly Certified Grocers), a cooperative wholesaler which has been a supplier for approximately
twenty-seven years and which accounted for approximately 22% of Gelson's purchases in 2001. No other supplier accounts for a material percentage of Gelson's purchases. The Company believes that there
would be a negative impact if the Company were to lose Unified Western Grocers, Inc. as a supplier for Gelson's, but that such impact would likely be mitigated by a combination of events, which
could include: (i) purchasing certain items for direct store delivery, thereby freeing warehouse capacity to allow other items to be purchased through the warehouse and (ii) purchasing
certain products through other wholesalers. However, such a loss could have a short-term adverse effect on the performance of Gelson's.

Employees

Gelson's has approximately 1,161 full-time and 1,104 part-time store, warehouse and office employees. Most Gelson's employees are covered
by collective bargaining agreements that require union membership and establish rates of pay, hours of work, working conditions and procedures for the
orderly settlement of disputes. In general, these agreements have been negotiated on an area-wide and industry-wide basis. The Company believes that its employee relations are
good.

In
addition, Arden-Mayfair has approximately 60 full-time employees at its executive and headquarters offices, some of whom are covered by a collective bargaining agreement.

Properties

The Company currently owns two of its freestanding supermarket properties and a shopping center in which a Gelson's Market is located. The shopping center owned
by the Company, located in Calabasas, California, consists of approximately 18,000 square feet of space leased to twelve tenants in addition to the approximately 40,000 square foot Gelson's Market.
Fifteen supermarkets and the warehouse and distribution facilities which service the markets are leased. Generally, supermarkets are leased for terms of 20 years initially and may include
options up to an additional 20 years under leases which generally stipulate a minimum rental against a percentage of gross sales. The average term remaining on the supermarket leases, including
renewal options, is approximately 20 years. The 18 markets range in size from approximately 18,000 to 40,000 square feet. Gelson's warehouse, distribution and truck service facilities in the
City of Commerce, California are leased and contain approximately 93,000 square feet. The term of the lease expires in September 2015 including renewal options.

The
Company owns its 30,000 square foot corporate headquarters office building in Compton, California. In addition, AMG Holdings, Inc. ("AMG Holdings"), a wholly-owned subsidiary
of Arden-Mayfair, leases a 64,000 square foot building in Los Angeles consisting of office and warehouse space, which is subleased until the lease on the property expires in 2012 (including renewal
options).

Governmental Regulation

Gelson's is subject to regulation by a variety of governmental agencies, including the U.S. Food and Drug Administration, the California Department of Alcoholic
Beverage Control, and state and local health departments. The Company believes that Gelson's and Mayfair store operations comply with all federal, state and local health, environmental and other laws
and regulations. Although the Company cannot predict the effect of future laws or regulations on its operations, expenditures for continued compliance with current laws are not expected to have a
material adverse effect on Gelson's competitive position or the Company's consolidated financial position, results of operations or cash flows.

Legal Proceedings

The Company and certain of its subsidiaries are involved in a number of pending legal and/or administrative proceedings. Such proceedings are not expected
individually or in the aggregate to have a material adverse impact upon either the Company's consolidated financial position, results of operations or cash flows. See Note 14 of Notes to
Consolidated Financial Statements.

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

None.

4

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PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters

(a)  The
Company's Class A Common Stock ("Class A") is traded over-the-counter in the NASDAQ National Market System. During the past two years,
the range of high and low sales prices (not including markups, markdowns or commissions) for each quarterly period was, according to NASDAQ, the following:

2001

2000High

Low

High

Low1st Quarter

43

36
3/4
38

28
7/82nd Quarter

55

40
5/32
42
3/8
27
7/83rd Quarter

58

38

48
3/4
31
7/84th Quarter

62
13/64
44

49

41
1/2


There
is no established public trading market for the Company's Class B Common Stock ("Class B"), which is subject to various restrictions on transfer. Class B is
convertible, at the option of the holder, into Class A on a share-for-share basis.

(b)  As
of December 29, 2001, there were 1,191 holders of record of the Company's Class A, with aggregate holdings of 1,982,985 shares of Class A. This
does not include 1,357,200 shares of the Company's Class A owned by AMG Holdings. As of the same date, there were 11 holders of record of the Company's Class B, with aggregate holdings
of 1,364,584 shares of Class B.

(c)  No
dividends have been paid on either Class A or Class B during the past three years. Cash or property dividends on Class B are restricted to an
amount equal to 90% of any dividend paid on Class A.

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Item 6. Selected Financial Data of Arden Group, Inc.

|                                                       |            | 2001 |           | 2000   |   | 1999      |        | 1998 |           | 1997   |  
|------------------------------------------------------ | ---------- | ---- | --------- | ------ | - | --------- | ------ | ---- | --------- | ------ | -
|
|Operations For The Year:                               |            |      |           |        |   |           |        |      |           |        |  
|Sales                                                  |            | $    | 391,880   |        | $ | 359,994   |        | $    | 324,168   |        | $
|Gross profit                                           |            |      | 165,578   |        |   | 149,110   |        |      | 131,722   |        |  
|Operating income                                       |            |      | 20,112    |        |   | 19,838    |        |      | 16,830    |        |  
|Other income (expense), net                            |            |      | 1,926     |        |   | 1,019     |        |      | 1,009     |        |  
|Income tax provision                                   |            |      | 8,731     |        |   | 8,498     |        |      | 6,122     |        |  
|Income from continuing operations, net of income taxes |            |      | 13,307    |        |   | 12,359    |        |      | 11,717    |        |  
|Loss from discontinued operations, net of income taxes |            |      |           |        |   |           |        |      |           |        |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|                                                       | Net income |      | $         | 13,307 |   | $         | 12,359 |      | $         | 11,717 |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|Depreciation and amortization on continuing operations |            | $    | 7,872     |        | $ | 6,719     |        | $    | 5,824     |        | $
|Financial Position At Year End:                        |            |      |           |        |   |           |        |      |           |        |  
|Total assets                                           |            | $    | 121,526   |        | $ | 118,160   |        | $    | 111,279   |        | $
|Working capital                                        |            |      | 27,868    |        |   | 27,424    |        |      | 24,677    |        |  
|Long-term debt                                         |            |      | 3,134     |        |   | 6,735     |        |      | 8,322     |        |  
|Stockholders' equity                                   |            |      | 85,139    |        |   | 77,267    |        |      | 69,276    |        |  
|Capital expenditures                                   |            |      | 10,066    |        |   | 9,882     |        |      | 19,630    |        |  
|Basic Per Share Data:                                  |            |      |           |        |   |           |        |      |           |        |  
|Income from continuing operations                      |            | $    | 3.93      |        | $ | 3.52      |        | $    | 3.27      |        | $
|Loss from discontinued operations                      |            |      |           |        |   |           |        |      |           |        |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|                                                       | Net income |      | $         | 3.93   |   | $         | 3.52   |      | $         | 3.27   |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|Diluted Per Share Data:                                |            |      |           |        |   |           |        |      |           |        |  
|Income from continuing operations                      |            | $    | 3.92      |        | $ | 3.52      |        | $    | 3.27      |        | $
|Loss from discontinued operations                      |            |      |           |        |   |           |        |      |           |        |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|                                                       | Net income |      | $         | 3.92   |   | $         | 3.52   |      | $         | 3.27   |  
|                                                       |            |      |           |        |   |           |        |      |           |        |  
|Basic weighted average shares outstanding              |            |      | 3,389,234 |        |   | 3,513,028 |        |      | 3,585,472 |        |  
|Diluted weighted average shares outstanding            |            |      | 3,398,671 |        |   | 3,515,117 |        |      | 3,585,472 |        |  

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All years are 52 weeks except for 1997 which is 53 weeks. 1997 share and per share data have been restated to reflect the four-for-one stock split in
July 1998.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Certain statements
contained in Management's Discussion and Analysis, in other parts of this report and in other Company filings are forward-looking statements. These statements discuss, among other things, future sales
growth, operating results and financial condition. Forward-looking statements reflect the Company's current plans and expectations regarding important risk factors and are based on information
currently available to us.

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The
Company cautions readers that any forward-looking statements contained in this report or made by the management of the Company involve risks and uncertainties, and are subject to
change based on various important factors. The following factors, among others, could affect the Company's financial results and could cause the Company's financial performance to differ materially
from the expectations expressed in any forward-looking statement made by or on behalf of the Company:



Results of Operations

2001 Compared to 2000

Income before income taxes in 2001 increased 5.7% to $22,038,000 compared to $20,857,000 during 2000. Operating income increased 1.4% to $20,112,000 in 2001
compared to $19,838,000 in 2000.

Sales
from the Company's 18 supermarkets (all of which are located in Southern California) were $391,880,000 in 2001. This represents an increase of 8.9% over 2000, when sales were
$359,994,000. The majority of the sales increase is attributable to the opening of new stores in Irvine, Dana Point and Pasadena, California in September 2000, January 2001 and
September 2001, respectively. Same store sales increased 2.3% in 2001 compared to the prior year. The increase in same store sales reflects to some extent the positive impact of store remodel
activity and pricing.

In
September 2001, the Company opened a Gelson's Market in a multi-use center in Pasadena, California which is currently performing below management's expectations. Management
expects sales

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to improve as consumers respond to a local advertising and pricing campaign, the apartments located above the store are occupied, existing retail tenants become more established and enhancements to
parking and traffic flow are implemented. However, the occurrence of these events does not guarantee that sales at the Pasadena store will increase to originally anticipated levels.

The
Company's gross profit as a percent of sales was at 42.3% in 2001 compared to 41.4% in 2000. Added controls over product costs, product pricing decisions and increased buying and
promotional allowances contributed to the increase in margins.

Delivery,
selling, general and administrative ("DSG&A") expense as a percent of sales was 37.1% in 2001 compared to 35.9% in 2000. The Company recognized compensation expense related to
its phantom stock options and stock appreciation rights of approximately $816,000 and $1,223,000 during the fourth quarter and year ended December 29, 2001, respectively, due to an increase in
the Company's stock price in 2001. Earnings per share decreased $.14 and $.21 per share during the fourth quarter and year ended December 29, 2001, respectively, as a result of these charges to
compensation expense compared to $.03 per share during the fourth quarter and year ended December 30, 2000. Salaries and promotions expense in 2001 increased due to the opening of new stores,
as described above. In addition, a substantial increase in workers' compensation premiums also contributed to the rise in DSG&A expense in spite of the Company's favorable claims experience. The
Company is continually looking for opportunities to reduce costs.

California
recently passed legislation aimed at reforming the workers' compensation insurance industry in the state. At this point in time, we are unable to predict how this legislation
will impact the insurance industry's rating process, and ultimately, the effect on premiums. The Company believes that premiums could increase substantially beginning with our next policy renewal
period commencing on October 1, 2002. While the Company continues to devote substantial time and commitment to maintaining favorable safety records and claims experience, this does not preclude
the Company from potentially experiencing a considerable increase in insurance costs. A substantial increase in workers' compensation premiums could have a negative impact on the Company's
consolidated financial position, results of operations and cash flows.

Assuming
the stock price of the Company's Class A Common Stock remains at the year end price of approximately $60, the Company anticipates 2002 compensation expense of
approximately $200,000 on an after tax basis related to the incremental vesting of phantom stock options and stock appreciation rights. Compensation expense will be adjusted by approximately $37,000
after tax for each dollar increase or decrease in the Company's stock price. The exercise of such options or rights could cause these estimates to vary.

The
Company contributes to several multi-employer union pension plans. Contributions to the union pension plan, covering the majority of the Company's employees, have been suspended
since 1999. The pension plan trustees have reserved the right to reinstate the pension contribution with minimal notice. If reinstated, we anticipate that the additional pension expense could have a
significant impact on the Company's financial position, results of operations and cash flows.

The
Company is primarily self-insured for losses related to general and auto liability claims. The Company carries insurance that covers individual claims in excess of
$250,000. Accruals are based on claims filed and an estimate of claims incurred but not reported. The Company's liability reserve for unpaid and incurred but not reported claims at December 29,
2001 was approximately $1,199,000. While
the ultimate amount of claims incurred are dependent on future developments, in management's opinion, recorded reserves are adequate to cover the future payment of claims.

The
Company also carries workers' compensation, property, business interruption, fiduciary, directors and officers, crime, earthquake and special event liability insurance. Management
believes that current insurance coverage is adequate to meet the requirements of the Company.

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The
Company procures approximately 22 percent of its product through Unified Western Grocers, Inc. ("Unified"), a grocery cooperative. As a member-patron, the Company is
required to provide Unified with certain minimum deposits in order to purchase product from the cooperative. As of December 29, 2001, the Company had approximately $1,606,000 on deposit with
Unified. The minimum deposit requirement is satisfied through a combination of cash and ownership of equity shares in Unified. Unified has recognized reductions in earned surplus in each of its fiscal
years ending September 29, 2001 and September 30, 2000. Unified's Board of Directors has adopted an equity enhancement plan for its 2002 fiscal year. Under the equity enhancement plan,
member-patrons will receive interest bearing subordinated patronage dividend certificates in lieu of amounts previously paid in cash. The Company has historically received less than $200,000 annually
in patronage dividends in the form of cash and Class B shares. In the event Unified continues to incur reductions in earned surplus, the Company may face impairment issues relating to the
deposits provided to Unified.

Interest
and dividend income was $2,166,000 in 2001 compared to $2,265,000 for 2000 primarily due to lower interest rates and lower average levels of interest bearing investments in
2001.

Interest
expense decreased to $596,000 in 2001 from $782,000 in 2000 primarily due to lower levels of fixture financing debt throughout the year and the prepayment of the balance in
October 2001.

Other
income (expense) includes gains (losses) realized on investments of $383,000 and ($434,000) in 2001 and 2000, respectively.

Investments
are accounted for under the provisions of Statement of Financial Accounting Standards No. ("SFAS") 115, "Accounting for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date. Debt securities
for which the Company does not have the intent or ability to hold to maturity and equity securities are classified as available-for-sale investments and any unrealized holding
gains and losses are included as a separate component of stockholders' equity. Unrealized losses on investments were $652,000 (net of income tax benefits of $449,000) in 2001 compared to unrealized
gains of $445,000 (net of income tax expense of $306,000) in 2000.

During
2001, the Company repurchased and retired 109,927 shares of Class A Common Stock for an aggregate purchase price of approximately $4,783,000. All shares were repurchased in
private transactions with sellers not affiliated with the Company. In addition, 4,400 shares of Class B Common Stock were exchanged for Class A Common Stock shares during 2001.

2000 Compared to 1999

Income before income taxes in 2000 increased 16.9% to $20,857,000 compared to $17,839,000 during 1999. Operating income increased 17.9% to $19,838,000 in 2000
compared to $16,830,000 in 1999.

Sales
from the Company's 16 supermarkets (all of which are located in Southern California) were $359,994,000 in 2000. This represents an increase of 11.1% over 1999, when sales were
$324,168,000. The majority of the sales increase is attributable to the opening of new stores in Sherman Oaks and Santa Barbara, California in late August and October 1999, respectively. In
addition, a new store in Irvine, California was opened in late September 2000. Same store sales increased 2.8% in 2000 compared to the prior year. The increase in same store sales reflects the
positive impact of store remodel activity and a robust economy in Southern California.

The
Company's gross profit as a percent of sales was at 41.4% in 2000 compared to 40.6% in 1999. Added controls over product costs, product pricing decisions and increased buying and
promotional allowances contributed to the increase in margins.

9

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DSG&A
expense as a percent of sales was 35.9% in 2000 compared to 35.4% in 1999. An increase in salaries and promotions expense contributed to the rise in DSG&A expense in 2000. In
addition, the opening of two new stores and a major remodel in late 1999 resulted in a slight increase in DSG&A expense as a percent of sales in early 2000. Expense was also higher in 2000 due to the
opening of the Irvine store in late September 2000. Included in 1999 DSG&A is approximately $496,000 of expense related to making the Company's systems and equipment Year 2000 compliant.

Interest
and dividend income was $2,265,000 in 2000 compared to $1,807,000 for 1999 primarily due to higher interest rates and higher average levels of interest bearing investments in
2000.

Interest
expense increased to $782,000 in 2000 from $694,000 in 1999 primarily due to higher average levels of fixture financing debt.

Other
income (expense) includes losses realized on investments in marketable securities of $434,000 and $74,000 in 2000 and 1999, respectively.

Investments
are accounted for under the provisions of SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." Management determines the appropriate
classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date. Debt securities for which the Company does not have
the intent or ability to hold to maturity and equity securities are classified as available-for-sale investments and any unrealized holding gains and losses are included as a
separate component of stockholders' equity. Unrealized gains on investments were $445,000 (net of income tax expense of $306,000) in 2000 compared to an unrealized loss of $839,000 (net of income tax
benefits of $572,000) in 1999.

During
1999, the California Franchise Tax Board withdrew tax assessments which it had previously rendered against the Company. As a result, in 1999 the Company recognized a reduction in
its tax reserve and an increase in net income of approximately $1,286,000. For an analysis of the Company's provision for income taxes, see Note 11 of Notes to Consolidated Financial
Statements.

During
2000, the Company repurchased and retired 127,976 shares of Class A Common Stock for an aggregate purchase price of approximately $4,853,000. All shares were repurchased in
private transactions with sellers not affiliated with the Company.

Liquidity and Capital Resources

The Company has an ongoing program to remodel existing supermarkets and to add new stores. In January and September 2001, the Company opened new stores in
Dana Point and Pasadena, California, respectively. In addition, a new store was opened in Irvine, California in September 2000. Total 2001 capital expenditures, including new stores and
remodels, was $10,066,000. As of December 29, 2001, authorized expenditures on incomplete projects for the purchase of property, plant and equipment totaled approximately $1,206,000. Of this
total, approximately $743,000 has been contractually committed.

The
Company and its subsidiaries are subject to a myriad of environmental laws, regulations and lease covenants with its landlords regarding air, water and land use, products for sale,
and the use, storage and disposal of hazardous materials. The Company believes it substantially complies, and has in the past substantially complied, with federal, state and local environmental laws
and regulations and private covenants. The Company cannot, at this time, estimate the expense it ultimately may incur in connection with any current or future violations, however, it believes any such
claims will not have a material adverse impact on either the Company's consolidated financial position, results of operations or cash flows.

The
Company has a credit facility with a bank establishing a revolving line of credit in the amount of $5,000,000 with a standby letter of credit sub-facility in the amount of
$5,000,000. During 1995, 1997

10

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and 1999, the Company borrowed a total of $10,000,000 against a non-revolving line of credit for term loans to finance capital expenditures. During October 2001, the Company
prepaid the outstanding term loans. In addition, the Company has a revolving line of credit with another bank in the amount of $3,000,000. There were no outstanding balances against either of the
revolving lines as of December 29, 2001. The Company's current cash position including investments, the lines of credit and net cash provided by operating activities (approximately $19,582,000
for 2001) are the primary sources of funds available to meet the Company's current liquidity requirements. See Note 7 of Notes to Consolidated Financial Statements for a description of the
Company's credit lines.

The
Company's total liabilities to equity ratio decreased to .43 at December 29, 2001 from .53 at December 30, 2000. The Company's current ratio was 1.90 at
December 29, 2001 compared to 1.88 at December 30, 2000. The Company's current assets at the end of 2001 were approximately $120,000 more than at the end of 2000.

The
Company's cash position, including investments, at the end of 2001 was $33,954,000 compared to $34,722,000 at the end of 2000. Cash not required for the immediate needs of the
Company has been temporarily invested in commercial paper, marketable securities and a limited partnership that invests primarily in publicly traded, high yield bonds. All temporary investments are
highly liquid except for the limited partnership investment of approximately $2,500,000 which allows for withdrawals on a quarterly basis. See Notes 1 and 2 of Notes to Consolidated Financial
Statements. The Company is continually investigating opportunities for the use of these funds including the expansion and remodeling of its supermarket operations.

Recent Accounting Standards

In July 2001, the Financial Accounting Standards Board issued SFAS 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible
Assets." These statements will change the accounting for business combinations and goodwill in two significant ways. SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. SFAS 142 changes the accounting for goodwill from
an amortization method to an impairment-only approach. This standard will be effective for the Company's 2002 fiscal year. These standards are not expected to have an impact on the
Company's consolidated financial statements.

In
October 2001, the Financial Accounting Standards Board issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which replaces
SFAS 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144 establishes one accounting
model, based on the framework established in SFAS 121, for the recognition, measurement and reporting of impairment of long-lived assets to be held and used and of
long-lived assets to be disposed of by sale. Adoption of SFAS 144 is required for the Company's 2002 fiscal year although early application is permitted. The Company does not
anticipate that this standard will have a significant impact on the Company's consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company could be exposed to market risk from changes in interest rates on debt. The Company's exposure to interest rate risk relates to its $5,000,000 and
$3,000,000 revolving lines of credit. Borrowings under the agreements bear interest as discussed in Note 7 of Notes to Consolidated Financial Statements. There were no borrowings outstanding
under either agreement as of December 29, 2001. Consequently, a hypothetical 1% interest rate change would have no impact on the Company's results of operations.

A
change in market prices also exposes the Company to market risk related to its investments which totaled $18,851,000 as of December 29, 2001. A hypothetical 10% drop in the
market value of

11

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these investments would result in a $1,885,000 unrealized pretax loss and a corresponding loss of a like amount in the fair value of these instruments. This hypothetical drop would not affect cash
flow and would not have an impact on earnings until the investments were disposed of or the decline is deemed permanent. In order to minimize the risk associated with market value fluctuations, the
Company actively manages its exposure through the regular review of its investment portfolio. The review takes into consideration, among other things, the risk level of the individual investments, the
amount invested in each and current economic conditions.

Item 8. Financial Statements and Supplementary Data

See Index to Consolidated Financial Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Change of accountants was previously reported.

12

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PART III

Item 10.    Directors and Executive Officers of the Registrant

Identification of Directors

Below is set forth certain information about each of the directors of the Company as of March 1, 2002. Certain of this information has been supplied by the
persons shown.

|Name               |  | Age |  | Principal Occupation(1)
and Other Directorships                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Director
Since(2) |  | Term Expires
|------------------ |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ------------
|Bernard Briskin    |  | 77  |  | Chairman of the Board of Directors, President and Chief Executive Officer of the Company and Arden-Mayfair, Inc. a subsidiary of the Company, and Chairman of the Board and Chief Executive Officer of AMG Holdings,
 Inc. and Gelson's Markets, both subsidiaries of Arden-Mayfair, Inc.                                                                                                                                                                                                                                                                                     |  | 1970              |  | 2004        
|John G. Danhakl    |  | 45  |  | Partner, Leonard Green & Partners since March 1995. Managing Director of Donaldson Lufkin Jenrette Securities Corporation from March 1990 to February 1995. Director of Big 5 Sporting Goods, Inc., Communications and Power
Industries Holding Corporation, Inc., Communications and Power Industries, Inc., Twin Laboratories Corporation, Hechinger/BSQ, Diamond Auto Glass Works, Liberty Group Publishing, Leslie's Poolmart, Inc., Veterinary Centers of America,
 Inc., Asian Media, MEMC Electronic Materials, Inc., VCA Antech, Inc. and Petco Animal Supplies, Inc. |  | 1995              |  | 2004        
|Robert A. Davidow  |  | 59  |  | Director of WHX Corporation; private investor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 1993              |  | 2002        
|Kenneth A. Goldman |  | 59  |  | Attorney and Director with Crosby, Heafey, Roach & May, Professional Corporation since September 2000. For more than five years prior thereto, Attorney and Principal of Sanders, Barnet, Goldman, Simons & Mosk, A Professional
Corporation.                                                                                                                                                                                                                                                                                                                                 |  | 2001              |  | 2004        
|Daniel Lembark     |  | 77  |  | Financial Consultant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 1978              |  | 2003        
|Ben Winters        |  | 81  |  | Business Consultant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 1978              |  | 2003        

---

13

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Identification of Executive Officers

Below is set forth certain information about each of the executive officers of the Company as of March 1, 2002:

|Name            |  | Age |  | Position(s)                                                                                                                                                                                                        
|--------------- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Bernard Briskin |  | 77  |  | Chairman of the Board of Directors, President and Chief Executive Officer of the Company and Arden-Mayfair, Inc., and Chairman of the Board and Chief Executive Officer of AMG Holdings, Inc. and Gelson's
Markets.
|David M. Oliver |  | 44  |  | Chief Financial Officer of the Company and Arden-Mayfair, Inc., Chief Financial Officer and Secretary of AMG Holdings, Inc. and Gelson's Markets.                                                                  

Mr. Briskin
served as Chairman of the Executive Committee of the Board of Directors of Arden-Mayfair until August 1978, when he was elected President and Chief Executive
Officer of Arden-Mayfair. In November 1978, Mr. Briskin was elected President and Chief Executive Officer of the Company, and in June 1994 he was elected Chairman of the Board of
the Company. Mr. Briskin serves as Chairman of the Board, President and Chief Executive Officer of the Company and Arden-Mayfair, and Chairman of the Board and Chief Executive Officer of AMG
Holdings and Gelson's, pursuant to an employment agreement which expires on January 1, 2004, although the term will be automatically
extended for successive one year periods unless certain termination notices are given by either Mr. Briskin or the employers. See "Item 11. Executive Compensation".

Mr. Oliver
was elected Chief Financial Officer of the Company in November 1999. Mr. Oliver also serves as Chief Financial Officer of Arden-Mayfair, and Chief
Financial Officer and Secretary of AMG Holdings and Gelson's. From August 1998 until he joined the Company, he worked as an independent consultant. From July 1997 to July 1998,
Mr. Oliver served as Senior Vice President, Chief Financial Officer of Hughes Family Markets. He served as Vice President, Controller of The Vons Companies, Inc. from July 1994 to
April 1997 and as Assistant Controller from August 1988 to June 1994. Mr. Oliver was employed by Arthur Andersen & Co. as a Certified Public Accountant in the
audit department from June 1979 to May 1988.

Except
for Mr. Briskin, who has an employment agreement, all officers serve at the pleasure of the Board of Directors.

Item 11.    Executive Compensation

General

The
following table sets forth the total annual and long-term compensation paid or accrued by the Company and its subsidiaries in connection with all businesses of the
Company and its subsidiaries to or for the account of the Chief Executive Officer of the Company and each other executive officer of

14

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the Company whose total annual salary and bonus for the fiscal year ended December 29, 2001 exceeded $100,000 in the aggregate.

|                                            |  |                |  |                         |  |                         |  | Long Term
Compensation |  |                     
|------------------------------------------- |  | -------------- |  | ----------------------- |  | ----------------------- |  | ---------------------- |  | --------------------
|
|
|
|Bernard Briskin,
Chief Executive Officer    |  | 2001
2000
1999 |  | 542,442
524,352
511,563 |  | 778,598
735,731
626,299 |  |                        |  | 13,600
69,200
12,800
|David M. Oliver(1),
Chief Financial Officer |  | 2001
2000
1999 |  | 160,000
150,654
11,070  |  | 25,000
25,000           |  | 2,500                  |  | 13,600              

---

Stock Appreciation Rights

No
SARs were granted to or exercised by the executive officers listed above during the 2001 fiscal year. The following table provides information on the exercise of SARs by the named
executive officers in fiscal 2001 and the number of each officers' SARs that were unexercised at December 29, 2001:

Aggregated SAR Exercises in Last Fiscal Year and Fiscal
Year-End Unexercised SARs

|Name            |  | Shares Acquired
on Exercise (#) |  | Value Realized
($) |  | Number of
Securities Underlying
Unexercised SARs at
Fiscal Year-End (#)
Exercisable/Unexercisable |  | Value of Unexercised
In-the-Money SARs at
Fiscal Year-End ($)
Exercisable/Unexercisable
|--------------- |  | ------------------------------- |  | ------------------ |  | ------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------
|David M. Oliver |  | 0                               |  | 0                  |  | 625/1,875                                                                                         |  | 20,000/59,000                                                                          

Employment Agreement

The
compensation of Mr. Briskin, the Chief Executive Officer of the Company, is established under an Employment Agreement, as amended ("the Employment Agreement") which expires on

15

---

January 1, 2004. Pursuant to the terms of the Employment Agreement, Mr. Briskin's base salary increases on January 1 of each year based upon increases in the Consumer Price Index
subject to a maximum annual increase of 4%. His annual bonus is equal to 21/2% of the Company's first $2,000,000 of Pre-Tax Profits (as defined in the Employment Agreement)
plus 31/2% of Pre-Tax Profits in excess of $2,000,000. The Employment Agreement provides for an annual medical expense reimbursement up to $200,000 for Mr. Briskin
and his immediate family, as well as annual retirement compensation equal to twenty-five percent of Mr. Briskin's average base salary and bonus earned in the last three fiscal years
prior to his retirement and continuation of health insurance benefits and automobile allowance. In addition, if he becomes permanently disabled, dies or his employment is terminated prior to
January 1, 2004, the cumulative unpaid portion of two notes from Mr. Briskin to the Company, in the outstanding amount of $135,000 as of March 1, 2002, will be forgiven. The
maturity date of the two notes is December 31, 2003 with equal annual principal payments of $40,000 with the balance due at maturity plus interest at 6% per annum. On December 5, 2001,
the Company's Board of Directors voted to extend the due date of the December 31, 2001 principal payments to December 31, 2002.

Remuneration of Directors

Non-employee
directors are compensated for their services as directors at an annual rate of $22,800, plus $1,000 for each Board meeting attended and $1,000 for attendance at
each committee meeting. Non-employee directors who serve as committee chairmen are entitled to an additional $4,200 per year. In 2001, Mr. Goldman was elected a director and was
granted SARs for units covering 10,000 shares of the Company's Class A Common Stock with a base price of $48 per share, the market value of the Class A Common Stock on the date of grant.
See Note 9 of Notes to Consolidated Financial Statements. Mr. Briskin is an employee of the Company and does not receive the compensation otherwise payable to directors.

Compensation Committee Interlocks and Insider Participation

The
Board of Directors has a Compensation Committee. In 2001, the Compensation Committee was comprised of the following directors, none of whom are or have been officers of the Company:



16

---



Item 12.    Security Ownership of Certain Beneficial Owners and Management





|Name and Address of Beneficial Owner                                                                                                 |  | Title of Class       |  | Amount and
Nature of
Beneficial
Ownership(1) |        | Percent of
Class |   | Percent of
Total Vote |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------- |  | -------------------------------------------- | ------ | ---------------- | - | --------------------- | -
|City National Bank, as Trustee of the Company's Stock Bonus Plan and Trust
1950 Avenue of the Stars, 2nd Floor
Los Angeles, CA 90067 |  | Class A Common Stock |  | 224,338                                      |        | 11.3             | % | 1.4                   | %
|Bernard Briskin
Arden Group, Inc.
9595 Wilshire Blvd., Suite 411
Beverly Hills, CA 90212                                             |  | Class A Common Stock |  | 611,109                                      | (2)(3) | 30.8             | % | 3.9                   | %
|Bernard Briskin                                                                                                                      |  | Class B Common Stock |  | 1,362,496                                    | (3)    | 99.9             | % | 87.2                  | %

---



17

---



|Name of Beneficial Owner                                    |  | Title of Class                            |  | Amount and
Nature of
Beneficial
Ownership(1) |        | Percent of
Class(1) |    | Percent of
Total Vote |   
|----------------------------------------------------------- |  | ----------------------------------------- |  | -------------------------------------------- | ------ | ------------------- | -- | --------------------- | --
|Bernard Briskin                                             |  | Class A Common Stock
Class B Common Stock |  | 611,109
1,362,496                            | (2)(2) | 30.8
99.9           | %% | 3.9
87.2              | %%
|John G. Danhakl                                             |  | Class A Common Stock                      |  | 0                                            |        |                     |    |                       |   
|Robert A. Davidow                                           |  | Class A Common Stock                      |  | 0                                            |        |                     |    |                       |   
|Kenneth A. Goldman                                          |  | Class A Common Stock                      |  | 18,680                                       | (3)    | (4                  | )  | (4                    | ) 
|Daniel Lembark                                              |  | Class A Common Stock                      |  | 0                                            |        |                     |    |                       |   
|David M. Oliver                                             |  | Class A Common Stock                      |  | 0                                            |        |                     |    |                       |   
|Ben Winters                                                 |  | Class A Common Stock                      |  | 500                                          |        | (4                  | )  | (4                    | ) 
|All directors and executive officers as a group (7 persons) |  | Class A Common Stock
Class B Common Stock |  | 630,289
1,362,496                            | (2)(2) | 31.8
99.9           | %% | 4.0
87.2              | %%

---

Item 13.    Certain Relationships and Related Transactions

In
connection with the purchase by Mr. Briskin of shares of the Company's Class A Common Stock in 1979 and 1980, the Company loaned Mr. Briskin $212,500 and
$303,750, respectively. Effective January 1, 1997 the terms of the notes were modified to extend the maturity date from December 31, 2000 to December 31, 2003 and to reduce the
annual principal payments from $73,750 to $40,000 with the balance due at maturity plus interest at 6% per annum. The highest cumulative outstanding balance of the two loans was $135,000 during 2001
and was $135,000 as of March 1, 2002. On December 5, 2001, the Company's Board of Directors voted to extend the due date of the December 31, 2001 principal payments to
December 31, 2002.

Mr. Goldman,
a director of the Company, is also a director of a law firm which performs legal services for the Company.

18

---

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K



19

---





SIGNATURES

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

|         |  | ARDEN GROUP, INC.
|-------- |  | -----------------
|03/21/02 |  | By:              
|03/21/02 |  | By:              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the date indicated. The undersigned have also relied upon the reports of the registrant's independent accountants at pages 40 and 41.

|Name                                    |  | Title                              |  | Date    
|--------------------------------------- |  | ---------------------------------- |  | --------
|                                        |  |                                    |  |         
|/s/BERNARD BRISKINBernard Briskin       |  | Director and Chairman of the Board |  | 03/21/02
|/s/JOHN G. DANHAKLJohn G. Danhakl       |  | Director                           |  | 03/21/02
|/s/ROBERT A. DAVIDOWRobert A. Davidow   |  | Director                           |  | 03/21/02
|/s/KENNETH A. GOLDMANKenneth A. Goldman |  | Director                           |  | 03/21/02
|/s/DANIEL LEMBARKDaniel Lembark         |  | Director                           |  | 03/21/02
|/s/BEN WINTERSBen Winters               |  | Director                           |  | 03/21/02

20

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ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                          |                                                                                                     | Page
|----------------------------------------- | --------------------------------------------------------------------------------------------------- | ----
|Financial Statements:                     |                                                                                                     |     
|                                          | Consolidated Balance Sheets, December 29, 2001 and December 30, 2000                                |     
|                                          | Consolidated Statements of Operations and Comprehensive Income for fiscal years 2001, 2000 and 1999 |     
|                                          | Consolidated Statements of Stockholders' Equity for fiscal years 2001, 2000 and 1999                |     
|                                          | Consolidated Statements of Cash Flows for fiscal years 2001, 2000 and 1999                          |     
|                                          | Notes to Consolidated Financial Statements                                                          |     
|Reports of Independent Public Accountants |                                                                                                     | 40  

The
financial statements include the Registrant's subsidiary (Arden-Mayfair, Inc.) and the subsidiaries of Arden-Mayfair, Inc.

Schedules
are omitted because of the absence of the conditions under which they are required.

21

---



ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS

|                                                 |                                                                                                                                                                                                 | December 29, 2001                          |        | December 30, 2000 |        
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------------- | -------
|
|Assets                                           |                                                                                                                                                                                                 |                                            |        |                   |        
|Current assets:                                  |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 | Cash and cash equivalents                                                                                                                                                                       |                                            | $      | 15,103            |        
|                                                 | Investments                                                                                                                                                                                     |                                            |        | 18,851            |        
|                                                 | Accounts and notes receivable, net                                                                                                                                                              |                                            |        | 6,519             |        
|                                                 | Inventories                                                                                                                                                                                     |                                            |        | 14,748            |        
|                                                 | Other current assets                                                                                                                                                                            |                                            |        | 3,544             |        
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total current assets                       |        |                   | 58,765 
|Property held for resale or sublease             |                                                                                                                                                                                                 |                                            | 728    |                   |        
|Property, plant and equipment, net               |                                                                                                                                                                                                 |                                            | 56,618 |                   |        
|Deferred income taxes                            |                                                                                                                                                                                                 |                                            | 775    |                   |        
|Other assets                                     |                                                                                                                                                                                                 |                                            | 4,640  |                   |        
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total assets                               |        | $                 | 121,526
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|Liabilities and Stockholders' Equity             |                                                                                                                                                                                                 |                                            |        |                   |        
|Current liabilities:                             |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 | Accounts payable, trade                                                                                                                                                                         |                                            | $      | 16,794            |        
|                                                 | Other current liabilities                                                                                                                                                                       |                                            |        | 13,814            |        
|                                                 | Current portion of long-term debt                                                                                                                                                               |                                            |        | 289               |        
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total current liabilities                  |        |                   | 30,897 
|Long-term debt                                   |                                                                                                                                                                                                 |                                            | 3,134  |                   |        
|Deferred income taxes                            |                                                                                                                                                                                                 |                                            |        |                   |        
|Other liabilities                                |                                                                                                                                                                                                 |                                            | 2,356  |                   |        
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total liabilities                          |        |                   | 36,387 
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|Commitments and contingent liabilities (Note 14) |                                                                                                                                                                                                 |                                            |        |                   |        
|Stockholders' equity:                            |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 | Common Stock, Class A, $.25 par value; authorized 10,000,000 shares; 3,340,185 and 3,445,712 shares issued and outstanding for 2001 and 2000, respectively, including 1,357,200 treasury shares |                                            |        | 835               |        
|                                                 | Common Stock, Class B, $.25 par value; authorized 1,500,000 shares; 1,364,584 and 1,368,984 shares issued and outstanding for 2001 and 2000, respectively                                       |                                            |        | 341               |        
|                                                 | Capital surplus                                                                                                                                                                                 |                                            |        | 3,680             |        
|                                                 | Notes receivable from officer/director                                                                                                                                                          |                                            |        | (135              | )      
|                                                 | Unrealized loss on investments                                                                                                                                                                  |                                            |        | (653              | )      
|                                                 | Retained earnings                                                                                                                                                                               |                                            |        | 84,824            |        
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 |                                            | 88,892 |                   |        
|                                                 | Treasury stock, 1,357,200 shares at cost                                                                                                                                                        |                                            |        | (3,753            | )      
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total stockholders' equity                 |        |                   | 85,139 
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        
|                                                 |                                                                                                                                                                                                 | Total liabilities and stockholders' equity |        | $                 | 121,526
|                                                 |                                                                                                                                                                                                 |                                            |        |                   |        

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

22

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ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS  AND COMPREHENSIVE INCOME

|                                                       |                                          | 2001                                                                   |                                                                                                                       | 2000      |        | 1999    |          
|------------------------------------------------------ | ---------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | --------- | ------ | ------- | ---------
|
|Sales                                                  |                                          | $                                                                      | 391,880                                                                                                               |           | $      | 359,994 |          
|Cost of sales                                          |                                          |                                                                        | 226,302                                                                                                               |           |        | 210,884 |          
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Gross profit                             |                                                                        |                                                                                                                       | 165,578   |        |         | 149,110  
|Delivery, selling, general and administrative expenses |                                          |                                                                        | 145,466                                                                                                               |           |        | 129,272 |          
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Operating income                         |                                                                        |                                                                                                                       | 20,112    |        |         | 19,838   
|Interest and dividend income                           |                                          |                                                                        | 2,166                                                                                                                 |           |        | 2,265   |          
|Other income (expense), net                            |                                          |                                                                        | 356                                                                                                                   |           |        | (464    | )        
|Interest expense                                       |                                          |                                                                        | (596                                                                                                                  | )         |        | (782    | )        
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Income before income taxes               |                                                                        |                                                                                                                       | 22,038    |        |         | 20,857   
|Income tax provision                                   |                                          |                                                                        | 8,731                                                                                                                 |           |        | 8,498   |          
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       |                                          | Net income                                                             |                                                                                                                       | $         | 13,307 |         | $        
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|Other comprehensive income (loss), net of tax:         |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Unrealized gain (loss) from investments: |                                                                        |                                                                                                                       |           |        |         |          
|                                                       |                                          | Unrealized holding gains (losses) arising during the period            |                                                                                                                       |           | (680   | )       |          
|                                                       |                                          | Reclassification adjustment for realized losses included in net income |                                                                                                                       |           | 28     |         |          
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       |                                          |                                                                        | Net unrealized gain (loss), net of income tax expense (benefit) of ($449) for 2001, $306 for 2000 and ($572) for 1999 |           |        | (652    | )        
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       |                                          | Comprehensive income                                                   |                                                                                                                       | $         | 12,655 |         | $        
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|Net income per common share:                           |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Basic                                    |                                                                        | $                                                                                                                     | 3.93      |        | $       | 3.52     
|                                                       | Diluted                                  |                                                                        | $                                                                                                                     | 3.92      |        | $       | 3.52     
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          
|Weighted average common shares outstanding:            |                                          |                                                                        |                                                                                                                       |           |        |         |          
|                                                       | Basic                                    |                                                                        |                                                                                                                       | 3,389,234 |        |         | 3,513,028
|                                                       | Diluted                                  |                                                                        |                                                                                                                       | 3,398,671 |        |         | 3,515,117
|                                                       |                                          |                                                                        |                                                                                                                       |           |        |         |          

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

23

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ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                           |                                                                             | 2001                       |        | 2000   |        | 1999   |       
|------------------------------------------ | --------------------------------------------------------------------------- | -------------------------- | ------ | ------ | ------ | ------ | ------
|
|Common Stock, Class A:                     |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            | $      | 862    |        | $      | 894   
|                                           | Purchase and retirement of stock (109,927 and 127,976 shares, respectively) |                            |        | (28    | )      |        | (32   
|                                           | Exchange of stock (4,400 shares)                                            |                            |        | 1      |        |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | 835    |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|Common Stock, Class B:                     |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            |        | 342    |        |        | 342   
|                                           | Exchange of stock (4,400 shares)                                            |                            |        | (1     | )      |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | 341    |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|Capital surplus:                           |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            |        | 3,766  |        |        | 3,866 
|                                           | Purchase and retirement of common stock                                     |                            |        | (86    | )      |        | (100  
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | 3,680  |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|Notes receivable from officer/director:    |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            |        | (135   | )      |        | (175  
|                                           | Principal received                                                          |                            |        |        |        |        | 40    
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | (135   | )      |       
|                                           |                                                                             |                            |        |        |        |        |       
|Unrealized gain (loss) on investments:     |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            |        | (1     | )      |        | (446  
|                                           | Net unrealized gain (loss)                                                  |                            |        | (652   | )      |        | 445   
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | (653   | )      |       
|                                           |                                                                             |                            |        |        |        |        |       
|Retained earnings:                         |                                                                             |                            |        |        |        |        |       
|                                           | Balance, beginning of year                                                  |                            |        | 76,186 |        |        | 68,548
|                                           | Net income                                                                  |                            |        | 13,307 |        |        | 12,359
|                                           | Purchase and retirement of common stock                                     |                            |        | (4,669 | )      |        | (4,721
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Balance, end of year       |        |        | 84,824 |        |       
|                                           |                                                                             |                            |        |        |        |        |       
|Stockholders' equity before treasury stock |                                                                             |                            | 88,892 |        |        | 81,020 |       
|Treasury stock, at cost                    |                                                                             |                            | (3,753 | )      |        | (3,753 | )     
|                                           |                                                                             |                            |        |        |        |        |       
|                                           |                                                                             | Total stockholders' equity |        | $      | 85,139 |        | $     
|                                           |                                                                             |                            |        |        |        |        |       

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

24

---



ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                                  |                                                                    | 2001                                                |        | 2000     |         | 1999   |         
|------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | ------ | -------- | ------- | ------ | --------
|
|Cash flows from operating activities:                                                             |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  | Cash received from customers                                       |                                                     | $      | 392,698  |         | $      | 358,007 
|                                                                                                  | Cash paid to suppliers and employees                               |                                                     |        | (364,624 | )       |        | (334,693
|                                                                                                  | Interest and dividends received                                    |                                                     |        | 1,935    |         |        | 2,029   
|                                                                                                  | Interest paid                                                      |                                                     |        | (627     | )       |        | (761    
|                                                                                                  | Income taxes paid                                                  |                                                     |        | (9,800   | )       |        | (9,201  
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    | Net cash provided by operating activities           |        |          | 19,582  |        |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Cash flows from investing activities:                                                             |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  | Capital expenditures                                               |                                                     |        | (10,066  | )       |        | (9,882  
|                                                                                                  | Purchases of investments                                           |                                                     |        | (4,637   | )       |        | (2,614  
|                                                                                                  | Sales of investments                                               |                                                     |        | 282      |         |        | 5,797   
|                                                                                                  | Proceeds from the sale of property, plant and equipment            |                                                     |        | 54       |         |        | 121     
|                                                                                                  | Other                                                              |                                                     |        |          |         |        | (348    
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    | Net cash used in investing activities               |        |          | (14,367 | )      |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Cash flows from financing activities:                                                             |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  | Purchase and retirement of Company stock                           |                                                     |        | (4,783   | )       |        | (4,853  
|                                                                                                  | Principal payments on long-term debt                               |                                                     |        | (4,762   | )       |        | (1,880  
|                                                                                                  | Principal payments under capital lease obligations                 |                                                     |        | (257     | )       |        | (229    
|                                                                                                  | Loan payments received from officer/director                       |                                                     |        |          |         |        | 40      
|                                                                                                  | Proceeds from equipment financing                                  |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    | Net cash provided by (used in) financing activities |        |          | (9,802  | )      |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Net increase (decrease) in cash and cash equivalents                                              |                                                                    |                                                     | (4,587 | )        |         | 1,533  |         
|Cash and cash equivalents at beginning of year                                                    |                                                                    |                                                     | 19,690 |          |         | 18,157 |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Cash and cash equivalents at end of year                                                          |                                                                    | $                                                   | 15,103 |          | $       | 19,690 |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Reconciliation of Net Income to Net Cash Provided by Operating Activities:                        |                                                                    |                                                     |        |          |         |        |         
|Net income                                                                                        |                                                                    | $                                                   | 13,307 |          | $       | 12,359 |         
|Adjustments to reconcile net income to net cash provided by operating activities:                 |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  | Depreciation and amortization                                      |                                                     |        | 7,872    |         |        | 6,719   
|                                                                                                  | Provision for losses on accounts and notes receivable              |                                                     |        | 58       |         |        | 142     
|                                                                                                  | Net loss (gain) from the disposal of property, plant and equipment |                                                     |        | 44       |         |        | (19     
|                                                                                                  | Realized loss (gain) on investments, net                           |                                                     |        | (383     | )       |        | 434     
|Changes in assets and liabilities net of effects from noncash investing and financing activities: |                                                                    |                                                     |        |          |         |        |         
|                                                                                                  | (Increase) decrease in assets:                                     |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    | Investments                                         |        |          | (182    | )      |         
|                                                                                                  |                                                                    | Accounts and notes receivable                       |        |          | 966     |        |         
|                                                                                                  |                                                                    | Inventories                                         |        |          | (1,334  | )      |         
|                                                                                                  |                                                                    | Other current assets                                |        |          | (547    | )      |         
|                                                                                                  |                                                                    | Other assets                                        |        |          | (404    | )      |         
|                                                                                                  | Increase (decrease) in liabilities:                                |                                                     |        |          |         |        |         
|                                                                                                  |                                                                    | Accounts payable and other accrued expenses         |        |          | 1,092   |        |         
|                                                                                                  |                                                                    | Deferred income taxes                               |        |          | (1,189  | )      |         
|                                                                                                  |                                                                    | Other liabilities                                   |        |          | 282     |        |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         
|Net cash provided by operating activities                                                         |                                                                    | $                                                   | 19,582 |          | $       | 15,381 |         
|                                                                                                  |                                                                    |                                                     |        |          |         |        |         

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

25

---



ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The
following is a summary of significant accounting policies followed in the preparation of these consolidated financial statements.



The consolidated financial statements of Arden Group, Inc. (the "Company") include the accounts of the Company and its direct and indirect subsidiaries.
All intercompany accounts and transactions are eliminated in consolidation. The Company operates 18 supermarkets in Southern California.



The Company operates on a fiscal year ending on the Saturday closest to December 31. Fiscal years for the consolidated financial statements included herein
ended on December 29, 2001, December 30, 2000 and January 1, 2000. Each of the three years presented consists of 52 weeks.



The Consolidated Statements of Cash Flows classify changes in cash and cash equivalents (short-term, highly liquid investments readily convertible
into cash with an original maturity at date of purchase of three months or less) according to operating, investing or financing activities. At times, cash balances held at financial institutions are
in excess of federally insured limits. The Company places its temporary cash investments with high credit, quality financial institutions and limits the amount of credit exposure to any one financial
institution. The Company believes no significant concentration of credit risk exists with respect to these cash investments.



The Company invests in marketable securities including mutual funds and debt and equity securities. Marketable securities are stated at market value as determined
by the most recently traded price of each security at the balance sheet date. All marketable securities are defined as available-for-sale investments under the provisions of
SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities."

Management
determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date.
Debt securities for which the Company does not have the intent or ability to hold to maturity and equity securities are classified as available-for-sale. Investments are
carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders' equity. The cost of investments sold is determined based on the specific
identification method.

In
January 2001, the Company invested $2,500,000 in a limited partnership that invests primarily in publicly traded, high yield bonds. The holding represents less than a 3%
interest and the Company does not have the ability to exercise significant influence over the operating and financial policies of the partnership. Consequently, the investment is accounted for under
the cost method. The partnership allows withdrawals on a quarterly basis.



The Company monitors vendor receivables and extensions of credit on an ongoing basis and has not experienced significant losses related to its receivables. At
December 29, 2001, the Company did

26

---

not have significant credit risk concentrations. No single group or customer represents greater than 2% of total accounts and notes receivable. Issuance costs related to Gelson's charge cards are not
significant and are expensed as incurred.



Supermarket nonperishable inventories are stated at the lower of cost or market, with cost determined using the last-in, first-out
("LIFO") method. Perishable inventories are valued at the lower of cost on a first-in, first-out ("FIFO") method or market.



It is the Company's policy to hold for sale or sublease property considered by management as excess and no longer necessary for the operations of the Company. The
aggregate carrying values of such owned property and property under capital leases are periodically reviewed for impairment and adjusted, when appropriate.



Property, plant and equipment is recorded at cost. Depreciation is provided on the straight-line method over the estimated useful lives of individual
assets or classes of assets as follows:

Buildings and improvements

5 to 15 yearsStore fixtures and office equipment

3 to  8 yearsTransportation equipment

2 to  5 yearsMachinery and equipment

3 to 10 years


Improvements
to leased properties are amortized over their estimated useful lives or lease period, whichever is shorter. Leasehold interests are amortized over the life of the lease.

Leased
property meeting certain capital lease criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of capitalized leased
assets is computed on the straight-line method over the shorter of the estimated useful life or the term of the lease.

Normal
repairs and maintenance are expensed as incurred. Expenditures which materially increase values, change capacities or extend useful lives are capitalized. Replacements are
capitalized and the property, plant and equipment accounts are relieved of the items being replaced. The related costs and accumulated depreciation of disposed assets are eliminated and any gain or
loss on disposition is included in income.



SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires certain disclosures regarding the fair value of financial instruments. The
carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values because of the short-term maturity of these instruments.
The fair value of long-term debt closely approximates its carrying value. The Company uses quoted market prices, when available, or discounted cash flows to calculate these fair values.



In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
For purposes of evaluating the recoverability of long-lived assets, the

27

---

recoverability test is performed using undiscounted net cash flows of the individual stores and consolidated undiscounted net cash flows for long-lived assets not identifiable to
individual stores compared to the related carrying value. If the sum of the undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.



Costs incurred to investigate and remediate contaminated sites are expensed as incurred.



Noncapital expenditures incurred in opening a new store are expensed as incurred.



Advertising and sales promotion costs are expensed as incurred and totaled $3,187,000, $2,630,000 and $1,732,000 in 2001, 2000 and 1999, respectively.



Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to reverse.



Basic net income per share is computed by dividing the net income attributable to common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net income per share is calculated by adjusting outstanding shares to include all potentially dilutive stock options. The weighted average number of common shares used to
compute dilutive net income per share in 2000 and 1999 excludes 30,000 shares related to stock options. These shares are excluded due to their antidilutive effect on net income per share.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions for the reporting period and as of the financial statement date. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent
liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates.



In July 2001, the Financial Accounting Standards Board issued SFAS 141, "Business Combinations," and SFAS 142, "Goodwill and Other Intangible
Assets." These statements will change the accounting for business combinations and goodwill in two significant ways. SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. Use of the pooling-of-interests method will be prohibited. SFAS 142 changes the accounting for goodwill from
an amortization method to an impairment-only approach. This standard will be effective for the Company's 2002 fiscal year. These standards are not expected to have an impact on the
Company's consolidated financial statements.

In
October 2001, the Financial Accounting Standards Board issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which replaces
SFAS 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144 establishes one

28

---

accounting model, based on the framework established in SFAS 121, for the recognition, measurement and reporting of impairment of long-lived assets to be held and used and of
long-lived assets to be disposed of by sale. Adoption of SFAS 144 is required for the Company's 2002 fiscal year although early application is permitted. The Company does not
anticipate that this standard will have a significant impact on the Company's consolidated financial statements.

Marketable
securities are shown on the accompanying balance sheet at their fair value. The investment in a limited partnership that invests primarily in publicly traded, high yield bonds
is accounted for under the cost method as the Company owns less than 3% of the partnership and does not have the ability to exercise significant influence over the operating and financial policies of
the partnership. The fair market value of the Company's investment in the limited partnership was approximately $2,824,000 at December 31, 2001. The partnership allows withdrawals on a
quarterly basis.

|                         |              | Cost                |       | Unrealized
Gain (Loss) |        | Fair Value
|------------------------ | ------------ | ------------------- | ----- | ---------------------- | ------ | ----------
|
|As of December 29, 2001: |              |                     |       |                        |        |           
|                         | Investments: |                     |       |                        |        |           
|                         |              | Mutual funds        |       | $                      | 12,597 |           
|                         |              | Equity securities   |       |                        | 2,237  |           
|                         |              | Debt securities     |       |                        | 2,609  |           
|                         |              | Limited partnership |       |                        | 2,500  |           
|                         |              |                     |       |                        |        |           
|                         |              |                     | Total |                        | $      | 19,943    
|                         |              |                     |       |                        |        |           
|As of December 30, 2000: |              |                     |       |                        |        |           
|                         | Investments: |                     |       |                        |        |           
|                         |              | Mutual funds        |       | $                      | 11,575 |           
|                         |              | Equity securities   |       |                        | 2,282  |           
|                         |              | Debt securities     |       |                        | 1,167  |           
|                         |              |                     |       |                        |        |           
|                         |              |                     | Total |                        | $      | 15,024    
|                         |              |                     |       |                        |        |           

Debt
securities held as of December 29, 2001 mature on May 15, 2006. Realized net losses from the sale of securities were $44,000, $434,000 and $342,000 in 2001, 2000 and
1999, respectively.

|                                                           |  | December 29, 2001 |       | December 30, 2000 |  
|---------------------------------------------------------- |  | ----------------- | ----- | ----------------- | -
|
|Accounts receivable, trade                                 |  | $                 | 3,970 |                   | $
|Notes receivable                                           |  |                   | 42    |                   |  
|Other accounts receivable                                  |  |                   | 2,764 |                   |  
|                                                           |  |                   |       |                   |  
|                                                           |  |                   | 6,776 |                   |  
|Less: Allowance for doubtful accounts and notes receivable |  |                   | (257  | )                 |  
|                                                           |  |                   |       |                   |  
|                                                           |  | $                 | 6,519 |                   | $
|                                                           |  |                   |       |                   |  

The
provision for doubtful accounts and notes receivable in 2001, 2000 and 1999 was approximately $58,000, $142,000 and $191,000, respectively.

29

---

Inventories
valued by the LIFO method totaled $11,779,000 in 2001, $10,530,000 in 2000 and $9,635,000 in 1999. Inventory balances would have been $3,440,000, $3,253,000 and $3,123,000
higher at the end of 2001, 2000 and 1999, respectively, if they had been stated at the lower of FIFO cost or market. The LIFO effect on net income and basic net income per common share in 2001, 2000
and 1999 was a decrease of approximately $111,000 ($.03 per share), $77,000 ($.02 per share) and $187,000 ($.05 per share), respectively.

|                                          |  | December 29, 2001 |         | December 30, 2000 |  
|----------------------------------------- |  | ----------------- | ------- | ----------------- | -
|
|Land                                      |  | $                 | 8,110   |                   | $
|Buildings and improvements                |  |                   | 9,693   |                   |  
|Store fixtures and office equipment       |  |                   | 35,775  |                   |  
|Transportation equipment                  |  |                   | 2,664   |                   |  
|Machinery and equipment                   |  |                   | 973     |                   |  
|Leasehold improvements                    |  |                   | 41,738  |                   |  
|Leasehold interests                       |  |                   | 4,538   |                   |  
|Assets under capital leases               |  |                   | 3,058   |                   |  
|Assets under construction                 |  |                   | 373     |                   |  
|                                          |  |                   |         |                   |  
|                                          |  |                   | 106,922 |                   |  
|Accumulated depreciation and amortization |  |                   | (50,304 | )                 |  
|                                          |  |                   |         |                   |  
|                                          |  | $                 | 56,618  |                   | $
|                                          |  |                   |         |                   |  

As
of December 29, 2001, approximately $14,382,000 of property, plant and equipment (at cost) was fully depreciated and is still being used in operations.

|                                                                                 |  | December 29, 2001 |        | December 30, 2000
|-------------------------------------------------------------------------------- |  | ----------------- | ------ | -----------------
|
|Employee compensated absences                                                    |  | $                 | 4,216  |                  
|Taxes (including taxes collected from others of $1,398 and $1,392, respectively) |  |                   | 2,340  |                  
|Other                                                                            |  |                   | 7,258  |                  
|                                                                                 |  |                   |        |                  
|                                                                                 |  | $                 | 13,814 |                  
|                                                                                 |  |                   |        |                  

30

---

7. Long-Term Debt

|                                                        |  | Current |     | Non-Current
|------------------------------------------------------- |  | ------- | --- | -----------
|
|
|Notes payable                                           |  |         |     |            
|Obligations under capital leases                        |  | $       | 289 |            
|7% Subordinated income debentures due September 1, 2014 |  |         |     |            
|                                                        |  |         |     |            
|                                                        |  | $       | 289 |            
|                                                        |  |         |     |            

At
December 29, 2001, the approximate principal payments required on long-term debt for each fiscal year are as follows:

(In Thousands)2003

$
3242004


3642005


4092006


460Thereafter


1,577$
3,134


The
Company has a loan agreement for a credit facility with a bank establishing a revolving line of credit in the amount of $5,000,000 with a standby letter of credit subfacility in the
amount of $5,000,000 and a $10,000,000 non-revolving line of credit providing for term loans. The loan agreement expires July 31, 2002. Major provisions of the agreement permit the
Company to elect to pay interest based on LIBOR plus .9% or the bank's prime rate. Additionally, there are certain minimum requirements as to the Company's equity, working capital and
debt-to-equity relationships. The Company also has a revolving line of credit with another bank in the amount of $3,000,000 which expires October 30, 2002. Borrowings
bear interest at the bank's prime rate or the adjusted LIBOR rate plus 1.2%. At the end of 2001 and 2000, there were no amounts borrowed against either of the revolving lines of credit.

Notes
Payable: In 1999, 1997 and 1995, the Company borrowed $4,750,000 (at 6.98%), $2,500,000 (at 6.76%) and $2,750,000 (at 6.18%), respectively, from its $10,000,000
non-revolving line of credit to finance the purchase of supermarket equipment. The note payable entered into in 1995 was paid in full in December 2000 and the 1997 and 1999 notes
payable were paid in full in October 2001. No additional borrowing capacity under this line is available.

Debentures:
The indenture relating to the 7% (6% prior to November 7, 1978) subordinated income debentures ("7% Debentures"), due September 1, 2014, provides for interest
payable semiannually on March 1 and September 1 to the extent that current annual net income (consolidated net income before income taxes and interest accrued on the 7% Debentures) is
sufficient therefor, or at the discretion of the Company, out of available retained earnings. No accrued interest was in arrears as of December 29, 2001. The debentures are recorded at face
value which approximates its fair value.

8. Capital Stock

Class A
Common Stock: The Company is authorized to issue 10,000,000 shares of Class A Common Stock, par value $.25 per share. At December 29, 2001 and
December 30, 2000, shares issued were 3,340,185 and 3,445,712,respectively, including 1,357,200 treasury shares. During 2001 and 2000,

31

---

the Company purchased and retired 109,927 and 127,976 shares, respectively, of its Class A Common Stock for an aggregate purchase price of approximately $4,783,000 and $4,853,000,
respectively. The Class A Common Stock has one vote per share on all matters on which stockholders are entitled to vote or consent.

Class B
Common Stock: The Company is authorized to issue 1,500,000 shares of Class B Common Stock, par value $.25 per share. At December 29, 2001 and
December 30, 2000, there were 1,364,584 and 1,368,984 shares, respectively, issued and outstanding. The Class B Common Stock has ten votes per share on virtually all matters on which
stockholders are entitled to vote or consent. Transfer of Class B Common Stock is restricted to other Class B stockholders and certain other classes of transferees. Class B Common
Stock is convertible, at the option of the holder, into Class A Common Stock on a share-for-share basis. The Class B Common Stock is also automatically converted
into Class A Common Stock under certain circumstances, including upon the transfer of such stock to a transferee other than another Class B stockholder and certain other classes of
transferees. 4,400 shares of Class B Common Stock were exchanged for Class A Common Stock during 2001. No shares were converted in 2000 or 1999. Cash or property dividends on
Class B Common Stock are restricted to an amount equal to 90% of any dividend paid on Class A Common Stock.

9. Stock Options and Stock Appreciation Rights

In
1998, the Company adopted a Non-Officer and Non-Director Stock Option Plan (the "Stock Option Plan") which initially provided for the granting of stock options
to key employees to purchase up to 35,000 shares of the Company's Class A Common Stock. The Stock Option Plan was amended in 2000 to increase the number of shares available thereunder to an
aggregate of 70,000 shares. The objective of the Stock Option Plan is to attract and retain quality personnel and to promote the success of the Company by providing employees the opportunity to share
in its growth.

The
Company granted 11,500 stock options at an exercise price of $291/16 per share in March 2000. No options were granted in 2001 or 1999. These options vest at 25%
per year beginning at the end of the first year and expire five years from the date of grant. The exercise price of stock options granted under the Stock Option Plan is equal to the fair market value
of the Company's Class A Common Stock on the date of grant. No options were exercised or cancelled in 2001, 2000 or 1999.

The
Company accounts for its Stock Option Plan using the intrinsic value based method prescribed in Accounting Principles Board Opinion No. ("APB") 25, "Accounting for Stock Issued to
Employees." Accordingly, no compensation cost has been recognized in the Company's Statements of Operations and Comprehensive Income for fiscal years 2001, 2000 or 1999. SFAS 123, "Accounting
for Stock-Based Compensation," encourages adoption of a fair value based method for valuing the cost of stock-based compensation. However, it allows companies to use the intrinsic value based method
prescribed by APB 25 and disclose pro forma net earnings and earnings per share in accordance with SFAS 123. Had compensation expense for the Company's Stock Option Plan been determined under
SFAS 123 using the fair value based method, the Company's pro forma net income and basic net income per common share would have been reduced to the pro forma amounts indicated below:

2001

2000

1999(In Thousands, Except Net Income Per Share)Net income, as reported

$
13,307

$
12,359

$
11,717Net income, pro forma


13,215


12,271


11,646Basic net income per common share, as reported


3.93


3.52


3.27Basic net income per common share, pro forma


3.90


3.49


3.25Diluted net income per common share, as reported


3.92


3.52


3.27Diluted net income per common share, pro forma


3.89


3.49


3.25


32

---

The
weighted average fair value at date of grant for options issued in 2000 was $12.50 per option. The fair value of options at date of grant was estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions:

Risk-free interest rate

6.54
%Expected dividend yield

0
%Expected option life

4 yearsExpected stock price volatility

44.3
%


The
effects of applying SFAS 123 for the pro forma disclosures are not necessarily indicative of the effects expected on current or future net income and basic net income per
common share as the valuations are based on highly subjective assumptions about the future, including stock price volatility and exercise patterns.

In
1998, the Company also adopted a Phantom Stock Option Plan (the "Phantom Plan") which provides for the granting of units covering up to 35,000 shares of the Company's Class A
Common Stock to persons who are at the vice president or higher level of the Company. Each unit entitles the holder to receive upon exercise thereof the excess of the fair market value of a share of
Class A Common Stock on the date of exercise over the fair market value of such share on the date specified by the committee administrating the Phantom Plan at the time of grant. All of the
units vest 25% each year beginning at the end of the first year and expire five years from the date of grant. During 2000, the Company granted units covering 10,000 shares of Class A Common
Stock at an exercise price of $291/16. During 1999, units for 7,000 shares were cancelled. No units have been exercised as of December 29, 2001. For 2001, 2000 and 1999, the
Company incurred compensation expense related to the Phantom Plan of $380,000, $42,000 and $0, respectively.

During
2001 and 2000, the Company also issued stock appreciation rights ("SARs") for units covering up to 10,000 and 40,000 shares, respectively, of the Company's Class A Common
Stock to the Company's non-employee directors with a base price of $48 and $291/16, respectively, representing the fair market value on the date of grant. When the SARs are
exercised, each unit entitles the holder to receive the excess of the fair market value of a share of Class A Common Stock on the date of exercise over the base price. All of the units vest 25%
each year beginning at the end of the first year and expire five years from the date of grant. No SARs have been exercised or cancelled as of December 29, 2001. For 2001 and 2000, the Company
incurred compensation expense related to the SARs of $843,000 and $106,000, respectively.

10. Retirement Plans

The
Company contributes to multi-employer union pension plans administered by various trustees which may be deemed to be defined benefit plans. Contributions to these plans are based
upon negotiated wage contracts. Information relating to accumulated benefits and fund assets as they may be allocable to the participants at December 29, 2001 is not available. The Company's
total union pension expense for all plans for 2001, 2000 and 1999 amounted to $1,165,000, $1,099,000 and $1,801,000, respectively. The Company's 2001 and 2000 expense is lower than 1999 due to the
suspension of a union pension contribution in late 1999.

The
Company has a noncontributory, trusteed Stock Bonus Plan (the "Plan") which is qualified under Section 401 of the Internal Revenue Code of 1986, as amended. All nonunion
employees over 18 years of age who complete 1,000 hours of service within the year ending on the anniversary date of employment are eligible to become participating employees in the
Plan. Contributions to the Plan for any fiscal year, as determined by the Board of Directors, are discretionary, but in no event will they exceed 15% of the annual aggregate salaries of those
employees eligible for participation in the Plan. Contributions must be invested in the Company's Class A Common Stock with excess cash being

33

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invested in certain government-backed securities. Contributions to the Plan are allocated among eligible participants in the proportion of their salaries to the salaries of all participants. There
were no contributions accrued for the Plan in 2001, 2000 and 1999.

The
Arden Group, Inc. 401(k) Retirement Savings Plan (the "Company Savings Plan") covers all nonunion employees of the Company and its subsidiaries who have attained the age of 18
and have completed at least one year of service. The Company Savings Plan provides that, with certain limitations, a participating employee may elect to contribute up to 15% of such employee's annual
compensation to the Company Savings Plan on a tax-deferred basis, subject to a limitation that the annual elective contribution may not exceed an annual indexed dollar limit determined
pursuant to the Internal Revenue Code ($10,500 in 2001). Annual matching contributions are made by the Company each year for those participants whose annualized gross earnings for the previous year
were $45,000 or less, and such matching contribution was $6,000 in 2001, $9,000 in 2000 and $8,000 in 1999. An additional discretionary amount of $720,000 was accrued in 2001 and contributed to the
Plan in early 2002. Similarly, $652,000 was accrued in 2000 and contributed to the Plan in early 2001 and $588,000 was accrued in 1999 and contributed in early 2000.

An
employment agreement with a key executive officer provides for annual retirement compensation equal to 25% of his average base salary and bonus earned in the last three years prior to
his retirement. The obligation determined on an actuarial basis is being accrued over the seven-year term of his agreement. The Company accrued $273,000 toward this benefit in each of the
last three years.

The
composition of the federal and state income tax provision (benefit) is as follows:

2001

2000

1999(In Thousands)Current:Federal

$
8,079

$
6,904

$
6,211State


2,290


1,856


342Total current tax provision


10,369


8,760


6,553Deferred:Federal


(1,204
)

(250
)

(326
)State


(434
)

(12
)

(105
)Total deferred tax provision


(1,638
)

(262
)

(431
)Total income tax provision

$
8,731

$
8,498

$
6,122


34

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The
Company's deferred tax assets (liabilities) were attributable to the following:

|                          |                                     | December 29, 2001        |                            | December 30, 2000 |       
|------------------------- | ----------------------------------- | ------------------------ | -------------------------- | ----------------- | ------
|
|Deferred tax assets:      |                                     |                          |                            |                   |       
|                          | Capital lease obligations           |                          | $                          | 903               |       
|                          | Accrued expenses                    |                          |                            | 2,362             |       
|                          | State income taxes                  |                          |                            | 750               |       
|                          | Allowance for doubtful accounts     |                          |                            | 105               |       
|                          | Other                               |                          |                            | 964               |       
|                          |                                     |                          |                            |                   |       
|                          |                                     | Deferred tax assets      |                            |                   | 5,084 
|                          |                                     |                          |                            |                   |       
|Deferred tax liabilities: |                                     |                          |                            |                   |       
|                          | Deferred gain on debenture exchange |                          |                            | (3,495            | )     
|                          | Capital lease assets                |                          |                            | (540              | )     
|                          | Other                               |                          |                            | (274              | )     
|                          |                                     |                          |                            |                   |       
|                          |                                     | Deferred tax liabilities |                            |                   | (4,309
|                          |                                     |                          |                            |                   |       
|                          |                                     |                          | Deferred income taxes, net |                   | $     
|                          |                                     |                          |                            |                   |       

Reconciliation
of the statutory federal rate and effective rate is as follows:

|                                               |  | 2001 |       | 2000 |       | 1999 |  
|---------------------------------------------- |  | ---- | ----- | ---- | ----- | ---- | -
|
|
|Federal tax at statutory rate                  |  | $    | 7,713 |      | 35.0  | %    | $
|State income taxes, net of federal tax benefit |  |      | 1,266 |      | 5.7   | %    |  
|Tax reserve adjustment                         |  |      |       |      |       |      |  
|Other                                          |  |      | (248  | )    | (1.1) | %    |  
|                                               |  |      |       |      |       |      |  
|                                               |  | $    | 8,731 |      | 39.6  | %    | $
|                                               |  |      |       |      |       |      |  

The
California Franchise Tax Board rendered tax assessments against the Company in prior years. The Company believed these assessments to be excessive and filed an appeal. The matter was
favorably resolved during 1999 and tax reserves were adjusted accordingly.

The
principal kinds of property leased by the Company and its subsidiaries are supermarket buildings. The most significant obligations assumed under the lease terms, other than rental
payments, are the upkeep of the facilities, insurance and property taxes. Most supermarket leases contain contingent rental provisions based on sales volume and have renewal options. The Company's
decision to exercise renewal options is primarily dependent on the level of business conducted at the location and the profitability thereof.

All
leases and subleases with an initial term greater than one year are accounted for under SFAS 13, "Accounting for Leases." These leases are classified as either capital leases,
operating leases or subleases, as appropriate.

Assets
Under Capital Leases: Assets under capital leases are capitalized using interest rates appropriate at the inception of each lease. Contingent rentals associated with capital
leases in 2001,

35

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2000 and 1999 were $214,000, $181,000 and $160,000, respectively, and accordingly have been charged to expense as incurred. Following is an analysis of assets under capital leases:

December 29, 2001

December 30, 2000(In Thousands)Buildings:Cost

$
3,058

$
3,058Accumulated amortization


(2,410
)

(2,296
)$
648

$
762


Also,
included in property held for sublease are properties classified as capital leases with aggregate net book values of $677,000 and $744,000 as of the end of 2001 and 2000,
respectively.

36

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Future minimum lease payments for the above assets under capital leases at December 29, 2001 are as follows:

(In Thousands)2002

$
5352003


5362004


5352005


5362006


535Thereafter


371Total minimum obligations


3,048Executory costs


(23
)Net minimum obligations


3,025Interest


(830
)Present value of net minimum obligations


2,195Current portion


(289
)Long-term obligations

$
1,906


Minimum
capital lease obligations have not been reduced by related minimum future sublease rentals of approximately $1,092,000.

Executory
costs include such items as property taxes and insurance.

Operating
Leases and Subleases: Future minimum lease payments for all noncancelable operating leases having a remaining term in excess of one year at December 29, 2001 are as
follows:

Commitments

Deduct
Sublease
Rentals

Net
Rental
Commitments(In Thousands)2002

$
6,465

$
603

$
5,8622003


6,913


473


6,4402004


7,164


419


6,7452005


6,812


397


6,4152006


6,572


373


6,199Thereafter


75,202


2,269


72,933$
109,128

$
4,534

$
104,594


Rent
expense under operating leases was as follows:

|                 |  | 2001 |        | 2000 |   | 1999   |  
|---------------- |  | ---- | ------ | ---- | - | ------ | -
|
|Minimum rent     |  | $    | 6,998  |      | $ | 6,164  |  
|Contingent rent  |  |      | 1,389  |      |   | 1,247  |  
|                 |  |      |        |      |   |        |  
|                 |  |      | 8,387  |      |   | 7,411  |  
|Sublease rentals |  |      | (1,644 | )    |   | (1,597 | )
|                 |  |      |        |      |   |        |  
|                 |  | $    | 6,743  |      | $ | 5,814  |  
|                 |  |      |        |      |   |        |  

37

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13. Related Party Transactions

At
December 29, 2001 and December 30, 2000, the Company held two notes receivable with balances totaling $135,000 from an officer/director of the Company. These notes arose
from transactions in 1979 and 1980 whereby the Company loaned the officer/director money to purchase an aggregate of 800,000 shares (adjusted for the 1998 four-for-one stock
split) of the Company's Class A Common Stock at the then fair market value. These notes, which bear interest at the rate of 6% per annum payable annually, mature on December 31, 2003
with annual principal payments of $40,000 and the balance due at maturity. On December 5, 2001, the Company's Board of Directors voted to extend the December 31, 2001 due date of
principal payments to December 31, 2002. If the officer's employment is terminated
prior to January 1, 2004, the unpaid portion of the two notes would be forgiven. The loans are collateralized by 720,000 shares of Class B Common Stock (adjusted for the 1998
four-for-one stock split). The receivable is shown on the balance sheets as a reduction of stockholders' equity.

A
director of the Company is also a director of a law firm which performs legal services for the Company.

14. Commitments and Contingent Liabilities

The
Company has an employment agreement with a key executive officer and shareholder which expires on January 1, 2004. In addition to a base salary, the agreement provides for a
bonus based on pre-tax earnings. No maximum compensation limit exists. Total salary and bonus expensed in 2001, 2000 and 1999 was approximately $1,321,000, $1,260,000 and $1,138,000,
respectively.

The
Company is contingently liable as a guarantor of certain leases which it has either assigned or subleased. Any liability arising as a result of these guarantees would have no
significant effect on either the Company's consolidated financial position, results of operations or cash flows.

As
of December 29, 2001, authorized expenditures on incomplete projects for the purchase of property, plant and equipment totaled approximately $1,206,000. Of this total,
approximately $743,000 has been contractually committed.

The
Company and its subsidiaries are subject to a myriad of environmental laws, regulations and lease covenants with its landlords regarding air, water and land use, products for sale,
and the use, storage and disposal of hazardous materials. The Company believes it substantially complies, and has in the past substantially complied, with federal, state and local environmental laws
and regulations and private covenants. The Company cannot, at this time, estimate the expense it ultimately may incur in connection with any current or future violations, however, it believes any such
claims will not have a material adverse impact on either the Company's consolidated financial position, results of operations or cash flows.

The
Company or its subsidiaries are defendants in a number of cases currently in litigation, being vigorously defended, in which the complainants seek monetary damages. As of the date
hereof, no estimate of potential liability, if any, is possible. Based upon current information, management, after consultation with legal counsel defending the Company's interests in the cases,
believes the ultimate disposition thereof will have no material effect upon either the Company's consolidated financial position, results of operations or cash flows.

38

---

15. Selected Quarterly Financial Data (Unaudited)

|Quarter |           | Sales |   | Gross
Profit |  | Net
Income |        | Diluted
Net Income
Per Share(1)
|------- | --------- | ----- | - | ------------ |  | ---------- | ------ | -------------------------------
|
|2000    |           |       |   |              |  |            |        |                                
|        | First     |       | $ | 86,445       |  | $          | 35,902 |                                
|        | Second    |       |   | 88,670       |  |            | 36,708 |                                
|        | Third     |       |   | 88,009       |  |            | 36,657 |                                
|        | Fourth(2) |       |   | 96,870       |  |            | 39,843 |                                
|2001    |           |       |   |              |  |            |        |                                
|        | First     |       | $ | 95,018       |  | $          | 39,879 |                                
|        | Second    |       |   | 96,301       |  |            | 40,508 |                                
|        | Third     |       |   | 96,920       |  |            | 41,397 |                                
|        | Fourth(2) |       |   | 103,641      |  |            | 43,794 |                                

---

39

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Stockholders of Arden Group, Inc.:

We
have audited the accompanying consolidated balance sheet of Arden Group, Inc. (a Delaware corporation) and subsidiaries as of December 29, 2001, and the related
consolidated statement of operations and comprehensive income, stockholders' equity and cash flows for the period then ended.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We
conducted our audit in accordance with auditing standards generally accepted in the United States. 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 audit provides a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arden Group, Inc. and subsidiaries as of
December 29, 2001, and the results of their operations and their cash flows for the period then ended in conformity with accounting principles generally accepted in the United States.

/s/ARTHUR
ANDERSEN LLP

Los
Angeles, California
March 1, 2002

40

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
the Stockholders of Arden Group, Inc.:

In
our opinion, the consolidated balance sheet and the related statements of operations and comprehensive income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Arden Group, Inc. and its subsidiary at December 30, 2000, and the consolidated results of their operations and comprehensive income, and
their cash flows for each of the two fiscal years in the period ended December 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America which require that we plan and perform the audits 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PRICEWATERHOUSECOOPERS
LLP

Los
Angeles, California
March 14, 2001

41

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ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARIES        INDEX TO EXHIBITS

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1.1   |  | Restated Certificate of Incorporation of Arden Group, Inc. dated November 7, 1988 filed as Exhibit 3.1 to the Annual Report on Form 10-K of Arden Group, Inc. for the fiscal year ended
December 31, 1988 and incorporated herein by reference.                                                                                                                                                                           
|3.1.2   |  | Certificate of Amendment of Restated Certificate of Incorporation of Arden Group, Inc. dated June 17, 1998 filed as Exhibit 3.1.2 to the Annual Report on Form 10-K of Arden Group, Inc. for the fiscal year ended January 2,
 1999 and incorporated herein by reference.                                                                                                                                                 
|3.2.1   |  | Amendment to By-laws of Arden Group, Inc. effective November 6, 2001.                                                                                                                                                                                                                                                                                                                                                     
|3.2.2   |  | Amended and Restated By-Laws of Arden Group, Inc. as amended as of November 6, 2001.                                                                                                                                                                                                                                                                                                                                      
|4.1     |  | Indenture dated as of September 1, 1964 between Arden Farms Co. and Security First National Bank, as Trustee, pertaining to 6% Subordinated Income Debentures, due September 1, 2014, filed as Exhibit 4.2 to Registration Statement on
Form S-1 of Arden Group, Inc. and Arden-Mayfair, Inc., Registration No. 2-58687, and incorporated herein by reference.                                                            
|4.1.1   |  | First Supplemental Indenture dated as of November 7, 1978, to Indenture which is Exhibit 4.1, filed as Exhibit 7 to the Annual Report on Form 10-K of Arden Group, Inc. for the fiscal year ended December 30, 1978 and
incorporated herein by reference.                                                                                                                                                                 
|4.1.2   |  | Second Supplemental Indenture dated as of November 7, 1978, to Indenture which is Exhibit 4.1, filed as Exhibit 8 to the Annual Report on Form 10-K of Arden Group, Inc. for the fiscal year ended December 30, 1978 and
incorporated herein by reference.                                                                                                                                                                
|4.1.3   |  | Third Supplemental Indenture dated April 24, 1981, to Indenture which is Exhibit 4.1, filed as Exhibit 4.2.3 to the Quarterly Report on Form 10-Q of Arden Group, Inc. for the quarter ended April 4, 1981 and incorporated
herein by reference.                                                                                                                                                                          
|4.2     |  | Loan Agreement dated December 23, 1993, as amended by a Second Amendment thereto dated December 20, 1995, a Third Amendment thereto dated December 18, 1996 and a Fourth Amendment thereto dated January 13, 1997, between Arden Group,
 Inc. and Union Bank filed as Exhibit 4.2 to the Annual Report on Form 10-K of Arden Group, Inc. for the fiscal year ended December 28, 1996 and incorporated herein by reference.
|4.2.1   |  | Fifth Amendment dated April 30, 1998 to Loan Agreement between Arden Group, Inc. and Union Bank, as previously amended filed as Exhibit 4.2.1 to Annual Report of Form 10-K of Arden Group, Inc. for the fiscal year ended
January 1, 2000 and incorporated herein by reference.                                                                                                                                          
|4.2.2   |  | Sixth Amendment dated July 7, 2000 to Loan Agreement between Arden Group, Inc. and Union Bank, as previously amended filed as Exhibit 4.2.2 to Annual Report of Form 10-K of Arden Group, Inc. for the fiscal year ended
December 30, 2000 and incorporated herein by reference.                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                           

42

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|10.1*  |  | Employment Agreement dated May 13, 1988 by and among Arden Group, Inc., Arden-Mayfair, Inc., Telautograph Corporation and Gelson's Markets and Bernard Briskin, filed as Exhibit 10 to the Quarterly Report on Form 10-Q of Arden
Group, Inc. for the quarter ended July 2, 1988 and incorporated herein by reference.                  
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2*  |  | Amendment to Employment Agreement dated April 27, 1994 by and between Arden Group, Inc., Arden-Mayfair, Inc., AMG Holdings, Inc. and Gelson's Markets and Bernard Briskin, filed as Exhibit 10.7 to the Quarterly Report on
Form 10-Q of Arden Group, Inc. for the quarter ended April 2, 1994 and incorporated herein by reference.    
|10.3*  |  | Extension Agreement dated January 4, 1981 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin, filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of Arden Group, Inc. for
the quarter ended July 4, 1981 and incorporated herein by reference.                                     
|10.4*  |  | Extension Agreement dated January 1, 1984 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin filed as Exhibit 19.1 to the Quarterly Report on Form 10-Q of Arden Group, Inc. for the
quarter ended September 29, 1984 and incorporated herein by reference.                                
|10.5*  |  | Extension Agreement dated May 13, 1988 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin filed as Exhibit 10.11 to the Annual Report on Form 10-K of Arden Group, Inc. for the
fiscal year ended December 31, 1988 and incorporated herein by reference.                                  
|10.6*  |  | Modification and Fourth Extension Agreement dated as of January 1, 1994 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin, filed as Exhibit 10.8 to the Quarterly Report on Form 10-Q of
Arden Group, Inc. for the quarter ended April 2, 1994 and incorporated herein by reference.      
|10.7   |  | Form of Indemnification Agreement between the Registrant and the Directors and certain officers, filed as Exhibit 10.13 to the Annual Report on Form 10-K of Arden Group, Inc. for the year ended December 29, 1990 and incorporated
herein by reference.                                                                               
|10.8*  |  | Amended Loan and Stock Pledge Agreement dated November 4, 1993 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin, filed as Exhibit 10.6 to the Annual Report on Form 10-K of Arden Group,
 Inc. for the year ended January 1, 1994 and incorporated herein by reference.                  
|10.9*  |  | Second Amendment to Employment Agreement as of January 1, 1997 by and between Arden Group, Inc., Arden-Mayfair, Inc., AMG Holdings, Inc. and Gelson's Markets and Bernard Briskin, filed as Exhibit 10.9 to the Annual Report on
Form 10-K of Arden Group, Inc. for the year ended January 3, 1998 and incorporated herein by reference.
|10.10* |  | Modification and Fifth Extension Agreement as of January 1, 1997 regarding promissory notes held by the Registrant between Arden Group, Inc. and Bernard Briskin, filed as Exhibit 10.10 to the Annual Report on Form 10-K of Arden
Group, Inc. for the year ended January 3, 1998 and incorporated herein by reference.                
|10.11* |  | Phantom Stock Plan of Arden Group, Inc., filed as Exhibit 10.11 to the Annual Report on Form 10-K of Arden Group, Inc. for the year ended January 2, 1999 and incorporated herein by reference.                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                         

43

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|10.12* |  | Form of Non-Employee Director Phantom Stock Unit Agreement with each of John G. Danhakl, Robert A. Davidow, Daniel Lembark and Ben Winters filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q of Arden Group, Inc. for the quarter
ended July 1, 2000 and incorporated herein by reference.
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13* |  | Form of Non-Employee Director Phantom Stock Unit Agreement with Kenneth A. Goldman dated June 19, 2001.                                                                                                                                                                                            
|21.    |  | Subsidiaries of Registrant.                                                                                                                                                                                                                                                                        
|23.1   |  | Consent of Independent Public AccountantsArthur Andersen LLP.                                                                                                                                                                                                                                     
|23.2   |  | Consent of Independent Public AccountantsPricewaterhouseCoopers LLP.                                                                                                                                                                                                                              

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