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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the 53-Week Period Ended Commission file number
January 3, 1998 No. 0-17540

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

MONTGOMERY WARD HOLDING CORP.
(Exact name of Registrant as specified in its charter)

Delaware 36-3571585
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

Montgomery Ward Plaza, 60671-0042
Chicago, Illinois (Zip code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (312) 467-2000

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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
------------------- -----------------------------------------
Not Applicable None

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

Class A Common Stock, Series 1, $.01 Par Value
(Title of class)
Class A Common Stock, Series 2, $.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common Stock, Series 1,
$.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common Stock, Series 2,
$.01 Par Value
(Title of class)
Class B Common Stock, $.01 Par Value

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

At March 16, 1998, there were 18,322,247 shares of Class A Common Stock and
25,000,000 shares of Class B Common Stock of the Registrant outstanding.

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Item 1. Business

Forward-Looking Statements

Information included in this Report on Form 10-K may constitute forward-
looking statements that involve a number of risks and uncertainties. From time
to time, information provided by the Company or statements made by its
employees may contain other forward-looking statements. Factors that could
cause actual results to differ materially from the forward-looking statements
include but are not limited to: Bankruptcy Court actions or proceedings
related to the bankruptcy, general economic conditions including inflation,
consumer debt levels, trade restrictions and interest rate fluctuations;
competitive factors including pricing pressures, technological developments
and products offered by competitors; inventory risks due to changes in market
demand or the Company's business strategies; and changes in effective tax
rates.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

General

Montgomery Ward Holding Corp., a Delaware corporation ("the Company" or "MW
Holding"), and its wholly-owned subsidiary, Montgomery Ward & Co.,
Incorporated ("Wards"), are engaged in retail merchandising and direct
response marketing (including insurance) in the United States. See Note 21 to
the Consolidated Financial Statements for financial information regarding
these segments.

Founded in 1872 and incorporated in Illinois in 1968, Wards is one of the
nation's largest retail merchandising organizations. As of January 3, 1998,
Wards operated 301 retail stores in 37 states with approximately 24 million
square feet of selling space. In addition, Wards operated 6 outlet and
liquidation centers which sell overstock merchandise, 17 distribution
facilities and 78 product service centers.

Wards offers life and health insurance, revolving credit insurance, club
products and other consumer services through Signature Financial/Marketing,
Inc., a Delaware corporation ("Signature"), and through Signature's
subsidiaries (collectively, with Signature, "The Signature Group"). The
Signature Group is one of the largest direct marketing companies in the United
States.

Chapter 11 Filing

On July 7, 1997 (the "Petition Date"), MW Holding and certain of its U.S.
subsidiaries filed petitions for reorganization under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). These related proceedings are being jointly
administered under the caption "In re Montgomery Ward Holding Corp., a
Delaware corporation, et. al.", Case No. 97-1409 (PJW), pursuant to an order
of the Bankruptcy Court. The following U.S. subsidiaries were not included in
the bankruptcy filings: Signature Financial/Marketing, Inc. and its direct and
indirect subsidiaries; Marinco Insurance U.S.A., Inc. ("Marinco"); and
Montgomery Ward Foundation.

After a long period of negotiation, Wards was unable to reach an out-of-court
settlement with its lenders. Accordingly, bankruptcy petitions were filed in
order to obtain an opportunity to reorganize and begin implementing the
Company's strategies while working to restructure its indebtedness. Pursuant
to the Post-Petition Loan and Guaranty Agreement dated July 8, 1997, among
Wards and Lechmere, Inc. ("Lechmere"), as borrowers; MW Holding and other
debtor subsidiaries of MW Holding, as guarantors; General Electric Capital
Corporation ("GE Capital"), as agent and lender; and various lenders, as
amended (the "DIP Facility"), the lenders have agreed to provide up to $1
billion in post-petition financing to Wards.

Item 1. Business (continued)

Chapter 11 Filing (continued)

As a result of the Chapter 11 filings, absent approval of the Bankruptcy
Court, the Company is prohibited from paying, and creditors are prohibited
from attempting to collect, claims or debts arising pre-petition. The
consummation of a plan of reorganization is the principal objective of the
Company's Chapter 11 case. A plan of reorganization sets forth the means for
satisfying claims and interests in the Company and its debtor subsidiaries,
including the Liabilities subject to compromise. The consummation of a plan of
reorganization for the Company and its debtor subsidiaries will require the
requisite vote of impaired creditors and stockholders under the Bankruptcy
Code and confirmation of the plan by the Bankruptcy Court.

The Company expects to reorganize its affairs under the protection of Chapter
11 and to propose a Chapter 11 plan of reorganization for itself and the other
filing subsidiaries, including Wards. The Bankruptcy Court has granted the
Company's request to extend its exclusive right to file a plan of
reorganization through May 1, 1998. The Company intends to request a further
extension of the exclusivity period. There can be no assurance that the
Bankruptcy Court will grant such further extension. Although management
expects to file a plan of reorganization in 1998, which would contemplate
emergence in 1999, there can be no assurance at this time that a plan of
reorganization will be proposed by the Company or approved or confirmed by the
Bankruptcy Court, or that such plan will be consummated. After the expiration
of the exclusivity period, creditors of the Company have the right to propose
alternative plans of reorganization. Any plan of reorganization, among other
things, is likely to result in material dilution or elimination of the equity
of existing shareholders as a result of the issuance of equity to creditors or
new investors.

At this time, it is not possible to predict the outcome of the Chapter 11
filing, in general, or its effects on the business of the Company or on the
interests of creditors or shareholders. The Company's independent auditors
have issued a report expressing doubt about the Company's ability to continue
as a going concern. See the Consolidated Financial Statements of the Company
beginning on page 19.

Merchandising

The major product offerings by the Company are apparel, furniture and home
furnishings, appliances and electronics, jewelry, and automotive, including
service.

The Apparel offering includes branded, value-oriented merchandise in women's,
men's, children's and intimate apparel as well as footwear and accessories.
The apparel brand and price point offering is targeted at the large middle
market between department stores and discounters. An offering of prominent
name brands has been built, including Lee, Playtex, Bugle Boy, Bestform,
Converse, Gloria Vanderbilt and Hanes. In addition, the Company has developed
licensed and proprietary brands for certain product categories, such as Ship
'N Shore in women's apparel and BIKE in activewear.

Furniture and home furnishings include broad selections emphasizing name
brands in furniture and small ticket lines for the bath, bedroom and kitchen.
Furniture includes accessorized room groupings to provide customers the
convenience of coordinated furniture pieces including major brands. The
Company offers combined consumer electronics and appliance product categories,
including video, audio, telephones, electronic games and kitchen, laundry and
other major appliances. The product offering includes significant national
brands plus some private label brands.

Jewelry offers all major merchandise categories: diamonds, gemstones, gold and
watches. Wards has become one of the largest fine jewelry retailers in the
country, and its major vendor relationships enable it to offer highly featured
products at outstanding prices.

Item 1. Business (continued)

Merchandising (continued)

Automotive focuses on the sale and installation of tires, batteries, brakes
and shocks. Wards is one of the leading retailers of branded tires, including
Goodyear, Firestone, Michelin, Bridgestone and B.F. Goodrich.

Wards currently operates 295 full line stores and 6 stores featuring a variety
of other formats, including free-standing automotive and limited line stores.
Full line Wards stores average approximately 80,000 square feet of selling
space.

Wards' retail business is seasonal, with approximately one-third of sales
occurring in the fourth quarter. The results of Wards' operations are also
subject to changes in consumer demand associated with general economic
conditions, which is especially true with respect to demand for durable goods
and other "big ticket" merchandise. Wards' retail operations are supported by
its corporate buying division which has its principal office in Chicago, and
includes foreign purchasing offices in Hong Kong, Taiwan, Japan, and Korea. In
addition to its buying staff, the corporate buying division employs technical
teams to ensure quality control of Wards' merchandise.

Performance Initiatives

Facility Closings and Divestitures

In 1997, management undertook a review of the retail operations of Wards, and
determined that the number of different retail formats then in operation
resulted in a lack of focus on Wards' core business. In August 1997, the
Bankruptcy Court approved a motion filed by Wards to exit its non-core
specialty retail businesses - Lechmere, Home Image by Lechmere and Electric
Avenue & More. The closings, which took place in August 1997, resulted in a
pre-tax charge of $330 million. Management also reviewed the performance of
retail stores operating under the core retail format and closed 45
underperforming retail stores in November 1997. In addition, two outlet and
liquidation centers were closed. The closings were approved by the Bankruptcy
Court in November 1997 and resulted in a pre-tax charge of $154 million.

Wards also closed eight other underperforming retail stores and two other
liquidation and outlet stores during 1997. The financial performance of the
remaining retail stores will be reviewed on a continuing basis and additional
stores may be closed (with the approval of the Bankruptcy Court) if such
closures are warranted.

Other Divestitures

In December 1997, the Bankruptcy Court approved the disposition of Wards'
investment in the common stock and warrants to purchase common stock of
ValueVision International, Inc. ("ValueVision"). In addition, the agreements
relating to ValueVision's sales promotion rights with regard to the Wards
credit cardholder file were restructured. Under the restructured agreements,
Wards' obligation to purchase advertising from ValueVision was significantly
reduced. Additionally, ValueVision and its affiliates agreed to cease
solicitations to its customers using the Wards servicemarks after March 31,
1998. ValueVision may continue to use the servicemark in connection with
televised home shopping through July 31, 2008. The transaction was consummated
on January 15, 1998.

New Merchandising Strategy

Middle-income females aged 30 to 55 with family incomes of $25,000 to $50,000
have been targeted as Wards' core fashion customer. Wards' core Hardlines
customer is defined more broadly, representing both males and females with
higher income levels and wider age distributions than the core fashion
customer. These core customers share lifestyle characteristics and shopping
preferences typical of today's time-pressed, value-conscious families with
traditional/conservative values and fashion tastes.

Item 1. Business (continued)

Performance Initiatives (continued)

New Merchandising Strategy (continued)

Wards' strategic plan has been developed to focus its merchandise offering
around categories of business that meet the needs of the targeted customer, as
well as those categories that also offer opportunities to drive sales and
gross margin rate improvements. Wards intends to leverage current areas of
merchandising strength (major appliances, fine jewelry and furniture, for
example) to drive near-term profit improvements and capture additional market
share. Additionally, Wards has targeted certain categories, primarily family
apparel, domestics, seasonal and home theater, as areas in which growth in
terms of penetration and market position must be dramatically improved.
Resources will be focused on developing "trend-right" assortments and
substantially improving merchandising and marketing in these businesses.
Finally, Wards will strive to improve the in-store execution of its important
electronics, automotive and housewares businesses in order to maintain its
market share, improve margins and achieve a service level comparable to its
competitors.

Store Operations/Customer Service Strategy

Wards is focused on improving its customer service and presenting retail
stores that are bright, clean and easy to shop. Wards' goal is to provide
knowledgeable and friendly sales associates coupled with quick and efficient
completion of sales transactions at the register. Store policies and
procedures are currently under review; the objective of the review is to shift
time spent from non-service oriented tasks to customer-directed activities.

A customer-service culture is being instilled in both corporate headquarters
and store associates. As a first step, a Director of Customer Service was
appointed in 1997. The primary focus of this position is to improve service
and coordination at all levels of the organization. Also in 1997, the "Kick It
Up A Notch" program was initiated to reward store associates who provide
exceptional customer service.

Logistics Strategy

Wards is currently in the process of reviewing its logistics network to better
serve the retail stores at an optimal cost to Wards. Improved management of
the flow of goods through the network is expected to result in improved
product velocity and reduced inventory levels, while still maintaining an
optimal in-stock level at the retail level. A particular focus is improvement
in the home delivery process, including the simplification of the current
computer systems and implementation of an automated routing process. These
changes are expected to allow a customer delivery to be scheduled for a more
precise time window, thereby improving customer service while maximizing the
productivity of routing staffs.

Systems Strategy

Computerized information systems are currently under development that will
support the merchandising, customer service and logistics strategies
previously discussed. The systems under development are primarily focused on
supply chain efficiencies (through the implementation of state-of-the-art
buying and warehouse management systems) and customer service improvements
(through the implementation of a new point of sale system and the enhancement
of customer delivery systems). Additionally, a major initiative is underway to
assure the ability of all continuing systems to process dates that occur in
the next century. Based on Wards' plans and amounts already expended, the
total future cost to address the date change issue is not expected to
materially impact future cash flows.

Item 1. Business (continued)

Direct Marketing

The Signature Group, headquartered in Schaumburg, Illinois, is a leading
provider of fee-based membership services offered to consumers through direct
response marketing. Signature provides consumers with a broad range of
continuity club products including credit card registration, auto, dining,
dental and legal services as well as insurance products, including credit
insurance and various supplemental life and health insurance policies.
Signature's products typically are sold through affiliations with major bank,
oil or retail credit cards, including the Wards proprietary credit card.
Signature's clients include 14 of the top 20 issuers of bank credit cards, 8
of the top 10 issuers of oil company credit cards and a number of leading
retailers and affinity groups. Signature's teleservices unit also provides a
variety of inbound and outbound telemarketing services as well as customer
retention services to various financial, insurance and telecommunications
clients.

Established in 1966 as a wholly-owned subsidiary of Wards, Signature has over
30 years of expertise developing targeted marketing programs. Signature is the
largest outbound telemarketer for the credit card industry in the country,
with over 8,000 employees in 41 locations. It operates 37 call centers with
2,578 workstations and annually conducts over 70 million carefully scripted
telemarketing presentations. Signature also mails over 400 million
solicitations annually. The combination of leading-edge technology and
marketing expertise allows Signature to offer a completely integrated
marketing plan to its customers. Signature assigns a multi-functional account
team to each client to manage every aspect of their marketing program, from
the development and execution of marketing plans to the establishment of
billing, fulfillment, customer service and post-marketing analysis. In
addition to its proven experience marketing directly to consumers, Signature
has developed a unique expertise in managing networks of independent
contractors. For example, Signature's auto, dining, dental and legal services
plans utilize networks of Signature-managed independent service providers and
professionals to deliver value and quality customer service to the Company's
customers. These networks have been developed over many years and are integral
to the successful delivery of Signature's products.

Signature works in partnership with its clients and other organizations to
offer consumers convenience and significant savings when purchasing a wide
array of high-quality goods and services. Signature has a total of 14.5
million consumer members including 5.5 million Wards credit card customers and
9.0 million other credit card customers. Signature has exclusive marketing
rights to the entire Wards credit card file. It also markets on behalf of
approximately 130 other clients, including some of the nation's largest
financial institutions, retailers, airlines, oil companies, associates, unions
and employer groups. Signature's major third party clients include American
Airlines, AARP, American Express, Amoco, BancOne, Chase, Citicorp, Discover,
FirstCard, General Electric, The Limited (Alliance Data Systems), Merrill
Lynch, Mobil, Norwest Mortgage, Proffitt's, Shell, Texaco, TWA, United
Airlines and Wells Fargo.

Since 1994, Signature has aggressively sought to diversify its customer
account base through the development of new third party client (non-Wards)
relationships and business acquisitions. As of November 30, 1997, 9 million,
or 62%, of the Company's total members were from third party clients, up
significantly from 3.1 million, or 33%, of total members at the end of 1994.

Signature has retained investment advisors to determine whether its core
competencies and market opportunities could be maximized as a result of a sale
or merger. The study (which includes the solicitation of bids, discussions
with potential purchasers and the providing of information to such potential
purchasers) has not been completed and management cannot provide any assurance
as to whether a sale or merger with respect to Signature or any portion
thereof may occur, or the timing of a transaction, if such a transaction does
occur. Any transaction would require the approval of the Bankruptcy Court.

See Note 21 to the Consolidated Financial Statements for restrictions on
dividends which may be paid by insurance subsidiaries of Signature.

Item 1. Business (continued)

Competition and Regulation

The sale of merchandise by Wards is conducted under highly competitive
conditions. Buying and selling are each done in open competitive markets.
Wards' stores are in competition with specialty stores, department stores and
other types of retail outlets in the areas in which they operate. The Company
believes that merchandise assortments, brand names, competitive pricing and
availability of services such as credit, delivery, installation and repair,
are the principal factors which differentiate it from competitors.

Certain of Signature's operations are highly regulated and conducted under
highly competitive conditions. To date, Signature has been able to compete
effectively with other companies which offer programs similar to those
provided by Signature. Signature also competes with traditional methods of
marketing by unaffiliated dentists and lawyers. Insurance companies operate
pursuant to specific state statutes, rules and regulations and are required to
file reports with such agencies at least quarterly.

Telemarketing and direct mail solicitations are regulated at state and federal
levels, and management believes that these activities will increasingly be
subject to such regulation. Such regulation may limit Signature's ability to
solicit new members or to offer more products and services to existing members
and may materially adversely affect Signature's business and revenues.

The requirements of environmental protection laws and regulations have not had
a material effect upon Wards' operations. Compliance may, in certain cases,
lengthen the lead time of expansion plans and could increase construction and
operating costs.

Account Purchase Agreements

Credit is extended to Wards' customers under an open-end revolving credit plan
and is an important element in generating sales, especially in the big ticket
businesses. Wards' private label credit card sales were 50.7% and 57.1% of
total sales for 1997 and 1996, respectively. Bankcard sales were an additional
21.2% and 19.9% of total sales for 1997 and 1996, respectively.

Wards entered into a Bank Credit Card Program Agreement ("Card Agreement")
effective April 1, 1996 with Monogram Credit Card Bank of Georgia
("Monogram"), and an Account-Related Agreement ("Account Related Agreement")
effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery
Ward Credit") (collectively referred to as the "Agreements") pursuant to which
Monogram and Montgomery Ward Credit (collectively referred to as the
"Montgomery Ward Credit Companies" or "MWCC"), both of which are affiliates of
General Electric Capital Corporation ("GE Capital"), make payments to Wards as
to their receivables generated by sales to customers of Wards, its affiliates
and licensees who utilize the Wards private label credit card, and provide
services to Wards, all of which are guaranteed by GE Capital. Under the
Agreements, Monogram has the exclusive right to operate the Wards private
label credit card system and the obligation to pay to Wards the face amount of
Monogram's receivables generated by the Wards private label credit card
system, up to $7 billion outstanding at any time. If Wards desires to receive
payment for receivables generated by the Wards private label credit card
system at any time when Montgomery Ward Credit Companies own $7 billion or
more of such receivables and do not desire to finance additional receivables,
alternative arrangements, such as the sale of receivables to banks or other
financial institutions, would be required unless Monogram agrees to fund the
excess. As of January 3, 1998, there were $4.2 billion of Wards private label
credit card receivables owned by Montgomery Ward Credit Companies, and the
average outstanding amount of such receivables owned by Montgomery Ward Credit
Companies during 1997 was $4.5 billion.

Under the Card Agreement, Wards is required to pay Monogram the excess
interest costs on a monthly basis if a blended interest rate applicable to
funding costs with respect to the receivables exceeds 10% per annum. This
blended interest rate has been less than 10% since 1988.

Item 1. Business (continued)

Account Purchase Agreements (continued)

Wards generally bears the risk of credit losses due to non-payment by
cardholders to the extent of (i) the amount of credit losses that are between
3.9% and 5.0% of average outstanding receivables, plus (ii) 50% of credit
losses that are between 5.0% and 8.0% of average outstanding receivables,
subject to offsets described below relating to Wards' share of certain
incremental increases in finance charges and late fees payable by cardholders.
Wards is also responsible for losses on certain higher risk starter card
accounts to the extent the loss percentage as to those accounts exceeds the
loss percentage experience on the rest of the portfolio. Wards' net unpaid
liability for credit losses for 1991 through 1997 is to be payable to
Montgomery Ward Credit pursuant to a note (Continuation Note) due in early
2003, which is to provide that: (i) the outstanding balance of such note
cannot exceed $300 million, (ii) scheduled monthly principal payments ranging
from $.4 million to $2.8 million are to be required through 2002, and (iii)
starter card losses are to be payable currently. Interest on Wards' unpaid
liability for credit losses is payable at a rate equal to rates on comparable
borrowings of Wards. A remaining note of $15 million, consisting of losses
incurred after July 7, 1997, is to be executed which provides for monthly
principal payments in the amount of 5% of the scheduled monthly principal
payments for the Continuation Note. Interest on notes outstanding as of July
7, 1997, has been stayed by the Chapter 11 proceedings.

In exchange for Wards' agreement to allow Montgomery Ward Credit to increase
finance charge rates and late fees in selected states, Wards receives a share
of incremental finance charges and late fees resulting from such increases.
Such amount is available for offset against Wards' unpaid liability for its
share of credit losses, and to the extent not currently paid or offset earns
interest at the same rate as amounts owed by Wards to Montgomery Ward Credit.
Effective April 1996, Monogram implemented additional finance charge and late
fee increases in various states. The amount of these additional incremental
finance charges and late fees are calculated each year pursuant to a formula
specified in the Account Related Agreement, which makes certain of these
amounts available to Wards. As the increased finance charge rate and late fees
are added to the credit card balances, this will cause the amount of losses to
increase. The higher finance charges and late fees also decrease the credit
available by the credit card customer.

In the event that, due to the increase in finance charge rates and late fees,
refunds are required to be made, Wards and Montgomery Ward Credit have agreed
in certain cases to share the financial risk. Legislation has from time-to-
time been introduced in certain jurisdictions, which if enacted, may require
rescinding all or a portion of such increases, in which case Wards' share of
such increases may be substantially reduced.

In connection with the foregoing arrangements, Wards paid $28 million in early
1998 and has previously executed notes for certain of its unpaid share of
credit losses which totaled $412 million through 1997. The incremental finance
charges and late fee assessments due to Wards at the end of 1997 were $112
million for a net obligation of $300 million.

Monogram has the right of first refusal to implement certain new financing
programs proposed by Wards.

The Agreements are scheduled to expire on December 31, 2011, provided the
terms shall continue thereafter from year to year unless either party gives
ten years prior notice of its election to terminate. Except upon the
occurrence of certain events of default, the Agreements may generally not be
terminated by either party prior to December 31, 2011. Wards has not yet
assumed these agreements and the Montgomery Ward Credit Companies have not
exercised the provision in the Agreements allowing the Montgomery Ward Credit
Companies to terminate the Agreements in the event of Wards' bankruptcy. Wards
has agreed to pay Montgomery Ward Credit $2.5 million per month for the months
of January 1998 through June 1998. Wards expects to execute an interim
amendment to the Account Purchase Agreement ("Interim Agreement") which will
provide the Company with the ability to utilize the private label credit card

Item 1. Business (continued)

Account Purchase Agreements (continued)

through the end of 1999. It is likely that the Interim Agreement will require
monthly payments similar to those required for the first six months of 1998.
GE Capital has guaranteed Montgomery Ward Credit Companies' obligations under
the Agreements.

Monogram makes payments in respect of Signature customer accounts receivable
pursuant to the Card Agreement. In 1997, Signature paid approximately $5
million to Montgomery Ward Credit for administrative services provided by
Montgomery Ward Credit in connection with Signature products.

Associates

At January 3, 1998, Wards and its subsidiaries employed the equivalent of
46,000 full-time associates. During certain seasons, temporary associates are
added and peak employment is approximately 59,000 associates during the
Christmas season. Approximately 2,000 Wards associates are covered by various
collective bargaining agreements. Wards has experienced no major labor-related
interruption or curtailment of operations during the last 15 years.

Item 2. Properties

At January 3, 1998, the Company owned or leased 381 retail, distribution and
other operating facilities. The Company's properties are located throughout
the continental United States and cover approximately 49 million square feet.

These properties are summarized as follows:

Number of Approximate Total
Use Locations Square Feet
- ------------------------------ --------- -----------------

Montgomery Ward Retail Stores:
Full Line 295 38,829,000
Limited Line 6 473,000
Corporate Office Complex 1 2,975,000
Miscellaneous Operating Locations 79 7,211,000
--- ----------

Total Locations 381 49,488,000
=== ==========

Owned and leased retail stores include approximately 24 million square feet of
selling space and 15 million square feet devoted to storage, office and
related uses. Miscellaneous operating locations include warehouses, office
buildings and distribution centers, but exclude vacant land parcels and
properties held for disposition. See Note 13 to the Consolidated Financial
Statements for information with respect to leased properties.

Item 2. Properties (continued)

The nationwide scope of Wards' operations helps minimize the impact of changes
in the economies of specific regions on the overall performance of its retail
stores and allows Wards to merchandise to a variety of demographic profiles.

The regional distribution of Wards retail stores, as of January 3, 1998, is
indicated in the following table:

State Total
---------- ---------

Alabama 2
Arizona 9
Arkansas 5
California 50
Colorado 8
Florida 15
Georgia 3
Idaho 1
Illinois 20
Indiana 5
Iowa 5
Kansas 6
Kentucky 1
Louisiana 6
Maryland 16
Michigan 13
Minnesota 7
Missouri 7
Montana 2
Nebraska 1
Nevada 3
New Mexico 3
New York 6
North Carolina 4
North Dakota 1
Ohio 5
Oklahoma 5
Oregon 8
Pennsylvania 15
South Carolina 2
Tennessee 2
Texas 41
Virginia 14
Washington 3
West Virginia 5
Wisconsin 1
Wyoming 1
---

Total 301
===

Item 3. Legal Proceedings

At the close of business on July 7, 1997, Montgomery Ward Holding Corp. and
certain of its U.S. subsidiaries filed petitions for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. These related proceedings are being jointly
administered under the caption "In re Montgomery Ward Holding Corp., a
Delaware corporation, et. al.", Case No. 97-1409 (PJW). The following U.S.
subsidiaries were not included in the bankruptcy filings: Signature and its
direct and indirect subsidiaries, Marinco; and Montgomery Ward Foundation. The
filing of the petitions and the rejection of certain contracts created certain
claims related to the filing. Among these cases is "Reliance Insurance Company
v. Forum Insurance Company." This case alleges that Forum Insurance Company,
an indirectly wholly-owned subsidiary of Signature, is liable under an
indemnification agreement of which Wards is a signatory for the surety bonds
issued to secure certain of Wards' obligations. The matter is now pending
before the United States Bankruptcy Court for the District of Delaware. The
potential liability related to the outcome of this claim cannot be estimated
at this time.

The Company and its subsidiaries are engaged in various litigation, including
purported class actions, and have a number of unresolved claims. While the
amounts claimed are substantial and the ultimate liability with respect to
such litigation and claims cannot be determined at this time, management is of
the opinion that such liability, to the extent not provided for through
insurance or otherwise, is not likely to have a material impact on the
financial condition or the results of operations of the Company.

In 1979, a suit entitled "United States v. Midwest Solvent Recovery, Inc.,
et.al." (Civil Action Number H-79-556) was initiated by the United States
Department of Justice on behalf of the Environmental Protection Agency in the
U.S. District Court for the Northern District of Indiana, and an Amended
Complaint was filed in January 1984. This suit was against Standard T Chemical
Company, Inc., a Delaware corporation and wholly-owned subsidiary of Wards
("Standard T"), which ceased operations in 1994 and is currently an inactive
entity and is a debtor in the bankruptcy proceedings described above, and
others involving two waste disposal sites and seeks reimbursement for the cost
of surface clean-up, investigation studies concerning possible contamination
of the soil and ground water and remedial action. In January 1990, the United
States filed a second Amended Complaint seeking inter alia, treble damages and
monetary sanctions. Standard T signed a consent decree, whereby it was
obligated to provide a financial assurance up to $3 million for remediation of
the site, which has been provided for in the financial statements. The Company
currently anticipates that its obligation will not exceed that amount.

In 1985, the New York Environmental Protection Agency brought an action for
remediation of a site in Staten Island, New York against the owner of the
property. The owner asserted that Standard T, among others, generated wastes
that were disposed of by a prior owner of the site. Standard T is in the
process of completing the clean-up of this site and has purchased the site
from the owner for $1.45 million.

In February 1986, Standard T, along with approximately 330 other companies,
was notified by the United States Environmental Protection Agency that the
agency was mandating a remediation of the contamination of the American
Chemical Services, Inc. ("A.C.S.") site located in Griffith, Indiana, under
authority vested in it by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. Standard T and a Wards paint factory
were each identified as a Potentially Responsible Party ("PRP"), under the
terms of the Act, because of their alleged status as generators of hazardous
waste ultimately disposed of at the A.C.S. site. The Company will pay its
proportionate share of the costs of the studies, and may ultimately pay a
share of the costs of abating the contamination of the A.C.S. site. One
estimate by the EPA of future costs of abating contamination at the A.C.S.
site is $69 million, of which $24 million has been paid by deminimus settling
parties, with the Company alleged to be responsible for 4% of the remaining
total costs. However, these costs cannot be estimated with any degree of
accuracy at this time. Thus, the Company is currently not in a position to
estimate the range or amount of potential exposure in this matter with a high
degree of certainty.

Item 3. Legal Proceedings (continued)

Standard T and Wards are also involved at various stages with several other
sites where Standard T and Wards have been notified or sued as a PRP. The
potential liability related to these sites cannot be estimated at this time.

On April 29, 1997, MW Holding, Wards and Lechmere, were served with a
complaint, purporting to represent a nationwide class, filed by certain
bankrupt credit card holders of Wards and Lechmere credit cards. The complaint
alleged that MW Holding, Wards and Lechmere, benefited from the actions taken
by Hurley, Lechmere's previous credit card provider, and MWCC and Monogram
(both of which are affiliates of GE Capital), Wards' and Lechmere's current
credit card providers, in that the recoveries received from the bankrupt
credit card holders, allegedly were in violation of the bankruptcy laws
dealing with reaffirmations, and ultimately reduced Wards' and Lechmere's loss
sharing obligations. Hurley, MWCC and Monogram took all actions related to
bankruptcy reaffirmations.

Management believes that the indemnification obligations contained in its
various agreements with Hurley, MWCC and Monogram will relieve Lechmere, Wards
and the Company of any material financial obligations related to the acts
alleged in the complaint. All material actions pending against the Company,
Wards and Lechmere in the litigation, have been stayed.

In 1997, a suit entitled "Trent v. Montgomery Ward," was initiated by Karen
Trent and four other plaintiffs alleging, on behalf of themselves and a class
of other commissioned sales employees, fraud and breach of contract in the
calculation of their sales commissions. This class action currently is being
heard in the Federal District Court for the District of Wyoming. The suit
claims that from 1992 to the present, Wards devised a commission sales plan
that was designed to underpay commissions promised to employees and that Wards
in fact paid employees less than the commissions they were supposed to have
earned. Plaintiffs seek certification of the class and actual and punitive
damages. Wards has denied the allegations and intends to aggressively defend
this matter. The case currently is in the early stage of class discovery, and
damage exposure cannot be determined at this time. A limited lifting of the
bankruptcy automatic stay has been granted so that the class certification
issue can be resolved.

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

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Listed below are the names and ages of the executive officers of the Company
as of March 16, 1998, and the positions each has held during the past five
years:

Roger V. Goddu, 47, has been a director of the Company and Chairman and Chief
Executive Officer of Wards since January 6, 1997. Prior thereto, he was with
Toys "R" Us, where from 1996 until 1997, he was President-U.S. Merchandising,
and from 1989 to 1995, he was Executive Vice President/General Merchandise
Manager. Prior to 1989, Mr. Goddu was a Senior Vice President and General
Merchandise Manager of Target, a division of Dayton Hudson Corporation.

Thomas J. Austin, 50, has been Executive Vice President - Men's and Children's
Apparel and Shoes of Wards since May 19, 1997. Prior thereto, Mr. Austin was
Senior Vice President - Divisional Merchandise Manager of Kohl's Corporation,
where he spent 15 years in various merchandising positions of increasing
responsibility.

EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

Louis J. Caporale, 44, has been Executive Vice President - Women's Apparel and
Fine Jewelry of Wards since May 27, 1997. Prior to joining Wards, Mr. Caporale
was Senior Vice President - Divisional Merchandise Manager of Kohl's
Corporation. From 1993 through 1997, he was Vice President - Divisional
Merchandise Manager of Kohl's. Prior to joining Kohl's, Mr. Caporale held
various merchandising positions with Federated Department Stores for 16 years.

Don Civgin, 36, has been Vice President and Treasurer of the Company and
Senior Vice President - Finance of Wards since May 8, 1997. Prior thereto, he
was Vice President - Treasurer of Alliant Foodservice, Inc. from 1995 to 1997.
From 1986 through 1995, Mr. Civgin held various financial management positions
with Itel Corporation.

Alan E. DiGangi, 51, has been Executive Vice President - Appliances,
Electronics and Automotive of Wards since November 1996. Prior thereto, he was
Executive Vice President Marketing of Wards from March 1996 through November
1996. Mr. DiGangi was Executive Vice President, Electric Ave., Rooms &
More/Soft Home of Wards from January 1996 through March 1996. Prior thereto,
he was Senior Vice President, Electric Ave. & More from April, 1995 to
January, 1996. From 1993 though 1995, Mr. DiGangi was Vice President of Wards,
with responsibilities in Store Management, Field Operations, Marketing and
Sales Promotion.

Kevin Freeman, 47, has been Executive Vice President - Store Operations of
Wards since May 1, 1997. Prior thereto, he was Executive Vice President of
Store Operations for Caldor from 1994 until 1997. Mr. Freeman was Executive
Vice President - Store Operations with Roses Stores from 1991 to 1994. Prior
thereto, Mr. Freeman held various positions with Target, a division of Dayton
Hudson Corporation, from 1978 to 1991, leaving as Senior Vice President of
Store Operations.

Thomas G. Grimes, 60, has been Executive Vice President - Home of Wards since
November 7, 1997. Mr. Grimes joined the Company on February 24, 1997 as Chief
Executive Officer of Lechmere, Inc. and President - Hardlines. Prior thereto,
he was Managing Director of Trimingham Bros. Ltd. from January 1996 through
February 1997. Prior to joining Trimingham Bros. Ltd., Mr. Grimes was Chairman
and Chief Executive Officer of the John Breuner Company, a division of Batus
Inc., from 1986.

Spencer H. Heine, 55, has been an Executive Vice President, Secretary and
General Counsel of the Company since September 30, 1991 and was a director
from May 15, 1992 through January 6, 1997. Mr. Heine has been Executive Vice
President, Secretary and General Counsel of Wards and President - Montgomery
Ward Properties since April 12, 1994. Prior thereto, Mr. Heine served as
Executive Vice President - Legal of Wards from September 30, 1991 through
April 11, 1994. Mr. Heine was Chairman and Chief Executive Officer of
Signature from March 8, 1993 through April 11, 1994 and is currently serving
as interim Chief Executive Officer and will continue to do so until April 1,
1998. Mr. Heine is a member of the Board of Directors of First Union Real
Estate Investment, a real estate investment trust located in Cleveland, Ohio.

Robert A. Kasenter, 51, has been an Executive Vice President of the Company
since February 21, 1992. Mr. Kasenter has served as Executive Vice President,
Human Resources of Wards since January 27, 1992 and was Senior Vice President-
Human Resources and Customer Satisfaction from June 23, 1988 to January 26,
1992.

Thomas J. Paup, 49, has been an Executive Vice President and Chief Financial
Officer of Wards since September 22, 1997. Prior to joining Wards, Mr. Paup
was Senior Vice President, Finance and Distribution of Lord & Taylor, a
division of The May Department Stores Company from 1990 to 1997.

Karl Taylor, 37, has been Senior Vice President- Strategic & Merchandise
Planning of Wards since March 3, 1997. Prior to joining Wards, Mr. Taylor was
Vice President of Merchandise Planning and Allocation at Toys "R" Us from
1993. Prior thereto, he was Director of Merchandise Planning and Allocation at
Toys "R" Us from 1991 to 1993. Prior to joining Toys "R" Us, Mr. Taylor was
with Arthur Andersen.

EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

John L. Workman, 46, has been Executive Vice President and Assistant Secretary
of the Company since January 28, 1994 and served as a director from May 12,
1995 through January 6, 1997. Mr. Workman has been Executive Vice President,
Corporate Restructuring of Wards since September 1997. Prior thereto, he was
Executive Vice President , Chief Financial Officer and Assistant Secretary of
Wards from January 28, 1994. He served as Senior Vice President, Chief
Financial Officer and Assistant Secretary from August 31, 1992 through January
27, 1994.

PART II

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

There is no established public trading market for the Common Stock of the
Company. All shares are subject to restrictions on transfers contained in the
Stockholders' Agreement dated as of June 17, 1988, as amended ("Stockholders'
Agreement"), or the Terms and Conditions ("Terms and Conditions") imposed
under the Montgomery Ward & Co., Incorporated Stock Ownership Plan ("Stock
Ownership Plan"). Due to the bankruptcy filing and other factors, it is not
expected that a market will develop in the near term.

Transfers of shares of Class A Common Stock are restricted for a period of
three years from certain applicable dates under the Stockholders' Agreement
and the Terms and Conditions. Transfers of Class A shares purchased other than
pursuant to the Stock Ownership Plan are restricted for a period of three
years from the holder's first acquisition of any such shares, while transfers
of shares received under the Stock Ownership Plan are restricted for a period
of three years after the award of such shares, exercise of purchase rights for
such shares or grant of options with respect to such shares, as applicable.
After the applicable three-year periods, limited transfers of such shares
which have become vested in accordance with the Stockholders' Agreement or the
Terms and Conditions, as applicable, are permitted, subject to certain rights
of first refusal. All of the Class B shares and virtually all of the
outstanding Class A shares are eligible for transfer.

Wards declared $6 million and paid $6 million in preferred stock dividends to
the Company in 1997, which declared $8 million and paid $3 million of
preferred stock dividends in 1997. Dividends declared of $2 million were
automatically deemed added to the liquidation value of the preferred stock
because the dividends were not paid. Additionally, dividends declared of $3
million on June 30, 1997, have not been paid. The redemption provisions of the
preferred stock have been stayed by the Chapter 11 proceedings. No further
dividends will be declared or paid on the preferred stock prior to the
approval of a plan of reorganization. Future payments of dividends, if any,
are dependent upon the approval of a plan of reorganization.

As of March 16, 1998, there were three holders of record of Class A Common
Stock, Series 1, one such holder of Class A, Common Stock, Series 2, and one
such holder of Class B Common Stock. No shares of Class A Common Stock, Series
3, were outstanding as of that date. As of March 16, 1998, there were 89
holders of record of Voting Trust Certificates representing beneficial
ownership in shares of Class A Common Stock, Series 1, of which 651,467 shares
are pledged as collateral for notes issued to effect the repurchase of shares.
Due to the Chapter 11 filing, no payments may be made to satisfy the payment
requirements for these notes. A noteholder can foreclose on the pledge of
shares repurchased if note payments are not made within one year of becoming
due; provided, however, that any such remedy has been stayed pursuant to the
Chapter 11 filing. See Note 15 to the Consolidated Financial Statements. There
were 193 holders of record of Voting Trust Certificates representing
beneficial ownership in shares of Class A Common Stock, Series 2. The
applicable voting trust will expire by its terms on June 21, 1998, and, absent
further action, the holders of Voting Trust Certificates will become holders
of Class A Common Stock at such time.

Item 6. Selected Financial Data

The following summary of certain financial information for each of the five
fiscal years in the period ended January 3, 1998 has been derived from the
Consolidated Financial Statements of MW Holding. Such information for each
fiscal year should be read in conjunction with the Consolidated Financial
Statements and notes thereto and the report of independent public accountants
beginning on page 19.

As Of and For The
-------------------------------------------------------------------------------------------
53-Week
Period
52-Week Period Ended Ended
----------------------------------------------------------------------- --------------

(Dollars in millions, except Jan. 1, Dec. 31, Dec. 30, Dec. 28, Jan. 3,
per share amounts) 1994 1994 1995 1996 1998
------------- -------------- ------------- ------------- --------------

Total Revenues $6,023 $7,029 $7,085 $6,620 $ 5,386

Net Income (Loss) 101 109 (9) (237) (1,152)

Net Income (Loss) Applicable
to Common Shareholders 101 107 (13) (249) (1,160)

Net Income (Loss) per Class A
Common Share 2.29 2.48 (.33) (6.33) (31.67)

Total Assets 3,835 4,537 4,884 4,879 4,572

Long-Term Debt 213 228 423 87 122

Obligations Under Capital
Leases (a) 89 81 66 60 -

Total Shareholders' Equity
(Deficit) 607 679 700 433 (716)

Redeemable Preferred Stock - 75 175 175 177

Cash Dividends per Common
Share .50 .50 - - -

(a) Excludes $51 million of Obligations under capital leases included in
Liabilities subject to compromise as of January 3, 1998.

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

The following discussion and analysis of results of operations for the Company
compares 1997 to 1996, as well as 1996 to 1995. Wards is on a 52- or 53-week
fiscal year basis, with 1997 being a 53-week year and 1996 and 1995 each being
52-week years. All dollar amounts are in millions, and all income and expense
items and gains and losses are shown before income taxes, unless specifically
stated otherwise.

The Company's retail business is seasonal, with approximately one-third of
sales occurring in the fourth quarter.

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

Results of Operations: 1997 Compared with 1996

Due to Wards' inability to reach an out-of-court settlement with its lenders,
petitions for reorganization under Chapter 11 of the Bankruptcy Code were
filed at the close of business on July 7, 1997. The Company's performance
reflected difficult competitive conditions and financial pressures, as well as
the negative impact of the aggressive markdowns and promotional advertising to
liquidate inventory in the first half of 1997.

Consolidated total revenues (net sales and direct response marketing revenues,
including insurance) were $5,386, compared with $6,620 in 1996, a decrease of
$1,234 or 19%. The $1,234 total revenue decrease consisted of a $1,345
decrease in net sales (a 23% decrease) and a $111 increase (a 15% increase) in
direct marketing revenues. After adjusting for the noncomparable impact of
sales that occurred in the 53rd week, sales on a comparable store basis, which
reflect only the stores in operation for all of 1997 and 1996, decreased 16%.
$534 of the sales decrease reflects the closings of 101 retail stores and
liquidation and outlet centers, including the exit of the Lechmere and
Electric Avenue & More formats. 1997 sales results also reflect the Company's
decision to exit certain product offerings, including personal computers. 1996
third and fourth quarter sales for the affected product lines were $84.
Additionally, the Company's management believes that merchandise shipment
interruptions as a result of the bankruptcy filing and the decline in
promotional offers to Wards' credit cardholders in the second half of 1997 (4
in 1997 versus 19 in 1996), contributed to the sales decline. The increase in
direct response marketing revenues was primarily due to increased clubs'
memberships.

Gross margin (net sales less cost of goods sold) dollars were $580, a decrease
of $431, or 43%, from 1996. This decrease was due to the gross margin impact
of the decreased sales of $298 and a decrease in the margin rate on sales of
$167, offset by decreased occupancy costs of $34, primarily related to closed
stores. The liquidation of slow moving and discontinued inventory, as well as
the Chapter 11 filing, negatively impacted margin rates. As certain of the
Company's vendors halted shipments for portions of the third quarter, a higher
mix of third quarter sales represented sales of lower margin clearance
merchandise. Gross margins showed substantial improvement in the fourth
quarter of 1997. Despite a $579 decrease in 1997 fourth quarter sales, gross
margin dollars increased by $4 and fourth quarter 1997 margin rates improved
by 5 percentage points over fourth quarter 1996 rates.

Operating, selling, general and administrative expenses increased $295, or
15%, from the prior year. The increase was due to increased amortization and
other direct-marketing related costs of Signature of $150; increased bad debt
expense of $29; write-downs of investments and other unrealizable assets of
$57 and decreased product service income of $66, offset by all other decreased
expenses of $7.

Net interest expense decreased $16, or 13%, from the prior year. The net
decrease reflects a $39 increase in interest expense for the first and second
quarters of 1997 offset by a $55 decrease in interest expense for the third
and fourth quarters of 1997. The first half increase reflects increased
borrowings (including borrowings under vendor financing programs) and an
increase in the weighted-average borrowing rate. The Company has stopped
accruing interest on its short-term debt in connection with the Chapter 11
filing. Second-half 1997 borrowings under the DIP Facility were substantially
below second-half 1996 borrowing levels.

Reorganization costs of $553 were related to the Company's exit of its non-
core strategies, certain dispositions of assets and various other expenses.
See Note 4 to the Consolidated Financial Statements for the components of
these costs.

The income tax benefit was $375 as compared to a benefit of $138 for 1996. See
Note 10 to the Consolidated Financial Statements for a discussion of
management's determination of the benefit recorded and the related valuation
allowance provided during 1997.

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

Results of Operations: 1996 Compared with 1995

Management's identification of slow-moving inventory resulted in inventory
liquidation efforts which negatively impacted 1996 results. From September
through December, the Company accelerated efforts to reduce and redeploy
inventory to allow for a shift in focus to items the Company believed would
provide higher inventory turnover and improved merchandise assortments in the
future. As of the beginning of fourth quarter 1996, over $300 in inventory was
identified in items which would not be re-ordered and which was competitively
disadvantaging the Company. Aggressive markdowns and promotional advertising
to liquidate this inventory were initiated in the fourth quarter of 1996.

At December 28, 1996, the remaining amount of this inventory was $130 before
any additional markdowns. In December, the Company provided $54 for the loss
on liquidation of this remaining inventory and also identified $55 of other
inventory that would be sold at a loss and provided $19 for the loss on
liquidation for this inventory as well. The Company believed that the
liquidation of this inventory would position it with balanced inventory
assortments to execute its strategic plan in future periods.

The Company's performance reflected the impact of the change in inventory
assortment and difficult competitive conditions discussed above with the
consolidated net loss increasing $228 from the prior year's net loss of $9.
The consolidated net loss applicable to common shareholders for 1996 was $249
versus $13 in 1995.

Consolidated total revenues (net sales and direct response marketing revenues,
including insurance) were $6,620 compared with $7,085 in 1995, decreasing by
$465 or 7%. The $465 total revenue decrease consisted of a $652 decrease in
net sales and a $187 increase in direct marketing revenues. The change in
total net sales represented a 10% decline. Specifically, Apparel sales
declined 10%, Jewelry sales declined 11%, Home and Furniture sales declined
9%, Electronics declined 10%, Appliances declined 8% and Automotive sales
declined 6%. Sales on a comparable store basis, which reflect only the stores
in operation for both 1996 and 1995, decreased 11%. The Company believes that
the decline in net sales in 1996 reflected a decline in market share compared
to competitors. The increase in direct response marketing revenues was
primarily due to increased clubs' membership driven by the acquisition of the
Amoco Motor Club business and increased insurance policy holder levels.

Gross margin (net sales less cost of goods sold) dollars were $1,011, a
decrease of $309, or 23%, from 1995. This decrease was due to the gross margin
impact of the decreased sales of $163, a decrease in the margin rate on sales
of $142, and increased occupancy costs of $7 related to increased depreciation
on capital investments in new and existing stores, partially offset by
decreased buying and other expenses of $3. The liquidation of slow moving and
discontinued inventory and the continued competitive pressures also had a
significant impact on margin rates.

Operating, selling, general and administrative expenses increased $194, or
11%, from the prior year. The increase includes the impact of new store
openings of $16, increased provision for bad debt expense under the Account
Purchase Agreements of $21, increased advertising and other promotional costs
of $74, increased amortization of direct response and insurance acquisition
cost of $61 and increased operating and administrative expenses of $7, and
decreased income generated from the sale of product service contracts of $10.
1995 included a provision for severance costs and relocation of certain
administrative functions of both Wards and Lechmere of $25.

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

Results of Operations: 1996 Compared with 1995 (continued)

Net interest expense increased $36, or 40%, from the prior year. The increase
is due to increased borrowings resulting from a combination of higher average
working capital levels and reduced cash flow resulting from slower than
anticipated sales, partially offset by reduced capital expenditures for new
and existing stores.

Income tax benefit was $138 for 1996 as compared to an income tax benefit of
$14 for 1995. See Note 10 to the Consolidated Financial Statements.

Discussion of Financial Condition

Due to the inability of Wards to negotiate an out-of-court settlement with its
lenders, MW Holding and certain of its subsidiaries have filed petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result of
the Chapter 11 filing, the Company and those subsidiaries have ceased making
certain debt, interest, trade payable and other liability payments that arose
prior to the Chapter 11 filing. Payments related to these liabilities are
deferred, in most cases, until a plan for reorganization is confirmed by the
Bankruptcy Court.

Net cash used in the Company's operating activities totaled $192 for 1997
compared to $356 for 1996, a decrease of $164. The lower cash usage is
summarized as follows:

Cash impact of larger net loss $(610)
Net cash received from facility closings 155
Increased cash provided by inventory
and accounts payable 397
Lower expenditures for direct response
and insurance acquisition costs 85
All other cash from operations 137
-----
$ 164
=====

As shown above, cash required for inventory was significantly reduced in 1997.
This was primarily due to the sales decrease, an inventory reduction program
and better receipts management. Cash required for accounts payable was also
reduced significantly, primarily as a result of the Chapter 11 filing.

Net cash used in the Company's investing activities totaled $93 in 1997,
compared to net cash used of $148 in 1996. The net cash used in 1996 included
Signature's acquisition of the Amoco Motor Club. 1997 cash used reflects the
increase in investments of insurance operations.

Net cash provided by financing activities totaled $442 for 1997, compared to
$499 for 1996. The Company had borrowed to the full extent of its financing
facilities prior to the Chapter 11 filing, with the exception of the Seasonal
Credit Agreement. Net borrowings in the post-petition period under the DIP
Facility were $50.

Wards is the only subsidiary of the Company and, therefore, Wards and its
subsidiaries are the Company's sole source of funds.

Wards entered into the DIP Facility on July 8, 1997, which was approved by the
Bankruptcy Court on July 31, 1997. Under the DIP Facility, the lenders have
agreed to provide a revolving credit and letter of credit facility, the
maximum amount of which is based on the book value of eligible inventory (as
defined in the DIP Facility), the fair market value of eligible real property
(as defined in the DIP Facility) and the earnings of Signature.

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

Discussion of Financial Condition (continued)

In no case may borrowings exceed $1,000. Total borrowings outstanding were $50
and letters of credit outstanding were $52 at January 3, 1998.

The DIP facility imposes various restrictions on Wards, including limitations
on capital expenditures. The DIP facility also requires the satisfaction of
certain financial tests, including the achievement of specified earnings
levels as defined in the DIP Agreement. As of January 3, 1998, the Company had
met all such financial tests.

The Company is currently in default of the terms of each of the Long-Term
Credit Agreement, the Short-Term Credit Agreement and the Note Purchase
Agreements and no future amounts may be drawn thereunder. The Company was in
default of the Seasonal Credit Agreement, which was terminated as a result of
the Chapter 11 filings. There were no borrowings outstanding under this
agreement.

Signature borrowed $102 under a Credit Agreement (Signature Credit Agreement)
dated as of September 27, 1996 as amended and restated October 21, 1996 and
amended December 23, 1996 between Signature and various lenders. The proceeds
were used to repay the intercompany loan from Wards to Signature arising from
Signature's acquisition of the Amoco Motor Club. During 1997, the maturity
date was extended to January 31, 1998 and has not been repaid. In 1998, the
lenders agreed that they will extend the maturity date to the earlier of May
29, 1998 or the funding of a replacement loan facility, provided that
Signature provide the lenders with certain security and other terms and
conditions the new lenders may deem appropriate. In March 1998, Signature
received a commitment from a new lender which would enable Signature to repay
the amounts borrowed under the Signature Credit Agreement. Management expects
to borrow the amounts required and repay the amounts due by May 29, 1998. If
the new lender's commitment were to be terminated, the aforementioned
extension agreement would also terminate.

In 1997, Wards had facilities available under vendor financing programs
(which are reflected in Liabilities subject to compromise) which totaled $725.
At June 28, 1997, these facilities were principally drawn. These facilities
are no longer available due to the Chapter 11 filing.

The Company intends to improve its financial condition and reduce its
dependence on borrowing by improving sales and gross margins and reducing
expenses. Management has reevaluated the Company's merchandising, marketing,
store operations and real estate strategies, and is in the early stages toward
implementing the new strategy. See "Business - Performance Initiatives" for a
discussion of the new strategies to be employed.

On August 14, 1997, the Bankruptcy Court approved a motion filed by Wards to
exit its non-core specialty retail store businesses - Lechmere, Home Image by
Lechmere and Electric Avenue & More. The exit involved the closing of 44
stores. On November 7, 1997, the Bankruptcy Court approved a motion to close
45 underperforming retail stores and two outlet and liquidation centers. The
closings generated positive cash flows and are expected to reduce future
operating losses. The Company recorded a pre-tax charge of $484 associated
with the exit of these businesses, which included losses and costs associated
with liquidation of assets, rejection of leases, severance payments and other
related costs.

Future cash is also expected to continue to be provided by ongoing operations,
receipt of payment for credit sales under the agreements with Montgomery Ward
Credit Companies and borrowings under the DIP Facility.

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

Discussion of Financial Condition (continued)

As discussed in Note 2 to the Consolidated Financial Statements, the
accompanying financial statements have been prepared on a going concern basis.
The appropriateness of using the going concern basis is dependent upon, among
other things, confirmation of a plan of reorganization, future profitable
operations, the ability to comply with the terms of the DIP Facility and the
ability to generate sufficient cash from operations and financing arrangements
to meet obligations.

As a result of the Chapter 11 filings, the interest rate exchange agreements
with various banks were canceled. In connection with the cancellation, Wards
incurred a liability of $3 which is included in Liabilities subject to
compromise.

Capital expenditures during 1997 of $66 were primarily related to the opening
of a new distribution center, systems development, merchandise fixture and
presentation programs, and retail facility improvements.

1997 1996 1995
----------------- --------------- ---------------

Total capital expenditures $ 66 $ 75 $ 122
Capital appropriations authorized during the year 76 86 152
Cancellations of prior year's appropriations (66) (34) (75)
Unexpended capital appropriations at year-end 57 113 $ 136

Wards is not contractually committed to spend all of the capital
appropriations unexpended at January 3, 1998, but generally expects to do so.
The DIP Agreement restricts the amount of capital expenditures Wards may make
during the term of the Agreement. Capital expenditures for 1998 may not
exceed $144.

The Company's subsidiaries utilize software and related technologies that will
be affected by the date change in the year 2000. The Company has completed its
planning to address the changes and has assessed the level of effort required
in order to affect these changes. The Company's plans include modifications to
existing programs and purchase and installation of new software. Modification
to existing programs began in 1996, and certain of the new software was
purchased in 1997. Based on the Company's plans and amounts already expended,
the total future cost to address the date change issue is not expected to
materially impact future cash flows.

Item 8. Financial Statements

Page
--------------------

Report of Independent Public Accountants 20

For the 53-Week Period Ended January 3, 1998 and the 52-Week Periods
Ended December 28, 1996 and December 30, 1995
Consolidated Statements of Income 21
Consolidated Statements of Shareholders' Equity 23
Consolidated Statements of Cash Flows 26

Consolidated Balance Sheets at January 3, 1998 and December 28, 1996 22

Notes to Consolidated Financial Statements 28

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

To the Board of Directors and Shareholders
of Montgomery Ward Holding Corp.:

We have audited the accompanying consolidated balance sheets of MONTGOMERY WARD
HOLDING CORP. (a Delaware Corporation) AND SUBSIDIARIES (of which Montgomery
Ward Holding Corp. and certain of its U.S. subsidiaries filed petitions for
reorganization on July 7, 1997 under Chapter 11 of the United States Bankruptcy
Code), as of January 3, 1998 and December 28, 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for the fiscal years
ended January 3, 1998, December 28, 1996 and December 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Montgomery Ward
Holding Corp. and Subsidiaries as of January 3, 1998 and December 28, 1996 and
the results of their operations and their cash flows for the fiscal years ended
January 3, 1998, December 28, 1996 and December 30, 1995, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, on July 7, 1997, the Company filed a
voluntary petition seeking to reorganize under Chapter 11 of the United States
Bankruptcy Code. The Chapter 11 filing was the result of violation of certain
debt covenants, recurring operating losses, deterioration of vendor support, and
cash flow deficiencies. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Although the Company is
currently operating as a Debtor-In-Possession under the jurisdiction of the
Bankruptcy Court, the continuation of the business as a going concern is
contingent upon, among other things, the ability to formulate a plan of
reorganization which will gain approval of the creditors and shareholders and
confirmation by the Bankruptcy Court, success of future operations, and the
ability to recover the carrying amount of assets and/or the amount and
classification of liabilities. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

Arthur Andersen LLP
Chicago, Illinois
February 23, 1998

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF INCOME

53-Week 52-Week
Period Period
Ended Ended
------- ----------------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions, except per share amounts) 1998 1996 1995
------- -------- --------

Revenues
Net sales, including leased and licensed department sales $ 4,534 $5,879 $6,531
Direct response marketing revenues, including insurance 852 741 554
------- ------ ------
Total Revenues 5,386 6,620 7,085
------- ------ ------

Costs and Expenses
Cost of goods sold, including net occupancy and buying expense 3,954 4,868 5,211
Operating, selling, general and administrative expenses, including
benefits and losses of direct response operations (Notes 17 and 20) 2,295 2,000 1,806
Interest expense, net (Note 18) 111 127 91
------- ------ ------
Total Costs and Expenses 6,360 6,995 7,108
------- ------ ------

Loss before Reorganization Costs and Income Taxes (974) (375) (23)
Reorganization Costs (Note 4) 553 - -
------- ------ ------
Loss before Income Taxes (1,527) (375) (23)
Income Tax Benefit (Note 10) (375) (138) (14)
------- ------ ------

Net Loss (1,152) (237) (9)
Preferred Stock Dividend Requirements (Note 14) 8 12 4
------- ------ ------

Net Loss Applicable to Common Shareholders $(1,160) $ (249) $ (13)
======= ====== ======
Net Loss per Common Share (Note 15)
Class A $(31.67) $(6.33) $ (.33)
Class B (23.17) (5.22) (.27)

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEETS

Jan. 3, Dec. 28,
(In millions) 1998 1996
------- --------

Assets
Cash and cash equivalents (Note 1) $ 189 $ 32
Short-term investments 1 3
Investments of insurance operations (Note 6) 358 317
------- --------
Total Cash and Investments 548 352

Trade and other accounts receivable 234 213
Accounts and notes receivable from affiliates 6 13
------- --------
Total Receivables 240 226

Merchandise inventories 1,120 1,545
Prepaid pension cost (Note 8) 366 347
Properties, plants and equipment, net of accumulated
depreciation and amortization (Note 9) 1,067 1,308
Direct response and insurance acquisition costs 559 603
Other assets (Notes 9 and 11) 373 498
Deferred income taxes (Note 10) 299 -
------- --------
Total Assets $ 4,572 $ 4,879
======= ========

Liabilities
Short-term debt (Note 12) $ 102 $ 1,028
Trade accounts payable 442 1,585
Federal income taxes payable (Note 10) - 4
Accrued liabilities and other obligations (Note 7) 736 1,228
Insurance policy claim reserves (Note 11) 241 227
Long-term debt (Note 12) 122 87
Obligations under capital leases (Note 13) - 60
Deferred income taxes (Note 10) - 52
Liabilities subject to compromise (Notes 3, 8, 12 and 13) 3,468 -
------- --------
Total Liabilities 5,111 4,271

Commitments and Contingent Liabilities (Notes 12 and 19)

Redeemable Preferred Stock (Note 14) 177 175

Shareholders' Equity (Deficit)
Common stock (Note 15) 1 1
Capital in excess of par value 64 53
Retained earnings (deficit) (651) 509
Unrealized gain on marketable equity securities 9 9
Less: Treasury stock, at cost (139) (139)
------- --------
Total Shareholders' Equity (Deficit) (716) 433
------- --------
Total Liabilities and Shareholders' Equity $ 4,572 $ 4,879
======= ========

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in millions, except per share amounts)

Class A Class B
Common Common Capital
Stock Stock in Treasury Total
$.01 $.01 Excess Un- Stock Share-
Par Par Common of Par Retained realized at Holders'
Value Value Stock Value Earnings Gains Cost Equity
------- ------- ------ ------ -------- -------- -------- --------

(In thousands)
Balance
Jan. 1, 1995 19,280 25,000 $ - $ 23 $ 771 $ 2 $ (89) $ 707

Net loss - - - - (9) - - (9)

Cash dividends
paid - - - - (4) - - (4)

Compensation
expense on
stock option
grants/
repurchases - - - 5 - - - 5

Changes in un-
realized gain
on marketable
securities - - - - - 8 - 8

Shares repur-
chased as
Treasury stock (1,052) - - - - - (25) (25)

Shares issued
upon exercise
of options 980 - 1 17 - - - 18

Shares issued
upon exercise
of conversion
rights 2 - - - - - - -
------- ------- ------ ------ -------- -------- -------- --------
Balance,
Dec. 30, 1995 19,210 25,000 $ 1 $ 45 $ 758 $ 10 $ (114) $ 700
======= ======= ======= ======= ======== ======== ======== ========

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in millions, except per share amounts)

Class A Class B Capital
Common Common in
Stock Stock Excess Treasury Total
$.01 $.01 of Un- Stock Share-
Par Par Common Par Retained realized at Holders'
Value Value Stock Value Earnings Gains Cost Equity
------- -------- ------ ------- -------- -------- -------- --------

(In thousands)
Balance
Dec. 31, 1995 19,210 25,000 $ 1 $ 45 $ 758 $ 10 $ (114) $ 700

Net loss - - - - (237) - - (237)

Cash dividends
declared and
paid - - - - (9) - - (9)

Cash dividends
declared - - - - (3) - - (3)

Compensation
expense on
stock option
exercises and
other share
exchanges - - - 5 - - - 5

Changes in un-
realized gain
on marketable
securities - - - - - (1) - (1)

Shares repur-
chased as
Treasury stock (1,242) - - - - - (25) (25)

Shares issued
upon exercise
of options 352 - - 3 - - - 3

Shares issued
upon exercise
of conversion
rights 2 - - - - - - -
------- -------- ------ ------- -------- -------- -------- --------
Balance,
Dec. 28, 1996 18,322 25,000 $ 1 $ 53 $ 509 $ 9 $ (139) $ 433
======= ======== ====== ======= ======== ======== ======== ========

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in millions, except per share amounts)

Class A Class B Capital
Common Common in
Stock Stock Excess Treasury Total
$.01 $.01 of Retained Un- Stock Share-
Par Par Common Par Earnings realized at Holders'
Value Value Stock Value (Deficit) Gains Cost (Deficit)
------- ------- ------ ------- --------- -------- -------- ---------

(In thousands)
Balance
Dec. 28, 1996 18,322 25,000 $ 1 $ 53 $ 509 $ 9 $ (139) $ 433

Net loss - - - - (1,152) - - (1,152)

Cash dividends
declared and
paid - - - - (3) - - (3)

Cash dividends
declared - - - - (5) - - (5)

Grants of
restricted stock
and stock
options by
majority share-
holder
(Note 20) - - - 11 - - - 11
------- ------- ------ ------- --------- -------- -------- ---------
Balance,
Jan. 3, 1998 18,322 25,000 $ 1 $ 64 $ (651) $ 9 $ (139) $ (716)
======= ======= ====== ======= ========= ======== ======== =========

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

53-Week
Period
Ended 52-Week Period Ended
------ --------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
------- -------- --------

Cash flows used for operating activities:
Net loss $(1,152) $(237) $ (9)
Adjustments to reconcile net loss to net cash
used for operating activities:
Provision for disposition of assets of
Lechmere, Inc. 280 -- --
Provision for closing of Wards and
Electric Avenue & More stores 204 -- --
Net receipts of cash relating to disposition
of assets of Lechmere, Inc. and closing of
Wards and Electric Avenue & More stores 155 -- --
Depreciation and goodwill amortization 135 130 119
Amortization of direct response and
insurance acquisition costs 250 209 148
Deferred income taxes (375) (110) (20)
Other 40 -- (23)
Changes in operating assets and liabilities:
Trade and other accounts receivable (28) (32) (54)
Accounts and notes receivable from affiliates 7 9 (16)
Merchandise inventories 191 225 (112)
Prepaid pension cost (19) (13) (11)
Direct response and insurance acquisition costs (206) (291) (220)
Other assets 34 31 (5)
Trade accounts payable 209 (222) 85
Liabilities subject to compromise (12) -- --
Federal income taxes payable, net (4) (2) (9)
Accrued liabilities and other obligations 85 (44) (55)
Insurance policy claim reserves 14 (9) --
------- ----- -----
Net cash used for operating activities $ (192) $(356) $(182)
------- ----- -----

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS

53-Week 52-Week
Period Period
Ended Ended
------- ---------------------

Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
------- -------- --------

Cash flows used in investing activities:

Purchase of short-term investments $ (85) $ (2) $ (60)
Purchase of investments of insurance operations (939) (756) (791)
Sale of short-term investments 87 - 62
Sale of investments of insurance operations 898 778 775
Capital expenditures (66) (75) (122)
Disposition of properties, plants and equipment, net 12 19 39
Investments - (12) (12)
Acquisition of Amoco Enterprises, net of cash and cash
equivalents - (100) -
------- -------- --------
Net cash used in investing activities (93) (148) (109)
------- -------- --------

Cash flows provided by financing activities:
Proceeds from issuance of short-term debt, net 409 588 16
Borrowings under Post-Petition Loan and Guaranty
Agreement 321 - -
Proceeds from issuance of long-term debt - - 205
Payments under Post-Petition Loan and Guaranty
Agreement (271) - -
Payments of long-term debt (5) (56) (10)
Payments of obligations under capital leases (9) (7) (7)
Cash dividends paid (3) (9) (4)
Proceeds from issuance of common stock - 3 18
Proceeds from issuance of preferred stock - - 175
Payments to redeem preferred stock - - (75)
Purchase of treasury stock, at cost - (20) (23)
------- -------- --------
Net cash provided by financing activities 442 499 295
------- -------- --------

Increase (decrease) in cash and cash equivalents 157 (5) 4
Cash and cash equivalents at beginning of period 32 37 33
------- -------- --------
Cash and cash equivalents at end of period $ 189 $ 32 $ 37
======= ======== ========

See notes to consolidated financial statements.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Major Accounting Policies

Business Segments

Montgomery Ward Holding Corp. ("the Company" or "MW Holding") and its
wholly owned subsidiary, Montgomery Ward & Co., Incorporated ("Wards"), are
engaged in retail merchandising and direct response marketing (including
insurance) in the United States. As of January 3, 1998, retail
merchandising operations are conducted through Wards. The assets of Wards'
wholly-owned subsidiary, Lechmere, Inc. ("Lechmere") were disposed of in
fiscal 1997 (see Note 4) and Lechmere's retail merchandising operations
closed. Direct response marketing operations are conducted primarily
through Signature Financial/Marketing, Inc. ("Signature"), a wholly-owned
subsidiary of Wards. Signature markets consumer club products and insurance
products through its subsidiaries. See Note 21 for information regarding
these segments.

Principles of Consolidation; Use of Estimates

The consolidated financial statements include the Company and all
subsidiaries. Investments in 20 percent to 50 percent owned affiliates,
where significant influence exists, are accounted for using the equity
method. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain prior period amounts have been
reclassified to be comparable with the current period presentation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Fiscal Year

The Company operates on a 52- or 53- week fiscal year basis. The Company's
fiscal year ends on the Saturday closest to December 31. The fiscal year
ended January 3, 1998 included 53 weeks. The fiscal years ended December
28, 1996 and December 30, 1995 included 52 weeks.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, time deposits and highly
liquid debt instruments with an original maturity of three months or less.
The carrying amount reported in the financial statements for cash and cash
equivalents approximates the fair value of these assets.

Cash and cash equivalents includes $110 million of restricted cash
generated from the disposition of the assets of Lechmere. The proceeds may
be used to pay Lechmere's post-petition obligations, or may be used for
other purposes only pursuant to order of the Bankruptcy Court. In addition,
the Company has approximately $32 million of cash held in segregated
accounts by various banks who were lenders to the Company under the Long-
term and Short-term Credit Agreements. This cash is being held subject to
potential offset, pursuant to the order of the Bankruptcy Court.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Major Accounting Policies (continued)

Cash and Cash Equivalents (continued)

Following is a summary of cash payments for interest and income taxes and
non-cash financing and investing activities:

53-Week 52-Week
Period Period
Ended Ended
----------------- --------------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
----------------- ------------ ------------

Cash paid (refunded) for:
Income taxes $ 2 $ (22) $ 24
Interest 83 119 82

Non-cash financing activities:
Notes issued for purchase of treasury stock - 5 2

Non-cash investing activities:
Grants of restricted stock and stock options
by majority shareholder 11 - -
Increase in liquidation value of preferred
stock 2 - -
Changes in unrealized gain on marketable
securities - (1) 8
Gain on stock distribution - - 16

Investments of Insurance Operations

The Company accounts for investments under Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
In Debt and Equity Securities". Under SFAS No. 115, all debt and equity
securities are classified by management as "available-for-sale" and are
stated at fair market value with all changes in unrealized gains or losses,
net of applicable income taxes, included in Shareholders' Equity.

Merchandise Inventories

Merchandise inventories consist primarily of products held for resale and
are valued at the lower of the cost or market using the retail, first-in,
first-out ("FIFO") method.

Properties, Plants and Equipment

Depreciation is computed on a straight-line basis over the estimated useful
life of the asset, with annual rates ranging between 2% and 3% for
buildings and between 12% and 25% for fixtures and equipment. Leasehold
improvements and assets under capital leases are amortized on a straight-
line basis over no longer than the primary term of the lease. Depreciation
expense includes amortization of assets under capital leases.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Major Accounting Policies (continued)

Properties, Plants and Equipment (continued)

Interest relating to construction in progress is capitalized and amortized
over the useful life of the property. Pre-operating expenditures which are
not capital in nature are charged against income in the year the store is
opened. Normal maintenance and repairs are expensed as incurred. Major
repairs that materially extend the lives of properties are capitalized.

Unamortized software costs included in Other assets were $21 million and
$30 million at January 3, 1998 and December 28, 1996 and the amortization
of these costs were $9 million, $7 million and $5 million for the periods
ended January 3, 1998, December 28, 1996 and December 30, 1995,
respectively.

Intangible Assets

Excess of cost over fair market value of net identifiable assets of
acquired companies (goodwill) and other intangible assets are amortized on
a straight-line basis over the estimated life. Intangible assets of $90
million and $225 million at January 3, 1998 and December 28, 1996,
respectively, are included in Other assets. The decrease in intangible
assets from December 28, 1996 to January 3, 1998, relates primarily to the
write-off of the Lechmere goodwill in connection with the disposition of
the assets of Lechmere in 1997. Amortization of intangible assets was $11
million, $8 million and $6 million for the periods ended January 3, 1998,
December 28, 1996 and December 30, 1995, respectively.

Impairment of Long-lived Assets

In the event facts and circumstances indicate the cost of any long-lived
assets may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the assets would be compared to the carrying amount of the
assets to determine if a write-down to market value or discounted cash flow
value is required.

Direct Response Marketing Revenues

Life and accident and health insurance premiums, which are recognized as
revenue when due from policyholders, are associated with related benefits
and expenses to result in the recognition of profit over the terms of the
policies. Property-liability insurance premiums and club membership dues
are deferred and earned on a pro-rata basis over the terms of the policies
and memberships. Unearned premiums and club memberships of $108 million and
$119 million at January 3, 1998 and December 28, 1996, respectively, are
included in Accrued liabilities and other obligations.

Interest Rate Exchange and Cap Agreements

Amounts paid or received pursuant to interest rate exchange and cap
agreements are deferred and amortized as interest expense or income over
the remaining life of the applicable agreement.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Major Accounting Policies (continued)

Direct Response and Insurance Acquisition Costs

Costs of acquiring new club memberships and insurance business (primarily
marketing expenditures) are deferred when considered recoverable. Such
costs are amortized in proportion to the anticipated revenue to be
recognized from club memberships (over a period not to exceed 10 years) and
from insurance policies (over the life of the policy, which is generally 10
years). The time period over which deferred policy and membership
acquisition costs are being amortized and the recoverability of such costs
could differ from estimates due to changing market conditions. Amortization
periods and related amounts of deferred policy and membership acquisition
costs are continually reviewed for potential impairment and as adjustments
become necessary they are reflected in current operations.

Present value of future profits represents costs allocated to the insurance
and club memberships acquired and is being amortized in proportion to the
anticipated revenue to be recognized from club memberships and from
insurance policies. The initial amortization periods range from 5 to 20
years.

Amortization expense is categorized as follows:

53-Week 52-Week
Period Period
Ended Ended
----------- -----------
Jan. 3, Dec. 28,
(In millions) 1998 1996
----------- -----------

Deferred acquisition costs $ 226 $ 180
Present value of future profits 24 29
---------- ----------
Total $ 250 $ 209
========== ==========

Insurance Policy Claim Reserves

Liabilities for future policy benefits have been determined principally by
the net level premium method. These amounts have been computed using
assumptions that include provisions for risk of adverse deviation. The
assumptions developed for interest rates (average 6%-8%) and withdrawal
rates are based on the experience of Montgomery Ward Life Insurance
Company, a wholly-owned subsidiary of Signature. The principal mortality
tables used to develop the assumed mortality rates are the 1960
Commissioners' Standard Group Table, the 1955-1960, 1965-1970, and 1975-
1980 Basic Mortality Tables and the 1969-1971 and 1979-1981 U.S. Life
Tables. The reserve for claims and related adjustment expenses is based on
estimates of the costs of individual claims reported and incurred, but not
reported prior to year-end. While management believes the reserve for
claims and related adjustment expenses is adequate, the reserve is
continually reviewed and as adjustments become necessary, they are
reflected in current operations.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Major Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences by applying enacted statutory tax rates to differences between
the financial statement carrying amounts and tax bases of existing assets
and liabilities. In addition, the amount of any future tax benefits is
reduced by a valuation allowance to the extent such benefits are not
expected to be realized on a more likely than not basis.

2. Reorganization

At the close of business on July 7, 1997 (the "Petition Date"), MW Holding
and certain of its U.S. subsidiaries filed petitions for reorganization
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware. These related proceedings are being
jointly administered under the caption "In re Montgomery Ward Holding
Corp., a Delaware corporation, et. al.", Case No. 97-1409 (PJW). The
following U.S. subsidiaries were not included in the bankruptcy filings:
Signature and its direct and indirect subsidiaries; Marinco Insurance
U.S.A., Inc. ("Marinco"); and Montgomery Ward Foundation.

After a long period of negotiation, Wards was unable to reach an out-of-
court settlement with its lenders. Accordingly, bankruptcy petitions were
filed in order to obtain an opportunity to reorganize and begin
implementing the Company's strategies while working to restructure its
indebtedness. Pursuant to the Post-Petition Loan and Guaranty Agreement
dated July 8, 1997, among Wards and Lechmere, as borrowers; MW Holding and
other debtor subsidiaries of MW Holding, as guarantors; General Electric
Capital Corporation ("GE Capital"), as agent and lender; and various
lenders, as amended (the "DIP Facility"), the lenders have agreed to
provide up to $1 billion in post-petition financing to Wards.

The Company expects to reorganize its affairs under the protection of
Chapter 11 and to propose a Chapter 11 plan of reorganization for itself
and the other filing subsidiaries, including Wards. The Bankruptcy Court
has granted the Company's request to extend its exclusive right to file a
plan of reorganization through May 1, 1998. Although management expects to
file a plan of reorganization in 1998, which would contemplate emergence in
1999, there can be no assurance at this time that a plan of reorganization
will be proposed by the Company or approved or confirmed by the Bankruptcy
Court, or that such plan will be consummated. After the expiration of the
exclusivity period, creditors of the Company have the right to propose
alternative plans of reorganization. Any plan of reorganization, among
other things, is likely to result in material dilution or elimination of
the equity of existing shareholders, as a result of the issuance of equity
to creditors or new investors.

As a result of the Chapter 11 filings, absent approval of the Bankruptcy
Court, the Company is prohibited from paying, and creditors are prohibited
from attempting to collect, claims or debts arising pre-petition. The
consummation of a plan of reorganization is the principal objective of the
Company's Chapter 11 case. A plan of reorganization sets forth the means
for satisfying claims and interests in the Company and its debtor
subsidiaries, including the Liabilities subject to compromise. The
consummation of a plan of reorganization for the Company and its debtor
subsidiaries will require the requisite vote of impaired creditors and
stockholders under the Bankruptcy Code and confirmation of the plan by the
Bankruptcy Court.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Reorganization (continued)

The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. However,
as a result of the Chapter 11 filing and circumstances relating to this
event, including the Company's leveraged financial structure and losses
from operations, such realization of assets and liquidation of liabilities
is subject to significant uncertainty. While under the protection of
Chapter 11, the Company may sell or otherwise dispose of assets, and
liquidate or settle liabilities, for amounts other than those reflected in
the financial statements. Further, a plan of reorganization could
materially change the amounts reported in the financial statements, which
do not give effect to all adjustments of the carrying value of assets or
liabilities that might be necessary as a consequence of a plan of
reorganization.

The appropriateness of using the going concern basis is dependent upon,
among other things, confirmation of a plan of reorganization, future
profitable operations, the ability to comply with the terms of the DIP
Facility and the ability to generate sufficient cash from operations and
financing arrangements to meet obligations.

3. Liabilities Subject to Compromise

The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All
amounts below may be subject to future adjustment depending on Bankruptcy
Court action, further developments with respect to disputed claims,
determination as to the value of any collateral securing claims, or other
events. Additional claims may arise resulting from rejection of additional
executory contracts or unexpired leases by the Company.

January 3,
(In millions) 1998
----------------

Accounts payable $ 1,340
Long-term Credit Agreement 603
Short-term Credit Agreement 456
Note Purchase Agreements 276
Other long-term debt 9
Obligations under capital leases 51
Lease and other contract rejection claims 104
Other liabilities 629
-----------
$ 3,468
===========

The Company has $83 million of liabilities due Signature and Marinco which
have been eliminated in consolidation but are subject to compromise (see
Note 22).

As a result of the bankruptcy filing, no principal or interest payments
will be made on any pre-petition debt without Bankruptcy Court approval or
until a reorganization plan defining the repayment terms has been approved.
Contractual interest expense not recorded on certain pre-petition debt
totaled $61 million for the period from July 8, 1997 through January 3,
1998.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Liabilities Subject to Compromise (continued)

Prior to the bankruptcy filing, the Company's debt consisted primarily of
borrowings under the Long-term Credit Agreement, the Short-term Credit
Agreement and Note Purchase Agreements. The Company was in default of the
terms of each applicable loan agreement. Each of these agreements had a
maturity date of August 29, 1997 and were to bear interest at varying
rates. The Company was also in default of the terms of the Seasonal Credit
Agreement, which was terminated as a result of the Chapter 11 filing. There
were no borrowings outstanding under this agreement. The caption "Accounts
payable," included in Liabilities subject to compromise, includes
facilities Wards had available under vendor financing programs which
totaled $725 million. At June 28, 1997, these facilities were principally
drawn. These facilities are no longer available due to the Chapter 11
filing.

The Company had entered into interest rate exchange and cap agreements with
various banks to offset the market risk associated with an increase in
interest rates under both the Long-term and Short-term Credit Agreements.
The aggregate notional principal amounts under the interest rate exchange
agreements was $175 million. The interest rate exchange agreements were
terminated upon the Company's bankruptcy filing. Pursuant to the early
termination, the Company incurred a pre-petition liability of $3 million
which has been included in Liabilities subject to compromise. The cap
agreements, which all expired during fiscal 1997, were not terminated
early.

As part of the Chapter 11 reorganization process, the Company has attempted
to notify all known or potential creditors of the Chapter 11 filing for the
purpose of identifying all pre-petition claims against the Company.
Generally, creditors whose claims arose prior to the Petition Date had
until March 2, 1998 ("Bar Date") to file claims or be barred from asserting
claims in the future. Claims arising from rejection of executory contracts
by the Company, and claims related to certain other items were permitted to
be filed by other dates set by the Bankruptcy Court. Differences between
amounts shown by the debtors and claims filed by creditors are being
investigated and will either be amicably resolved or adjudicated. The
ultimate amount of and settlement terms for such liabilities are subject to
the plan of the reorganization when confirmed, and accordingly are not
presently determinable.

4. Reorganization Costs

Reorganization costs recorded in fiscal 1997 consisted of the following (in
millions):

Loss on disposition of assets of Lechmere $ 280
Wards and Electric Avenue & More store closings 204
Other 61
Professional fees 10
Interest income (2)
---------
$ 553
=========

In August 1997, the Bankruptcy Court approved a motion filed by Wards to
exit its non-core specialty retail store businesses - Lechmere, Home Image
by Lechmere and Electric Avenue & More. The exit involved the closing of 44
stores. The closings are expected to generate positive cash flows and
reduce future operating losses. The Company recorded a pre-tax charge of
$280 million associated with the closing of Lechmere and $50 million
associated with the exit of Electric Avenue & More, which included losses
and costs associated with liquidation of assets, rejection of leases,
severance payments and other related costs.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Reorganization Costs (continued)

In November 1997, Bankruptcy Court approved a motion to close 45
underperforming retail stores and two outlet and liquidation centers. The
closings are expected to generate positive cash flows and reduce future
operating losses. The Company recorded a pre-tax charge of $154 million
associated with the closing of these stores, which includes losses and costs
associated with the liquidation of assets, lease rejection claims, severance
payments and other related costs.

The net receipts of cash relating to the disposition of the assets of
Lechmere and closing of Wards and Electric Avenue and More stores consist of
proceeds from the liquidation of inventory of $175 million and proceeds from
the sale of properties, plants and equipment of $36 million, net of other
related costs and expenses of $56 million.

Other reorganization costs represent expenses and losses associated with the
restructuring of the Company's agreement with ValueVision International, Inc.
(see Note 20), the exit of certain product lines, rejection of certain
contracts, retention bonuses, and other expenses incurred as a result of the
Chapter 11 filing.

Professional fees incurred consisted of consulting and legal fees for
bankruptcy activity and restructuring efforts on behalf of the Company and
Creditors' Committee.

5. Acquisition of Amoco Enterprises, Inc.

On December 31, 1995, Wards acquired all of the outstanding capital stock of
Amoco Enterprises, Inc. (Enterprises), operator of the Amoco Motor Club and a
wholly-owned subsidiary of Amoco Oil Holding Company. The purchase price was
$100 million. The acquisition was financed through the use of the majority of
the proceeds generated from the issuance of the Montgomery Ward Holding Corp.
Senior Preferred Stock. On January 2, 1996, Wards' wholly-owned subsidiary,
Signature, purchased Enterprises from Wards for $100 million, net of cash and
cash equivalents.

The allocation of the purchase price is summarized as follows (in millions):

Cash and cash equivalents $ 63
Present value of future profits 126
Goodwill 67
Other assets 22
Trade accounts payable (3)
Accrued liabilities and other obligations (67)
Deferred income taxes (45)
-----
$ 163
=====

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Investments of Insurance Operations

Following is a summary of investments of insurance operations other than related
party investments. The market values for marketable debt and equity securities
are based on quoted market prices.

(In millions) January 3, 1998
-----------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Type of Investment Cost Gains Losses Value
- ------------------------------- ---------- ---------- ---------- ------

Fixed maturities:
Bonds:
United States Government
and government agencies
and authorities $ 57 $ 1 $ - $ 58
Public utilities 48 3 - 51
All other corporate bonds 47 2 - 49
Mortgage-backed securities 91 2 - 93
---------- ---------- ---------- ------
Total fixed maturities 243 8 - 251
---------- ---------- ---------- ------
Equity securities:
Common stock 19 7 - 26
---------- ---------- ---------- ------
Policy loans 7 - - 7
Limited partnership 5 - - 5
Short-term investments 69 - - 69
---------- ---------- ---------- ------
Total investments $ 343 $ 15 $ - $ 358
========== ========== ========== ======

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Investments of Insurance Operations (continued)

(In millions) December 28, 1996
---------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Type of Investment Cost Gains Losses Value
- ---------------------------------------- --------- ---------- ---------- ------

Fixed maturities:
Bonds
United States Government and
government agencies and authorities $ 52 $ - $ - $ 52
Public utilities 60 5 - 65
All other corporate bonds 9 1 - 10
Mortgage-backed securities 108 2 (1) 109
--------- ---------- ---------- ------
Total fixed maturities 229 8 (1) 236
--------- ---------- ---------- ------

Equity securities:
Common stock 17 4 - 21
--------- ---------- ---------- ------

Policy loans 7 - - 7
Limited partnership 2 - - 2
Short-term investments 51 - - 51
--------- ---------- ---------- ------
Total investments $ 306 $ 12 $ (1) $ 317
========= ========== ========== ======

Proceeds from sales of investments in debt securities were $30 million, $26
million and $13 million for the periods ended January 3, 1998, December 28, 1996
and December 30, 1995, respectively. Proceeds from sales of equity securities
were $41 million, $9 million and $9 million for the periods ended January 3,
1998, December 28, 1996 and December 30, 1995, respectively.

The fixed investment maturities as of January 3, 1998 are as follows:

Amortized Market
(In millions) Cost Value
--------- ------

Due in 1997 $ 29 $ 30
Due in 1998 through 2002 71 75
Due in 2003 through 2007 33 34
Due in 2008 and beyond 19 19
Mortgage-backed securities 91 93
--------- ------
$ 243 $ 251
========= ======

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Investments of Insurance Operations (continued)

Consolidated realized gains on sales of investments before income taxes and
changes in unrealized gains (losses) after income taxes on fixed maturities,
mortgage loans and equity securities, including those investments held by
non-insurance related subsidiaries, are as follows:

Fixed
Maturities
and Mortgage Equity
(In millions) Loans Securities
------------ ----------

53-week period ended January 3, 1998
Realized $ 1 $ 2
Unrealized - -

52-week period ended December 28, 1996
Realized $ - $ 4
Unrealized (4) 3

52-week period ended December 30, 1995
Realized $ 1 $ 5
Unrealized 10 (2)

7. Accounts and Notes Receivable from Affiliates

Under the Agreements, Monogram has the exclusive right to operate the Wards'
private label credit card system and the obligation to pay to Wards the face
amount of Monogram's receivables generated by the Wards private label credit
card system, up to $7 billion outstanding at any time. Sales of receivables
to Montgomery Ward Credit under the prior arrangements, and payments in
respect of receivables under the current Agreements, were $2.6 billion, $3.6
billion and $3.9 billion for the periods ended January 3, 1998, December 28,
1996 and December 30, 1995, respectively. At January 3, 1998 and December 28,
1996, there were $4.2 billion and $5.2 billion, respectively, of Wards credit
card receivables owned by Montgomery Ward Credit Companies. Amounts
receivable from Monogram in connection with such receivables are included in
Accounts and notes receivable from affiliates.

Wards is exposed to both market risk and credit risk under the Agreements.
Under the Agreements, Wards is required to pay Monogram the excess interest
costs on a monthly basis if a blended interest rate applicable to funding
costs with respect to the receivables exceeds 10% per annum. Since 1988, the
blended interest rate has been less than 10%.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Accounts and Notes Receivable from Affiliates (continued)

Should Montgomery Ward Credit Companies, or their guarantor General
Electric Capital Corporation, fail to perform their obligations under the
Agreements, Wards would suffer an accounting loss up to the amount of
Wards' share of finance charges and late fees (as described below), net of
applicable reserves carried by Montgomery Ward Credit. Wards estimates that
any accounting loss would be immaterial at January 3, 1998. Montgomery Ward
Credit Companies' obligations under the Agreements are not collateralized.

Wards generally bears a portion of the risk of credit losses due to non-
payment by cardholders up to a maximum of 2.6% of average outstanding
receivables, subject to offsets relating to Wards' share of certain
incremental increases in finance charges and late fees payable by
cardholders. Wards is also responsible for losses on certain higher risk
starter card accounts to the extent the loss percentage as to those
accounts exceeds the loss percentage experience of the rest of the
portfolio.

Wards' net unpaid liability for credit losses for 1991 through 1997 are to
be payable to Montgomery Ward Credit pursuant to a note ("Continuation
Note") due in early 2003, provided that the outstanding balance of such
note cannot exceed $300 million. A remaining note in the amount of $15
million, consisting of losses incurred after July 7, 1997, is to be
executed which provides for monthly principal payments in the amount of 5%
of the scheduled monthly principal payments for the Continuation Note.
Starter card losses are payable currently. Interest on Wards' unpaid
liability for credit losses is to be payable at a rate equal to rates on
comparable borrowings of Wards. Interest on notes outstanding as of July 7,
1997, has been stayed by the Chapter 11 proceeding.

In exchange for Wards' agreement to allow MWCC to increase finance charge
rates and late fees in selected states, Wards receives a share of
incremental finance charges and late fees resulting from such increases.
Such amount is available for offset against Wards' unpaid liability for its
share of credit losses, and to the extent not currently paid or offset
earns interest at the same rate as amounts owned by Wards to Montgomery
Ward Credit. In the event that, due to the increase in finance charge rates
and late fees, refunds are required to be made, Wards and MWCC have agreed
in certain cases to share the financial risk.

Wards has executed notes for its unpaid share of credit losses which
totaled $412 million with respect to credit losses through 1997. The
incremental finance charges and late fee assessments earned by Wards at the
end of 1997 were $112 million for a net obligation of $300 million. As
Wards' net unpaid liability for credit losses for 1991 through 1997
exceeded the $300 million threshold, a payment of $28 million with respect
to the excess was made in early 1998. At January 3, 1998, $288 million of
the net obligation is included in Liabilities subject to compromise, and
$40 million of the obligation is included in Accrued liabilities and other
obligations. As the $300 million threshold has been reached, it is expected
that future payments may be required depending upon the level of credit
card losses.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. Accounts and Notes Receivable from Affiliates (continued)

The Agreements are scheduled to expire on December 31, 2011, provided the
terms shall continue thereafter from year to year unless either party gives
ten years prior notice of its election to terminate. Except upon the
occurrence of certain events of default, the Agreements may generally not be
terminated by either party prior to December 31, 2011. Wards has not yet
assumed these agreements and the Montgomery Ward Credit Companies have not
exercised the provision in the Agreements allowing the Montgomery Ward Credit
Companies to terminate the Agreements in the event of Wards' bankruptcy.
Wards has agreed to pay Montgomery Ward Credit $2.5 million per month for the
months of January 1998 through June 1998. Wards expects to execute an interim
amendment to the Account Purchase Agreement ("Interim Agreement") which will
provide the Company with the ability to utilize the private label credit card
during the pendancy of the Bankruptcy case. It is likely that the Interim
Agreement will require monthly payments similar to those required for the
first six months of 1998. GE Capital has guaranteed Montgomery Ward Credit
Companies' obligations under the Agreements.

8. Retirement Plans

Retirement plans cover a majority of full-time associates of Wards and its
subsidiaries. Retirement benefits are provided through a defined benefit
pension plan as well as through a savings and profit sharing plan.

The components of the net pension credit were as follows:

53-Week 52-Week
Period Period
Ended Ended
------- ---------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
------- -------- --------

Service cost-benefits earned during the period $ (11) $ (12) $ (10)
Interest cost on projected benefit obligation (48) (48) (51)
Actual return on assets 190 112 185
Deferral of unanticipated investment performance (110) (34) (110)
Amortization of unrecognized prior service cost 1 1 -
Amortization of unrecognized net loss (3) (6) (3)
------- -------- --------
Net pension credit $ 19 $ 13 $ 11
======= ======== ========

Assumptions:
Discount rate 7.7% 7.5% 8.5%
Increase in future compensation 3.0% 6.0% 6.0%
Rate of return on plan assets 9.5% 9.5% 9.5%

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Retirement Plans (continued)

The funded status of the defined benefit pension plan was as follows:

Jan. 3, Dec. 28,
(In millions) 1998 1996
-------- --------

Acturial present value of accumulated benefit
obligation:

Vested $ (683) $ (655)
Nonvested (1) (2)
-------- --------
Accumulated benefit obligation (684) (657)

Additional amounts related to projected increases
in compensation levels (7) (20)
-------- --------
Projected benefit obligation $ (691) (677)
Plan assets at fair value, primarily in equity
and fixed income securities 1,071 946
-------- --------
Plan assets in excess of projected
benefit obligation $ 380 $ 269
-------- --------

Unrecognized net loss since initial
application of FAS 87 (1) 71
Unrecognized prior service cost since
initial application of FAS 87 (13) 7
-------- --------

$ 366 $ 347
======== ========

The projected benefit obligation was determined using an assumed discount
rate of 7.0% at January 3, 1998 and 7.7% at December 28, 1996 and an
assumed rate of increase in future compensation levels of 3% for 1997 and
6% for 1996. Excess unrecognized net gains and losses and prior service
costs are amortized over the average future service period.

The Company provides a 401(K) defined contribution plan to eligible
employees. Company matching contributions for employees under the plan
amounted to $4 million for the period ended January 3, 1998 and $6 million
for the periods ended December 28, 1996 and December 30, 1995.

Substantially all associates who retire after participation in the
retirement plan for ten years and who were members of the health care plan
for the year prior to retirement are eligible for certain post-retirement
health care benefits, the cost of which is shared with the retirees.
Certain associates who retired before January 1, 1996 are eligible for
postretirement life insurance benefits. The postretirement healthcare
benefits cease at age 65 for associates who retire on or after January 1,
1996 and who do not meet certain age and service requirements. In 1992, the
Company established a limit on its future annual contributions on behalf of
retirees at a maximum of 125% of the projected 1992 company contributions.
The Company continues to evaluate ways in which it can better manage
retiree benefits and control costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits may have a
significant effect on the amount of the reported obligation and annual
expense.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Retirement Plans (continued)

The Company accounts for postretirement benefits under the provisions of
SFAS No. 106, "Employers Accounting for Postretirement Benefits other than
Pensions."

The components of the net periodic postretirement benefit cost were as
follows:

53-Week 52-Week
Period Period
Ended Ended
------- ---------------
(In millions) 1997 1996 1995
------- ---- -----

Service cost $ 1 $ 1 $ 2
Interest cost on accumulated post-retirement
benefit obligation 8 9 10
Curtailment gain on life insurance benefit termination - - (3)
Amortization of prior service cost (2) (1) -
------- ----- -----
Net periodic post-retirement benefit cost $ 7 $ 9 $ 9
======= ===== =====

The status of the Company's liability for postretirement benefits at January
3, 1998, which is included in Liabilities subject to compromise, and
December 28, 1996, which are included in Accrued liabilities and other
obligations, is as follows:

(In millions) 1997 1996
----- ----

Accumulated post-retirement obligation:
Retirees $ 72 82
Fully eligible active associates 16 16
Other active associates 21 22
----- -----

Total accumulated post-retirement benefit obligation 109 120

Unrecognized prior service cost 15 15
Unrecognized net gain 14 5
----- -----
Accumulated post-retirement benefit obligation $ 138 $ 140
===== =====

The weighted average discount rate used in measuring the accumulated
postretirement benefit obligation was 7% at January 3, 1998 and 7.7% at
December 28, 1996. The assumed health care cost trend rate and the impact of
a 1% increase in the medical trend rate on the accumulated postretirement
benefit obligation, service cost and interest cost are not applicable due to
caps established on current cost levels.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Properties, Plants and Equipment

The details of the properties, plants and equipment accounts are shown
below at cost:

Jan. 3, Dec. 28,
(In millions) 1998 1996
-------------- --------------

Land $ 164 $ 193
Buildings 795 886
Leasehold improvements 290 353
Fixtures and equipment 522 585
Assets under capital leases 92 96
Less accumulated depreciation and amortization (796) (805)
-------------- --------------
Properties, plants and equipment, net $ 1,067 $ 1,308
============== ==============

Depreciation expense for properties, plants and equipment was $117 million,
$122 million and $115 million for 1997, 1996 and 1995, respectively. Assets
held for disposition, representing primarily closed retail and warehouse
facilities, of $76 million and $17 million at January 3, 1998 and December
28, 1996, respectively, are included in Other assets. Losses of $16
million, which are included in Reorganization Costs, were recognized in
1997 in connection with the write-down of these properties to their net
realizable values.

10. Income Taxes

As of January 3, 1998, the Company has a tax benefit of $733 million
attributable to net operating loss ("NOL") carryforwards available, which
expire beginning in 2010, targeted jobs tax credit ("TJTC") carryforwards
of $8 million, which begin expire beginning in 2009 and alternative minimum
tax ("AMT") credits of $3 million available to offset future federal income
tax liabilities.

The Company increased the valuation reserve relating to the realizeability
of the NOL carryforwards in 1997. Management believes that the NOL
carryforwards, net of the applicable valuation reserve, could be realized
by selling appreciated non-operating assets, if necessary, to avoid
allowing the carryforwards to expire without being used. Management has
obtained third party valuations to establish the probable proceeds from
such sales.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes (continued)

The approximate tax effects of temporary differences and carryforwards that
give rise to the net deferred tax asset (liability) are as follows:

Jan. 3, Dec. 28,
(In millions) 1998 1996
--------------- ---------------

Accrued liabilities $ 133 $ 112
Post-retirement benefits 48 55
Insurance reserves 66 71
Other deferred tax assets 15 4
--------------- ---------------
Total deferred tax assets 262 242

Prepaid pension contribution (131) (141)
Direct response and insurance acquisition costs (199) (238)
Properties, plants and equipment (121) (159)
Other deferred tax liabilities (51) (51)
--------------- ---------------
Total deferred tax liabilities (502) (589)

NOL, TJTC and AMT credit carryforwards 744 327
Valuation allowance (205) (32)
--------------- ---------------
Net deferred tax asset (liability) $ 299 $ (52)
=============== ================

Income tax expense (benefit) consists of:

53-Week 52-Week
Period Period
Ended Ended
-------------- ---------------------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
-------------- --------------- --------------

Federal
Current $ 2 $ 2 $ 7
Deferred (361) (134) (20)
State, local and foreign (16) (6) (1)
-------------- --------------- --------------
Total income tax benefit $ (375) $ (138) $ (14)
============== =============== ==============

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Income Taxes (continued)

A reconciliation of the statutory to effective federal income tax rate is
as follows:

53-Week 52-Week
Period Period
Ended Ended
--------------- --------------------------------------
Jan. 3, Dec. 28, Dec. 30,
1998 1996 1995
--------------- ---------------- -----------------

Federal income tax rate (35)% (35)% (35)%
State taxes, net of reduction of federal tax
and NOL benefit (1) (1) (7)
Tax credits - (2) (31)
Deferred rate differential, net of adjustments - - (2)
Permanent differences - 1 14
Valuation allowance 11 - -
--------------- ---------------- -----------------
Effective income tax rate (25)% (37)% (61)%
=============== ================ =================

11. Reinsurance

The Company's insurance subsidiaries are involved in both the cession and
assumption of reinsurance with other companies. Risks are reinsured with
other companies to permit the recovery of a portion of the direct losses.
Policy related liabilities and accruals, including incurred but not
reported claims, are included in the financial statements as Insurance
policy claim reserves, and reinsurance ceded is reflected as a component of
Other assets. The Company remains liable to the extent the reinsuring
companies cannot meet their obligations under these reinsurance treaties.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Reinsurance (continued)

Premium revenues, which are included in Direct response marketing revenues,
are as follows:

Assumed Percentage
Ceded From of Amount
Gross to Other Other Net Assumed
(In millions) Amount Companies Companies Amount To Net
------ --------- --------- ------ ----------

53-Week Period ended January 3, 1998:
Life Insurance in force $4,693 $ (256) $ 923 $5,360 17.2%
====== ========= ========= ====== ==========
Premiums
Life Insurance 49 (1) 11 59 18.6%
Accident and health insurance 75 (3) 59 131 45.0%
Property and liability insurance 30 (9) 30 51 58.8%
Other - - 6 6 100.0%
------ --------- --------- ------ ----------
Total $ 154 $ (13) $ 106 $ 247 42.9%
====== ========= ========= ====== ==========

52-Week Period ended December 28, 1996:
Life Insurance in force $5,764 $ (104) $ 176 $5,836 3.0%
====== ========= ========= ====== ==========
Premiums
Life Insurance 59 (1) 7 65 10.8%
Accident and health insurance 94 (5) 11 100 11.0
Property and liability insurance 76 (15) - 61 0.0
------ --------- --------- ------ ----------
Total $ 229 $ (21) $ 18 $ 226 8.0%
====== ========= ========= ====== ==========

52-Week Period ended December 30, 1995:
Life Insurance in force $5,730 $ (84) $ 156 $5,802 2.7%
====== ========= ========= ====== ==========
Premiums
Life Insurance 53 (1) 2 54 3.7%
Accident and health insurance 91 (5) 15 101 14.9%
Property and liability insurance 73 (12) - 61 0.0%
------ --------- --------- ------ ----------
Total $ 217 $ (18) $ 17 $ 216 7.9%
====== ========= ========= ====== ==========

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Short-Term and Long-Term Debt

The long-term debt of Wards and its subsidiaries is as follows:

Jan. 3, Dec. 28,
(In millions) 1998 1996
----------- -------------

Wards
Post-Petition Loan and Guaranty Agreement $ 50 $ -
Commercial Development Revenue Bonds, due in 2013 at 4.5%
interest rate, adjusted at three-year intervals - 5
Other - 2
Wards' Real Estate Subsidiaries
11.50% Secured Note, due serially to September 1, 2001 11 12
7.50% Secured Note, due serially to November 30, 2002 5 5
9.45% Secured Notes, due serially to November 30, 2003 14 15
7.75% Secured Notes, due serially to August 31, 2004 16 17
7.875% Secured Notes, due serially to December 15, 2005 7 7
9.00% Secured Notes, due serially to January 1, 2006 11 12
Other 8 8
Lechmere
Other - 4
----------- -------------
Total long-term debt $ 122 $ 87
=========== =============

Maturities of long-term debt for the five years succeeding January 3, 1998
are as follows: 1998--$14 million, 1999--$61 million, 2000--$11 million,
2001--$10 million, 2002--$9 million, and thereafter --$17 million.

Wards entered into the Post-Petition Loan and Guaranty Agreement ("DIP
Facility") on July 8, 1997, which was approved by the Bankruptcy Court on
July 31, 1997. Under the DIP Facility, the lenders have agreed to provide a
revolving credit and letter of credit facility, the maximum amount of which
is based on the book value of eligible inventory (as defined in the DIP
Facility), the fair market value of eligible real property (as defined in
the DIP Facility) and the earnings of Signature. In no case may borrowings
exceed $1 billion. Total letters of credit outstanding were $52 million at
January 3, 1998. The Company had $811 million of borrowing availability
under the DIP Facility at January 3, 1998.

Under the DIP Facility, Wards may select among several interest rate
options, all of which are based on market rates plus a margin. A commitment
fee is payable based on the unused amount of the facility. The facility
expires on July 7, 1999, or earlier in the case of an event of default. The
Company is currently in default of the terms of each of the Long-Term
Credit Agreement, the Short-Term Credit Agreement and the Note Purchase
Agreements and no future amounts may be drawn thereunder. The Company was
also in default of the Seasonal Credit Agreement, which was terminated as a
result of the Chapter 11 filings. There were no borrowings outstanding
under this agreement.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Short-Term and Long-Term Debt (continued)

Signature borrowed $102 under a Credit Agreement (Signature Credit
Agreement) dated as of September 27, 1996 as amended and restated October
21, 1996 and amended December 23, 1996 between Signature and various
lenders. The proceeds were used to repay the intercompany loan from Wards to
Signature arising from Signature's acquisition of the Amoco Motor Club.
During 1997, the maturity date was extended to January 31, 1998 and has not
been repaid. In 1998, the lenders agreed that they will extend the maturity
date to the earlier of May 29, 1998 or the funding of a replacement loan
facility, provided that Signature provide the lenders with certain security
and other terms and conditions the new lenders may deem appropriate. In
March 1998, Signature received a commitment from a new lender which would
enable Signature to repay the amounts borrowed under the Signature Credit
Agreement. Management expects to borrow the amounts required and repay the
amounts due by May 29, 1998. If the new lender's commitment were to be
terminated, the aforementioned extension agreement would also terminate.

The Secured Notes of the real estate subsidiaries are secured by mortgage
liens and/or assignments of rental agreements whereby the real estate
subsidiaries have assigned to trustees certain monies payable under leases
with Wards. As the Secured Notes of the real estate subsidiaries are
adequately collateralized by the respective properties, these obligations
are not considered subject to compromise. The obligation relating to the
Commercial Development Revenue Bonds of $5 million is included in
Liabilities subject to compromise at January 3, 1998.

13. Leases

The Company leases real and personal property principally through
noncancelable capital and operating leases, which generally provide for the
payment of minimum rentals and, in certain instances, executory costs and
additional rentals based upon a percentage of sales. The terms of the real
estate leases typically contain renewal options for additional periods.

At January 3, 1998, the minimum lease payments under all noncancelable
operating leases with an initial term of more than one year, not including
$29 million of future sublease rentals, and under capital leases are as
follows:

Capital Operating
(In millions) Leases Leases
------- ---------

1998 $ 11 $ 100
1999 11 84
2000 10 71
2001 10 61
2002 9 55
Thereafter 19 407
------- ---------
Total Minimum Lease Payments $ 70 $ 778
=========
Less: Executory costs, principally real
estate taxes to be paid by the lessor (2)
Less: Imputed interest (17)
-------
Present value of net minimum capital
lease payments including portion due
within one year of $7 $ 51
=======

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Leases (continued)

The obligations under capital leases have been included in Liabilities
subject to compromise at January 3, 1998.

Net rent expense charged to earnings was $136 million, $149 million and
$140 million for the periods ended January 3, 1998, December 28, 1996 and
December 30, 1995, respectively, after deducting rentals from subleases of
$9 million, $10 million and $9 million for the periods ended January 3,
1998, December 28, 1996 and December 30, 1995, respectively. Rent expense
includes contingent lease rentals for capital and operating leases of $7
million, $10 million, and $12 million for the periods ended January 3,
1998, December 28, 1996 and December 30, 1995, respectively. These
contingent lease rentals are generally based on sales revenues.

Some rental agreements contain escalation provisions that may require
higher future rent payments. Rent expense incurred under rental agreements
which contain escalation clauses is recognized on a straight-line basis
over the life of the lease.

14. Redeemable Preferred Stock

On December 29, 1995, Wards issued 1,750 shares of a new series of senior
preferred stock ("MW Senior Preferred Stock"), par value of $1.00 per
share, to GE Capital in exchange for $175 million in cash. Subsequent to
year end 1995, Wards used a portion of the proceeds to finance the purchase
of the Amoco Motor Club by its wholly-owned subsidiary, Signature. The
subscription agreement for the MW Senior Preferred Stock contained an
exchange option which gave GE Capital the option to exchange the MW Senior
Preferred Stock for senior preferred stock of the Company with
substantially the same terms. On January 31, 1996, GE Capital exercised
this exchange option. On March 29, 1996, the Company's Certificate of
Incorporation was amended to authorize the issuance of a new series of
senior preferred stock ("New Senior Preferred Stock"). On March 29, 1996,
the Company issued all of the 1,750 shares of New Senior Preferred Stock to
GE Capital in exchange for the 1,750 shares of MW Senior Preferred Stock
held by GE Capital. Dividends on the New Senior Preferred Stock are payable
quarterly at an annual rate of $7,010 per share. The Company is required to
redeem the New Senior Preferred Stock on June 30, 2002, with the option of
redeeming all or any portion prior to June 30, 2002.

On March 4, 1997, GE Capital, Wards and Lechmere amended the Program
Agreement under which GE Capital provided funds to Wards and Lechmere to
pay manufacturers and distributors of goods purchased by Wards and
Lechmere. In exchange for a $150 million increase in the maximum amount of
funds GE Capital agreed to provide, MW Holding agreed to issue shares of a
new series of Preferred Stock having a liquidation value of $21 million. On
April 1, 1997, GE Capital further increased its funding under the Program
Agreement by $100 million and the Board of Directors of MW Holding agreed
to issue additional shares of the new series of Preferred Stock.

At its Annual Meeting held on May 29, 1997, the stockholders of MW Holding
approved an amendment to its Certificate of Incorporation authorizing the
issuance of up to 25,000 shares of preferred stock. The amendment allows
future issuances of preferred stock by action of the Board of Directors
without the need for further action by the stockholders. The Board of
Directors designated 1,000 shares of the newly authorized preferred stock
to be Series C Preferred Stock and MW Holding issued 352 shares of the
Series C Preferred Stock to GE Capital in full payment of the obligations
described above.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Redeemable Preferred Stock (continued)

All of the Series C Preferred Stock is required to be redeemed on September
30, 2002 at a redemption price of $100,000 per share (the "Liquidation
Value") plus unpaid accrued dividends. Dividends are payable quarterly at a
rate per annum equal to 15%, with the first payment based on the number of
days from and including March 4, 1997. If for any reason the full dividend
on any payment date is not paid in cash on such date, the unpaid amount
thereof will automatically, without further action, be deemed added to the
Liquidation Value. MW Holding did not pay the dividend due June 30, 1997 of
$2 million and such amount has been added to the liquidation value of the
Series C Preferred Stock.

MW Holding also did not pay dividends due on June 30, 1997 on its New
Senior Preferred Stock. The redemption provisions of the Series C and New
Senior Preferred Stock have been stayed by the Chapter 11 proceedings. No
further dividends will be declared or paid on the Series C or New Senior
Preferred Stock prior to the approval of a plan of reorganization.

15. Common Stock

As of January 3, 1998, the Company has the following authorized classes of
common stock:

Class A Common Stock, Series 1; $.01 par value; 25,000,000 shares
authorized; 18,222,706 shares issued and outstanding, net of 6,777,294
shares held in treasury.

Class A Common Stock, Series 2; $.01 par value; 5,412,000 shares
authorized; 99,541 shares issued and outstanding, net of 2,118,090
shares held in treasury.

Class A Common Stock, Series 3; $.01 par value; 12,400,000 shares
authorized; no shares issued or outstanding.

Class B Common Stock; $.01 par value; 25,000,000 shares authorized,
issued and outstanding; all owned by GE Capital.

The Company has repurchased 5,982,897 shares held by certain former
officers of the Company, Wards and Signature and their permitted
transferees by making cash payments and issuing installment notes in the
aggregate of approximately $54 million. As of January 3, 1998, the
outstanding balance of these notes was $7 million. These installment notes
bear interest at varying rates, are payable over multi-year periods
(generally three to five years) and are secured by shares of common stock.
These notes are classified as Liabilities subject to compromise. The
Company does not have the capacity under its borrowing agreements to
satisfy the payments for these notes. A noteholder may foreclose on the
pledge of shares repurchased if note payments are not made within one year
of becoming due; provided, however that the foreclosure remedy has been
stayed by the Chapter 11 filing.

Each share of Class B Common Stock entitles the holder thereof to one vote.
All shares of Class A Common Stock entitle the holders to a total of
25,000,000 votes, or one vote per share if the total number of Class A
shares issued and outstanding is less than 25,000,000.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. Common Stock (continued)

In 1997, the Company adopted Statement of Financial Accounting Standards
Number 128, "Earnings per Share" ("FAS 128"). FAS 128 requires the
presentation of "basic" earnings per share (income applicable to common
shareholders divided by the weighted-average number of common shares
outstanding during the period) and "diluted" earnings per share (which
gives effect to all dilutive potential common shares that were outstanding
during the period). All prior-period earnings per share data have been
restated to conform to FAS 128. Basic and diluted earnings per share are
the same for the periods ended January 3, 1998, December 28, 1996 and
December 30, 1995, as all common stock equivalents are antidilutive, due to
the net loss incurred during these periods.

For the 53-Week For the 52-Week For the 52-Week
(In millions, Period Ended Period Ended Period Ended
except share January 3, 1998 December 28, 1996 December 30, 1995
and per share -------------------------- --------------------------- --------------------------
amounts) Class A Class B Class A Class B Class A Class B
----------- ----------- ----------- ------------ ----------- -----------

Net loss applicable to
common shareholders $ 580 $ 580 $ 118 $ 131 $ 6 $ 7
Weighted average number
of common shares
outstanding 18,322,247 25,000,000 18,710,601 25,000,000 19,511,238 25,000,000
Net loss per
common share $ (31.67) $ (23.17) $ (6.33) $ (5.22) $ (.33) $ (.27)

16. Stock Ownership Plan

The Montgomery Ward & Co., Incorporated Stock Ownership Plan was adopted
effective July 19, 1988. A total of 1,000,000 Class A Common Stock, Series
1, 5,412,000 shares of Class A Common Stock, Series 2, and 12,400,000
shares of Class A Common Stock, Series 3, have been reserved for issuance
under the plan. Key associates of Wards and its subsidiaries are eligible
to participate and may receive awards, purchase rights and options. Awards
are grants of shares for no consideration. The Stock Ownership Plan expires
on July 19, 1998 and no additional stock options may be granted after such
date.

During 1991, the Board of Directors approved the Directors Plan. The
Directors Plan was established to, among other things, allow outside
directors to receive all or any portion of the fees for their services as
directors of the Company and Wards via conversion rights in Series 1 or
Series 2 shares. In 1997, 1996 and 1995, 706, 2,421 and 2,476 Series 1
shares were issued from treasury stock as payment for directors fees,
respectively.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Stock Ownership Plan (continued)

Following is a summary of activity under the plans:

January 3, December 28, December 30,
1998 1996 1995
---------------------- ----------------------- -----------------------
Wtd. Wtd. Wtd.
Shares Avg. Shares Avg. Shares Avg.
(000) Ex. Price (000) Ex. Price (000) Ex. Price
---------- ---------- -------- ---------- -------- ----------

Outstanding,
beg. of year 4,338 $17.87 5,165 $17.61 6,163 $17.76
Granted 4,721 7.32 340 23.95 673 24.90
Exercised - - (352) 9.52 (980) 19.29
Forfeited (970) 18.61 (458) 21.14 (72) 19.22
Canceled (1,328) 11.54 (357) 23.86 (619) 24.15
---------- ---------- -------- ---------- -------- ----------
Outstanding,
end of year 6,761 $11.64 4,338 $17.87 5,165 $17.61
========== ========== ======== ========== ======== ==========
Exercisable,
end of year 3,688 $15.23 3,981 $16.39 3,980 $15.92
========== ========== ======== ========== ======== ==========

5.3 million of the 6.8 million options outstanding at January 3, 1998 have
exercise prices between $.20 and $18.75, with a weighted average exercise
price of $8.38 and a weighted average remaining contractual life of 7.5
years. 2.2 million of these options are exercisable. The remaining 1.5
million options have exercise prices between $22.50 and $26.50, with a
weighted average exercise price of $23.36 and a weighted average remaining
contractual life of 6.02 years. All of these options are exercisable.

In 1996, the Company adopted the disclosure only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," requiring pro-forma net
loss and net loss per common share be determined as though stock-based
compensation expense had been recognized using an option pricing model.
However, due to the Company's bankruptcy filing and the significant losses
incurred in fiscal 1997, the Company does not believe the pro-forma net
loss and net loss per common share would be materially different from the
reported amounts.

17. Operating, Selling, General and Administrative Expenses

Operating, selling, general and administrative expenses include insurance
benefits, claims and losses related to direct response marketing operations
of $150 million, $144 million and $100 million for the periods ended
January 3, 1998, December 28, 1996 and December 30, 1995, respectively. The
Company expenses production costs of print, radio and television
advertisements on the date the advertising first takes place. Advertising
expenses included in operating, selling, general and administrative
expenses were $363 million, $392 million and $335 million for the periods
ended January 3, 1998, December 28, 1996 and December 30, 1995,
respectively.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Interest Expense, Net of Investment Income

Net interest expense is as follows:

53-Week 52-Week
Period Period
Ended Ended
-------- ----------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
-------- ---------- --------

Interest on short-term borrowings $ 63 $ 53 $47
Interest on long-term debt and obligations under
capital leases 14 44 32
Miscellaneous interest, net 36 32 15
Investment income (2) (2) (3)
-------- ---------- ---------
Total interest expense, net of investment income $111 $127 $91
======== ========== =========

19. Litigation and Other Proceedings

MW Holding, Wards and its subsidiaries are engaged in various litigation
and have a number of unresolved claims. While the amounts claimed are
substantial and the ultimate liability with respect to such litigation and
claims cannot be determined at this time, management is of the opinion that
such liability, to the extent not provided for through insurance or
otherwise, is not likely to have a material impact on the financial
condition and the results of operations of the Company.

20. Related Party Transactions

Bernard F. Brennan

Substantially all shares of Class A Common Stock, except those held by
Bernard F. Brennan, former Chairman and Chief Executive Officer, and a
trust established for the benefit of his children, are held by a Voting
Trust which was created in 1988. In 1994, a second voting trust was created
to hold shares of Class A Series 3 Common Stock. As Voting Trustee, Bernard
F. Brennan has sole voting power and control of all shares held by both
Voting Trusts. The 1988 Voting Trust will expire June 21, 1998 or upon the
occurrence of certain specified events in accordance with the Voting Trust
Agreement. The 1994 Voting Trust has no expiration date but may expire upon
the occurrence of certain specified events in accordance with the Voting
Trust Agreement.

In conjunction with a Relationship Agreement entered into between Mr.
Brennan and the Company in December 1996, the Company provided a loan to
Mr. Brennan of $12.5 million. Class A common stock of the Company owned by
Mr. Brennan and his permitted transferees is pledged as collateral for this
loan. The loan does not bear interest. In addition, Mr. Brennan is to be
paid $1.5 million annually (for a five-year period) for consulting services
he provides to the Company. The Company ceased payment for such consulting
services upon the bankruptcy filing.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Related Party Transactions (continued)

GE Capital Corporation

Certain key executives in 1997 were granted restricted stock and stock
options of General Electric Company ("GE"). Roger Goddu, Chairman and Chief
Executive Officer, was granted 120,000 shares of GE restricted stock which
had a fair market value of $6.1 million at the date of grant. The shares
vest equally over a five-year period on each December 31, beginning on
December 31, 1997, subject to continuing employment.

Mr. Goddu and seven other key executives were granted GE stock options with
a fair market value of $5.4 million at the grant date. The shares vest over
periods ranging from four to six years, subject to continuing employment.
The exercise price equaled in each case the fair market value of the common
stock at the grant date. Upon the resignation of one executive, options
which were granted to the executive were canceled.

As a result of the above transactions, the Company recorded the grants of
GE restricted stock and stock options of $11.5 million as a capital
contribution and established an asset, unearned compensation expense. Total
expense recorded related to the amortization of the unearned compensation
was $2.2 million for the fiscal year ended January 3, 1998.

The Company engages in various other transactions with GE Capital as
described in Notes 2, 7, 14 and 15.

ValueVision International, Inc.

On August 8, 1995, Wards purchased 1.28 million unregistered shares of
common stock of ValueVision International, Inc. ("ValueVision") at $6.25
per share, which represented approximately 4.4% of the issued and
outstanding shares of common stock of ValueVision. Wards also received
warrants to purchase an additional 25 million shares of common stock of
ValueVision with exercise prices ranging from $6.50 to $17.00 per share,
with an average exercise price of $9.16 per share.

In July of 1996, the Company and ValueVision entered into an agreement
whereby ValueVision acquired the assets and assumed certain liabilities of
a joint venture of which the Company was a partner. Also, in July of 1996,
ValueVision and Wards entered into an agreement for the expansion and
restructuring of their ongoing marketing agreement. ValueVision issued to
Wards vested warrants (Class P Warrants) to purchase 2.97 million shares of
ValueVision common stock at an exercise price of $0.01 per share.

The new warrants replaced 18 million unvested warrants (Class C-O Warrants)
from an earlier grant. Concurrent with this agreement, ValueVision issued
to Merchant Partners Limited Partnership ("Merchant Partners") vested Class
P warrants to purchase 199,100 shares of ValueVision common stock at an
exercise price of $0.01 per share. Wards recognized a pre-tax gain of $8
million from these transactions, which is included in Operating, selling,
general and administrative expense.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Related Party Transactions (continued)

ValueVision International, Inc. (continued)

In September 1996, Wards and ValueVision exchanged warrants to purchase
ValueVision common stock. Wards exchanged 6 million vested warrants (Class
A-B Warrants) from the earlier grant of 25 million warrants which were
exercisable at prices ranging from $6.50 to $6.75, in return for vested
warrants (Class P Warrants) to purchase 2.2 million shares of ValueVision
common stock at an exercise price of $0.01 per share. Wards recognized a
pre-tax gain of $7 from this transaction which is included in Operating,
selling, general and administrative expense and deferred revenue
recognition on the exchange of warrants discussed above of $16 million,
which was included in Accrued liabilities and other obligations.

The earlier ValueVision warrants had been subject to certain vesting
conditions and termination rights which did not apply to the replacement
grant. A portion of the warrants were pledged as security for the
performance of Wards' obligations under the ongoing marketing agreements.

On December 30, 1997, the Bankruptcy Court approved a restructuring of the
operating agreement between Wards and ValueVision. ValueVision agreed to
cede exclusive use of the Wards' name for catalog and mail order catalog
"syndicates" back to Wards in exchange for Wards' return to ValueVision of
warrants covering the purchase of approximately 3.8 million shares of
ValueVision common stock. In addition, ValueVision agreed to repurchase
1.28 million shares of its stock owned by Wards, at a price of $3.80 per
share. Under the new operating agreement, Wards' commitment to support
ValueVision's television spot advertising purchases will be $2 million
annually, for a period of three years. The transaction was consummated on
January 15, 1998. In connection with this transaction, Wards recorded a
loss on the sale of its investment in ValueVision of approximately $25
million, which is included in Reorganization Costs.

Merchant Partners

In July 1994, Wards became a limited partner in Merchant Partners. Wards
made capital contributions to the partnership of $17 million in 1996, $4
million in 1995 and $1 million in 1994. In December 1995, Merchant Partners
made a partnership distribution of $22 million to Wards, resulting in a
gain of $16 million. On December 31, 1996, Wards entered into an agreement
under which Wards assigned, transferred and set over unto, the general
partner of Merchant Partners Wards' entire right, title and interest in and
to its limited partnership interest. The general partner assumed the
performance of all of the covenants and obligations associated with the
interest under the Limited Partnership Agreement. The agreement eliminated
Wards' future obligations with respect to its interest in Merchant
Partners. Wards recognized a charge to earnings of $7.8 million and $10
million for the periods ended January 3, 1998 and December 28, 1996,
respectively, which is included in Operating, selling, general and
administrative expense.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. Business Segments

Wards and its subsidiaries are engaged in retail merchandising and direct
response marketing, including insurance, in the United States. Following is
information regarding revenues, earnings and assets of the Company by
segment.

53-Week 52-Week
Period Period
Ended Ended
------- --------------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
------- -------- --------

Total revenues
Retail merchandising $ 4,534 $ 5,879 $ 6,531
Direct response marketing 852 741 554
------- -------- --------
Total 5,386 6,620 7,085
======= ======== ========

Operating earnings (losses)
Retail merchandising $ (845) $ (320) $ 31
Direct response marketing 31 71 70
Corporate and other (160) (126) (124)
Reorganization costs (553) - -
------- -------- --------
Total $(1,527) $ (375) $ (23)
======= ======== ========

Identifiable assets
Retail merchandising $ 2,655 $ 3,207 $ 3,504
Direct response marketing 1,212 1,203 920
Corporate and other 705 469 460
------- -------- --------
Total $ 4,572 $ 4,879 $ 4,884
======= ======== ========

Depreciation and amortization
Retail merchandising $ 116 $ 119 $ 118
Direct response marketing 269 220 149
------- -------- --------
Total $ 385 $ 339 $ 267
======= ======== ========

Capital expenditures
Retail merchandising $ 47 $ 58 $ 109
Direct response marketing 19 17 13
------- -------- --------
Total $ 66 $ 75 $ 122
======= ======== ========

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. Business Segments (continued)

Under the laws and regulations applicable to insurance companies, certain
subsidiaries of Signature are limited in the amount of dividends they may
pay without the approval of the Illinois Insurance Department and are
prohibited from making any loans and advances to Wards and its affiliates.
Under these laws, the restricted subsidiaries, which had aggregate retained
earnings of $210 million, and aggregate total shareholders' equity of $267
million, can pay dividends of $30 million during 1998 as determined on a
statutory basis, subject to the ability of certain subsidiaries to generate
earned surplus. Dividends received by Signature from insurance subsidiaries
were $38 million, $44 million and $40 million for the periods ended January
3, 1998, December 28, 1996 and December 30, 1995, respectively.

22. Condensed Combined Financial Statements

The condensed combined financial statements as of January 3, 1998, of the
Company and its subsidiaries who have filed for reorganization under
Chapter 11 are presented below:

CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)

53-Week
Period
Ended
----------
January 3,
(In millions) 1998
----------

Net sales, including leased and licensed department sales $ 4,534
Total costs and expenses 5,536
----------
Loss before reorganization costs and income taxes (1,002)
Reorganization costs 553
----------
Loss before income taxes (1,555)
Income tax benefit (386)
----------
Net loss (1,169)
Preferred stock dividend requirements (8)
----------
Net loss applicable to common shareholders $ (1,177)
==========

Net loss per common share
Class A $ (32.15)
Class B (23.53)

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. Condensed Combined Financial Statements (continued)

CONDENSED COMBINED BALANCE SHEET
(Unaudited)

Jan. 3,
(In millions) 1998
-------

Assets

Cash and cash equivalents $ 164
Receivables 165
Intercompany receivables 7
Investment in subsidiaries 528
Merchandise inventories 1,120
Prepaid pension cost 366
Properties, plant and equipment,
net of accumulated depreciation
and amortization 1,030
Other assets 196
Deferred income taxes 520
-------
Total Assets $ 4,096
=======
Liabilities
Trade accounts payable $ 442
Accrued liabilities and other obligations 642
Liabilities subject to compromise 3,551
-------
Total Liabilities 4,635

Redeemable Preferred Stock 177

Shareholders' Deficit
Common stock 1
Capital in excess of par value 64
Accumulated deficit (651)
Unrealized gain on marketable equity securities 9
Less: Treasury stock, at cost (139)
-------
Total Shareholders' Deficit (716)
-------
Total Liabilities and Shareholders' Equity $ 4,096
=======

Liabilities subject to compromise includes intercompany payables to Signature
and Marinco totaling $83 million.

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

22. Condensed Combined Financial Statements (continued)

CONDENSED COMBINED STATEMENT OF CASH FLOWS
(Unaudited)

53-Week
Period
Ended
-------
Jan. 3,
(In millions) 1998
-------

Cash flows from operating activities:
Net loss $(1,169)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and goodwill amortization 116
Deferred income taxes (379)
Reorganization items 679
Changes in operating assets and liabilities, net 453
-------
Net cash used for operating activities (300)

Cash flows from investing activities:
Sale of short-term investments, net 2
Capital expenditures (47)
Disposition of properties, plants and equipment, net 12
-------
Net cash used in investing activities (33)
-------

Cash flows from financing activities:
Proceeds from issuance of short-term debt, net 409
Borrowings under Post-Petition Loan and Guaranty Agreement 321
Payments under Post-Petition Loan and Guaranty Agreement (271)
Payments of long-term debt (5)
Payments of obligations under capital leases (13)
Cash dividends received from Signature 15
Cash dividends paid (3)
-------
Net cash provided by financing activities 453
-------

Increase in cash and cash equivalents 120
Cash and cash equivalents at beginning of period 44
-------
Cash and cash equivalents at end of period $ 164
=======

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. Parent Company Financial Information

Following are the MW Holding balance sheets as of January 3, 1998 and
December 28, 1996 and the statements of income and cash flows for the 53-
week period ended January 3, 1998, and the 52-week periods ended December
28, 1996 and December 30, 1995.

BALANCE SHEETS

Jan. 3, Dec. 28,
(In millions) 1998 1996
------- --------

Assets
Deferred income taxes $ 2 $ 4
Investment in Wards (623) 534
Redeemable preferred stock of Wards 175 175
Other assets 9 1
------- --------
Total Assets $ (437) $ 714
======= ========
Liabilities
Accounts payable to Wards $ 91 $ 98
Accrued liabilities - 8
Liabilities subject to compromise 11 -
------- --------
Total Liabilities 102 106
Redeemable Preferred Stock 177 175
Shareholders' Equity (Deficit)
Common stock 1 1
Capital in excess of par value 64 53
Retained earnings (deficit) (651) 509
Unrealized gain on marketable equity securities 9 9
Less: Treasury stock, at cost (139) (139)
Total Shareholders' Equity (Deficit) (716) 433
------- --------
Total Liabilities and Shareholders' Equity (Deficit) $ (437) $ 714
======= ========

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. Parent Company Financial Information (continued)

STATEMENTS OF INCOME

Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
----------- ----------- ------------

Miscellaneous expenses $ (1) $ (2) $ (1)
----------- ----------- ------------
Total costs and expenses (1) (2) (1)
----------- ----------- ------------
Net loss before earnings of Wards (1) (2) (1)
Equity in net loss of Wards (1,151) (235) (8)
----------- ----------- ------------
Net loss (1,152) (237) (9)
Preferred stock dividend requirements 8 12 4
----------- ----------- ------------
Net loss available for common shareholders $ (1,160) $ (249) $ (13)
=========== =========== ============

STATEMENTS OF CASH FLOWS

53-Week 52-Week
Period Period
Ended Ended
---------- --------------------------
Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
---------- ---------- ----------

Net loss $ (1,152) $ (237) $ (9)
Adjustments to reconcile net loss to net cash
provided by operations:
Change in undistributed earnings of subsidiary 1,157 235 12
Compensation expense on stock option grants/
repurchases - 5 4
Change in operating assets and liabilities:
Other assets - - (1)
Accounts payable to Wards (2) 36 16
Accrued liabilities and liabilities subject to
compromise - (13) (13)
---------- ---------- ----------
Net cash provided by operating activities $ 3 $ 26 $ 9
---------- ---------- ----------

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

23. Parent Company Financial Information (continued)

STATEMENTS OF CASH FLOWS

Jan. 3, Dec. 28, Dec. 30,
(In millions) 1998 1996 1995
--------- -------- ---------

Cash flows from financing activities:
Proceeds from issuance of common stock $ - $ 3 $ 18
Proceeds from redemption of Wards preferred stock - - 75
Proceeds from issuance of preferred stock - 175 -
Purchase of Wards preferred stock - (175) -
Cash dividends paid (3) (9) (4)
Payments to redeem preferred stock - - (75)
Purchase of treasury stock, at cost - (20) (23)
--------- -------- ---------

Net cash used for financing activities (3) (26) (9)
--------- -------- ---------
Cash at end of period $ - $ - $ -
========= ======== =========
Non-cash investing activities:
Grants of restricted stock and stock options by
majority shareholder $ 11 $ - $ -
Increase in liquidation value of preferred stock 2 - -
Change in unrealized gain on marketable
securities - (1) 8

Non-cash financing activities:
Notes issued for purchase of treasury stock $ - $ 5 $ 2

MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

24. Quarterly Financial Data (unaudited)

The quarterly operations of MW Holding are summarized as:

Quarter
-------------------------------------------------------------------------------------
(In millions) First Second Third Fourth Year
------------ ------------ -------------- ------------ ------------

53-week period ended January 3, 1998
Net sales $1,119 $1,151 $ 947 $1,317 $ 4,534
Cost of goods sold 997 1,070 805 1,082 3,954
Net loss (141) (216) (615) (180) (1,152)
Net loss per Class A common share (3.71) (6.10) (16.97) (4.91) (31.67)
Net loss per Class B common share (3.05) (4.36) (12.14) (3.60) (23.17)

52-week period ended December 28, 1996
Net sales $1,253 $1,354 $ 1,376 $1,896 $ 5,879
Cost of goods sold 1,038 1,080 1,105 1,645 4,868
Net income (loss) (48) 22 (29) (182) (237)
Net income (loss) per Class A common
share (1.31) .49 (.84) (4.67) (6.33)
Net income (loss) per Class B common
share (1.06) .40 (.69) (3.86) (5.22)

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

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Board of Directors

The following persons currently serve as directors of the Company: Roger V.
Goddu, Bernard F. Brennan, Tommy T. Cato, Silas S. Cathcart, James A.
Parke, Denis J. Nayden, Gary C. Wendt and Edward D. Stewart. Under that
certain Stockholders' Agreement dated as of June 17, 1988, as amended to
date (the "Stockholders' Agreement"), the By-laws of the Company shall
provide (and the By-laws of the Company do so provide), and the parties to
the Stockholders' Agreement agree to vote, for the election of a Board of
Directors consisting of ten members, three to be designated by Mr. Brennan
(which three shall include Mr. Brennan), five to be designated by GE
Capital and two to be designated by the Chief Executive Officer of Wards
(which two shall include such Chief Executive Officer). Of the nominees
listed below, Mr. Brennan has designated himself and Mr. Cato, GE Capital
has designated Messrs. Cathcart, Parke, Nayden, Wendt and Stewart, and Mr.
Goddu, who is the Chief Executive Officer of Wards, has designated himself
as a director of the Company. Myron Lieberman, a director designated by Mr.
Brennan, resigned on July 18, 1997. Mr. Brennan then designated Edwin G.
Pohlmann to fill the vacant directorship. Due to the resignations of Mr.
Pohlmann and Burnett W. Donoho, a directorship to be designated by Mr.
Brennan and a directorship to be desginated by Mr. Goddu are each vacant.
Pursuant to the Stockholders' Agreement, if GE Capital and its affiliates
cease to own more than 50% of the number of shares of Common Stock
purchased by them in June 1988, the number of directors which Mr. Brennan
is permitted to designate will be increased by one, and the number of
directors which GE Capital may designate shall be reduced by one. If GE
Capital and its affiliates cease to own 20% or more of such shares of
Common Stock, except as described below, GE Capital shall have no right to
designate any directors, and the number of directors shall be reduced to
nine, seven to be elected by the holders of Class A Common Stock, voting as
a class, and two to be elected by the holders of Class B Common Stock,
voting as a class, provided that, so long as the Account Purchase Agreement
between Wards and Montgomery Ward Credit relating to the purchase by
Montgomery Ward Credit of customer receivables of Wards remains in effect,
and GE Capital or any of its affiliates owns any Common Stock, GE Capital
will have the right to elect one of the two directors to be elected by the
holders of Class B Common Stock.

Also pursuant to the Stockholders' Agreement, if Mr. Brennan and his
permitted transferees cease to own more than 50% of the number of shares of
Common Stock held by them on December 1, 1996, the number of directors
which GE Capital is permitted to designate will be increased by two and the
number of directors which Mr. Brennan may designate shall be reduced by
two. If Mr. Brennan and his permitted transferees cease to own 20% or more
of such shares of Common Stock, Mr. Brennan shall no longer have the right
to designate any directors and the directors that Mr. Brennan would have
been entitled to designate (after taking into account the application of
the preceding sentence) shall be designated by the Chief Executive Officer
of Wards.

The holder of the Senior Preferred Stock (currently GE Capital) has the
right to elect one director to be an additional member of the Board of
Directors (a) during the period following a default in the payment of
accrued dividends on the Senior Preferred Stock for four consecutive
quarters until such accrued dividends shall have been paid in full and (b)
during the period following any failure to make a mandatory redemption of
Senior Preferred Stock until such failure shall have been cured.

Information with respect to ages of the directors is as of March 16, 1997
and information as to their ownership of shares of the Company as of that
date is provided under Item 12 below.

Item 10. Directors and Executive Officers of the Registrant (continued)

Board of Directors (continued)

Roger V. Goddu, 47, has been a director of the Company and Chairman and
Chief Executive Officer of Wards since January 6, 1997. Prior thereto, he
was with Toys "R" Us, where from 1996 until 1997, he was President-U.S.
Merchandising, and from 1989 to 1995, he was Executive Vice
President/General Merchandise Manager. Prior to 1989, Mr. Goddu was a
Senior Vice President and General Merchandise Manager of Target, a division
of Dayton Hudson Corporation.

Bernard F. Brennan, age 59, has been a director of the Company since
February 9, 1988, has been Chairman of the Company since June 17, 1988, was
Chief Executive Officer of the Company from February 9, 1988 through
December 10, 1996, and was President of the Company from February 9, 1988
through September 10, 1992. Mr. Brennan served as Chief Executive Officer
of Wards from May 13, 1985 through December 10, 1996. He served as
President of Wards from May 13, 1985 through September 10, 1992. Mr.
Brennan has been a director of Itel Corporation since 1988.

Tommy T. Cato, age 56, has been a director of the Company since August 20,
1997. Mr. Cato served as Executive Vice President of the Company from May
15, 1992, until February 4, 1994. Mr. Cato was Executive Vice President -
Logistics and Product Service of Montgomery Ward from November 8, 1990
through February 3, 1994.

Silas S. Cathcart, age 71, has been a director of the Company since June
25, 1988. Mr. Cathcart is retired Chairman of Illinois Tool Works, Inc. and
Kidder, Peabody Group, Inc. He is a director of Quaker Oats Company,
Allegiance Corporation and General Electric Company.

Denis J. Nayden, age 43, has been a director of the Company since June 25,
1988. Mr. Nayden has been President and Chief Operating Officer of GE
Capital since January 1, 1995. Mr. Nayden served as President and Chief
Operating Officer of Kidder, Peabody Group, Inc. from June 1994 through
December 1994. Prior thereto, Mr. Nayden was an Executive Vice President of
GE Capital from February 1989 to June 1994. Mr. Nayden is a director of
General Electric Capital Services, Inc. and GE Capital.

James A. Parke, age 52, has been a director of the Company since March 31,
1997 and previously was a director from April 27, 1990 through December 17,
1996. He has been Senior Vice President - Finance of General Electric
Financial Services since November 1989. Mr. Parke is a director of GE
Capital, FGIC Corporation, Polaris Holding Co., and Financial Guaranty
Insurance Co.

Gary C. Wendt, age 56, has been a director of the Company since December
17, 1996. Mr. Wendt has been Chairman and Chief Executive Officer of GE
Capital since 1991. Mr. Wendt is a director of GE Capital, General Electric
Capital Services, Inc. and FGIC Corporation.

Edward D. Stewart, age 55, has been a director of the Company since
December 10, 1996. Mr. Stewart has been an Executive Vice President of GE
Capital since January 1, 1992. Mr. Stewart serves on the board of directors
of GE Capital.

Executive Officers

Information with respect to the executive officers of the Company is
included in Part I of this Form 10-K.

Item 10. Directors and Executive Officers of the Registrant (continued)

Section 16(a) Reporting

Section 16(a) of the Securities Exchange Act of 1934, and the rules
promulgated thereunder, requires the Company's executive officers,
directors and holders of 10% or more of the Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. GE Capital did not timely file with the SEC Forms 4, Statement
of Changes in Beneficial Ownership, with respect to the purchase by GE
Capital of Series C preferred stock of the Company on May 29, 1997. The
Form 4 with respect to such transaction was due no later than June 10,
1997. In addition, Mr. Pohlmann did not timely file with the SEC such a
Form 4 with respect to his agreement to serve as trustee of the Family
Trust, and consequent acquisition of beneficial ownership of the shares of
Common Stock held in the Family Trust, on or about July 18, 1997. The Form
4 with respect to such transaction was due no later than August 10, 1997.
In addition, neither Mr. Parke nor Mr. Cato timely filed with the SEC a
Form 3, Initial Statement of Beneficial Ownership of Securities, with
respect to their appointments to the Board of Directors of the Company in
May 1997 and August 1997, respectively. Such Forms 3 with respect to the
appointments of Messrs. Parke and Cato were due no later than June 10, 1997
and September 10, 1997, respectively.

Item 11. Executive Compensation

The Company (Montgomery Ward Holding Corp.) had no employees and paid no
compensation in 1997. The following information details compensation
accrued by Wards and its subsidiaries to executive officers of the Company.

Item 11. Executive Compensation (continued)

Summary Compensation Table

The following table sets forth summary compensation information for (i) Mr.
Goddu, who was the only person to serve as Chief Executive Officer during the
Company's 1997 fiscal year, (ii) the four most highly compensated other
executive officers who were serving as executive officers at the end of the
Company's 1997 fiscal year and (iii) Burnett W. Donoho, who would have been
among such four most highly compensated other executive officers but for the
termination of his employment in December 1997 (collectively, the "Named
Executive Officers").

Annual Compensation Long-Term Compensation
--------------------------------------------------- -------------------------------------
Other Securities All
Annual Underlying LTIP Other
Name and Salary Bonus Compensation Options Payout Compensation
Principal Position Year ($) ($) ($)/1/ (#) ($) ($)/2/
- ------------------ ---- ------- ------- ------------ ---------- ------ ------------

Roger V. Goddu 1997 985,215 350,000 10,296 2,596,219 - 2,849,330
Chairman and Chief
Executive Officer/3/

Thomas G. Grimes 1997 417,262 200,000 6,181 500,000 - 84,396
Executive Vice
President - Home/3/

Alan E. DiGangi 1997 425,000 125,000 18,673 - - 2,352
Executive Vice 1996 390,697 - 3,345 - - 424,371
President - Electric 1995 244,859 50,000 3,589 15,000 - 2,594
Avenue and Auto
Express

Thomas J. Austin 1997 247,312 300,000 3,543 - - 109,749
Executive Vice
President - Mens
and Childrens
Apparel and Shoes/3/

Louis J. Caporale 1997 238,710 300,000 1,168 - - 108,808
Executive Vice
President - Women's
Apparel and Fine
Jewelry/3/

Burnett W. Donoho 1997 718,750 - 3,811 1,000,000 - 2,438,727
Vice Chairman/4/

/1/ No named executive officer received perquisites exceeding $50,000 or 10%
of salary and bonus.

/2/ Represents company matching contributions to the Savings and Profit Sharing
Plan and company payments of premiums on group term life insurance
policies. Hiring bonuses of $50,000 were separately paid to Messrs. Grimes,
Austin, and Caporale in 1997. Relocation costs for Messrs. Goddu, Grimes,
Austin, Caporale and Donoho for 1997 were paid in the amounts of $533,782,
$34,396, $59,749, $58,808 and $98,085, respectively. Mr. Goddu was paid
$2,221,948 as compensation for benefits accrued with Mr. Goddu's prior
employer which were lost by Mr. Goddu in connection with the termination of
his employment with such former employer and $93,600 representing an amount
equivalent to dividends on non-vested GE restricted stock shares. For 1996,
amounts paid to Mr. DiGangi include $281,250 under a retention plan and
$140,025 under a security plan due to the triggering of a change of control
event. See "Certain Arrangements." Mr. Donoho was paid $2,340,192 in
connection with his termination of employment with Wards. $1,909,910 of
these amounts were paid by GE Capital. See "Certain Arrangements."

/3/ Messrs. Goddu and Grimes joined Wards in January 1997. Messrs. Austin and
Caporale joined Wards in May 1997.

/4/ Mr. Donoho joined Wards in January 1997 and his employment with Wards
terminated in December 1997.

Item 11. Executive Compensation (continued)

Option Grants and Exercises

The following tables set forth summaries of the terms of stock options granted
to Messrs. Goddu, Grimes, and Donoho during the Company's 1997 fiscal year and
the value of unexercised options held by Messrs. Goddu, Grimes, and DiGangi as
of January 3, 1998, using assumed annual rates of stock price appreciation
(without taking into account any impact on the value per share of Common Stock
of events or conditions since the applicable date of grant, including the
bankruptcy filing). None of the Named Executive Officers exercised any stock
options during the 1997 fiscal year. No stock appreciation rights were
granted to or exercised by any of the Named Executive Officers during the 1997
fiscal year.

Option Grants in Last Fiscal Year

Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------------------ ---------------------------
Percentage
No. of of Total
Securities Options
Underlying Granted to Exercise
Options Associates or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- ----------------- ---------- ---------- -------- ---------- ---------- ----------

Roger V. Goddu 2,596,219 55.0% $7.32 12/20/06 11,951,717 30,287,997

Thomas G. Grimes 500,000 10.6% $7.32 1/28/07 2,301,754 5,833,097

Burnett W. Donoho 1,000,000 21.2% $7.32 1/31/07 N/A/1/ N/A/1/

/1/ Amounts were not computed as Mr. Donoho's employment with Wards terminated
in December 1997.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End/1/
------------------------------ -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ------------- ----------- -------------

Roger V. Goddu 649,055 1,947,164 $0 $0

Thomas G. Grimes - 500,000 $0 $0

Alan E. DiGangi 29,300 - $0 $0

/1/ The stock was deemed to have value below the exercise price as the Company
has filed for reorganization under Chapter 11 of the Bankruptcy Code.

Item 11. Executive Compensation (continued)

Long-Term Incentive Plan Awards

Prior to the bankruptcy filing, senior executives of Wards, generally
Senior Vice Presidents and above, were eligible to participate in the
Executive Long-Term Incentive Plan. The Executive Long-Term Incentive Plan
generally consisted of three-year cycles that could be initiated annually.
If specific objectives for the pre-tax earnings and return on equity for
the Company and its subsidiaries established by the Incentive Compensation
Committee were achieved for any designated cycle, cash was awarded based
upon a target Executive Long-Term Incentive Plan payout, which was a
percentage (determined by the Incentive Compensation Committee) of the base
salary of each participant, but in no event would the target Executive
Long-Term Incentive Plan payout for any participant exceed $2,000,000 for
any cycle. The plan has not been operational subsequent to the bankruptcy
filing and no future benefits for outstanding cycles will be paid.

Executive Emergence Bonus Plan

Certain senior executives of Wards participate in the Montgomery Ward
Special Emergence Bonus Plan ("Emergence Bonus Plan"). The Emergence Bonus
Plan provides for a lump sum bonus payment within 30 days of court approval
of a plan of reorganization. To be eligible for the full bonus, the
executive must be actively employed on the date of the court approval of
the plan of reorganization or the executive must have separated from
employment after a Change of Control (as defined in the Severance Plan
described below) but within six months of approval of the plan of
reorganization. If the plan of reorganization is approved as of April 1,
1999, the bonus amount for Messrs. Goddu, Grimes, DiGangi, Austin and
Caporale would be $1,250,000, $562,500, $531,250, $500,000 and $500,000,
respectively. If the plan of reorganization is approved after April 1,
1999, but prior to or as of October 1, 1999, the bonus amount for Messrs.
Goddu, Grimes, DiGangi, Austin and Caporale would be $1,000,000, $450,000,
$425,000, $400,000 and $400,000, respectively. If the plan of
reorganization is approved after October 1, 1999, the bonus amount for
Messrs. Goddu, Grimes, DiGangi, Austin and Caporale would be $500,000,
$225,500, $212,500, $200,000 and $200,000, respectively.

Pension Plan

Executive officers of Wards, in addition to many other associates,
participate in a pension plan (the "Pension Plan"), which provides benefits
defined by formulae based primarily on a participant's compensation,
offset, with respect to periods prior to July 1, 1997, as provided by
benefits provided by the participant's accounts in the Savings Plan
("Savings Plan"), in which executive officers of Wards, in addition to many
other associates, participate. From 1989 through 1993, no more than
$200,000, as adjusted annually under Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code"), of any participant's
compensation was considered for any purpose, including for purposes of the
formulae, under the Pension Plan. Beginning in 1994, no more than $150,000,
as adjusted, ($160,000 in 1997) of any participant's compensation is
considered for any purpose, including for purposes of the formulae, under
the Pension Plan. The monthly pension benefit to which current associates
are entitled under the Pension Plan at the normal retirement age of 65 is
generally based on different benefit formulae that are applicable to
different years of service. The formula for service on and after July 1,
1997 is a credit of $.70 to $1.35 (depending on age) for each $1
contributed as a basic contribution (3% of compensation) to the Savings
Plan. Such Pension Plan accounts will be credited with interest at a rate
based on the 30-year rate earned by government securities. The formula for
service after 1988 and before July 1, 1997 applies to credited service, as
defined in the Pension Plan, earned during such period while making
contributions to the Savings Plan and is based on "career earnings".

Item 11. Executive Compensation (continued)

Pension Plan (continued)

A participant's annual benefit under such 1988 - 1997 formula is 1.5% of
the participant's eligible pay for each year of credited service after 1988
and before July 1, 1997.

A participant's benefit determined under the Pension Plan based on the
formulae through June 30, 1997 is reduced by an amount equivalent to an
annuity which could be purchased with the participant's Basic Contribution
and Transferred Contribution accounts in the Savings Plan as of June 30,
1997. The Pension Plan formulae benefit is determined by adding the benefit
under the formula in effect commencing July 1, 1997 to the participant's
accrued benefit under the Pension Plan as of June 30, 1997, as determined
under the formulae in effect prior to July 1, 1997.

The following table sets forth the estimated annual benefits (calculated on
a straight life annuity basis) upon retirement at age 65 (for executives
who have not retired or resigned) under the Pension Plan, which is the only
defined benefit plan under which associates of Wards can currently accrue
benefits, to the Named Executive Officers (calculated on the basis of
estimated years of service at retirement age; levels of compensation paid
in calendar year 1997 assuming 6% annual increases for executives who have
not retired or resigned and the Named Executive Officers make basic
contributions (3% of compensation) to the Savings Plan; but with regard to
Code limitations on compensation and benefits and without regard to any
reduction for benefits under the Savings Plan):

Estimated
Annual
Pension at
Name of Participant Retirement
- ------------------------------------------ ----------

Roger V. Goddu $23,578
Thomas G. Grimes 4,917
Alan E. DiGangi 50,353
Thomas J. Austin 19,527
Louis J. Caporale 33,640
Burnett W. Donoho N/A /1/

1 Mr. Donoho has resigned as an officer of Wards and will receive no payments
under the Pension Plan.

Certain Arrangements

In the course of recruiting new executives, promoting existing associates
to executive positions, increasing the responsibilities of existing
executives and retaining executives, Wards frequently enters into
employment agreements which set forth the general terms of the compensation
arrangements for such executive. Such agreements have, in the past,
typically set forth, among other things, a recipient's base salary, the
target annual bonus under the Senior Executive Performance Management
Program ("PMP"), the maximum percentage of the target bonus under the PMP
that can be earned, bonus guarantees, if any, relocation payments and the
number of stock options, if any, that are expected to be initially granted
to the executive in his or her new position. Of the executive officers
named in the Summary Compensation Table, Messrs. Grimes, DiGangi, Austin
and Caporale have agreements of this type, each of which were entered into
in connection with the commencement of the executive's employment with
Wards (other than the agreement with Mr. DiGangi, which was entered into
connection with his retention as an executive officer of Wards).

Item 11. Executive Compensation (continued)

Certain Arrangements (continued)

The agreements with Messrs. Grimes, DiGangi, Austin and Caporale provide
for, respectively, (i) annual base salary of $450,000, $425,000, $400,000
and $400,000; and (ii) PMP target bonuses of $200,000, $125,000, $150,000
and $150,000, in each case guaranteed at 100% for 1997 (the target bonuses
for Messrs. Austin and Caporale were also guaranteed at 100% for 1998 and
1999 and were prepaid for 1997 and 1998) and in each case with
opportunities to earn up to 150% of such target bonuses. The agreement with
Mr. Grimes states that he would receive options to purchase 500,000 Class A
Shares at $7.32 per share, with such options vesting 40% on February 1,
1998 and 30% on each of February 1, 1999 and 2000. On June 3, 1997, Mr.
Grimes was granted all of such options.

The agreements with Messrs. Grimes, Austin and Caporale provided for hiring
bonuses of $50,000 each, which were paid in 1997. The agreements provide
that Messrs. Austin and Caporale will also participate in a special bonus
plan to offset an equity loss relating to their previous employer and each
will receive a bonus with maximum payment of $500,000, which will vest as
follows: $200,000 on May 1, 1998 and $150,000 on each of May 1, 1999 and
2000. This bonus is to be paid on May 1, 2000. If the executive's
employment is terminated prior to May 1, 2000, only the vested portion of
the bonus will be paid. The Company agreed to reimburse Messrs. Grimes,
Austin and Caporale for certain relocation costs in connection with their
moves. The Company also agreed that Messrs. Austin and Caporale would each
be recommended for a stock option of 300,000 shares of Montgomery Ward
Holding Stock vesting in equal installments on May 1, 1998, 1999 and 2000.
No stock options were issued to Messrs. Austin or Caporale pursuant to such
provision due to the bankruptcy filing. In the case of a separation of
employment initiated by the Company for a reason other than "Cause," the
agreements provide that Mr. Grimes will receive his base salary for twenty-
four months if terminated prior to February 1, 2000, and the continuation
of the vesting of stock and stock options through February 1, 2000; and
Messrs. Austin and Caporale will receive their base salaries through May 1,
2000 (however, not less than twelve months) and the continuation of the
vesting of stock and stock options through May 1, 2000. In addition, Mr.
Grimes has the right to elect to leave Wards upon 30 days notice within 30
days of a change of control where the Company is sold to a third party. Mr.
Grimes in such situation would receive one years base salary in a lump sum.

In February 1997, GE granted options to Messrs. Grimes and Donoho to
purchase 20,000 and 30,000 shares, respectively, of GE common stock, with
an exercise price of $105, which options vest 50% on September 7, 1999 and
50% on September 7, 2001. Mr. Donoho's employment with Wards terminated in
December 1997 and therefore no portion of the option ever became
exercisable. On April 28, 1997, after the date of the option grants, the
shares of GE common stock split 2-for-1. In June 1997, GE also granted
options to each of Messrs. Austin and Caporale to purchase 40,000 shares,
respectively, of GE common stock with an exercise price of $65.3125, which
options vest 50% on September 27, 1999 and 50% on September 27, 2001.

GE Capital has agreed to pay Messrs. Grimes, Austin and Caporale their base
salary for the first three years of their 1997 employment agreements
described above and the guaranteed bonus under such agreements if Wards
fails to pay such amounts for any reason other than the executives'
termination of employment either voluntarily by the executives or for cause
by Wards. Under the same situation, GE also agreed to pay amounts to
Messrs. Austin and Caporale under the special bonus plan designed to offset
an equity loss relating to a prior employer.

Item 11. Executive Compensation (continued)

Certain Arrangements (continued)

Mr. Goddu joined the Company as Chief Executive Officer and as Chairman and
Chief Executive Officer of Wards effective January 6, 1997. In connection
with his employment with Wards, Mr. Goddu, the Company and Wards entered
into an Employment Agreement dated as of December 20, 1996 (the "Goddu
Agreement"). The Goddu Agreement expires on December 31, 2001. During the
term of the Goddu Agreement (unless his employment is earlier terminated),
Mr. Goddu is to serve as Chairman of the Board and Chief Executive Officer
of Wards and as Chief Executive Officer of the Company. Pursuant to the
Goddu Agreement, Mr. Goddu is to receive a base salary of $1,000,000 per
annum, increasing at a rate of $50,000 per year or such larger increase as
the Board of Directors may determine. Mr. Goddu waived his annual increase
for 1998 and has elected not to accept contractual annual increases until
the Company successfully emerges from Chapter 11.

In addition, the Goddu Agreement provides that Mr. Goddu is eligible to
receive an annual cash bonus of up to 50% of his base salary, based on
performance targets to be established from time to time by the Board of
Directors or a committee thereof. For each of 1997, 1998 and 1999, Mr.
Goddu's bonus is guaranteed to be at least $350,000 without regard to such
targets. The bonus may be increased by up to an additional 50% of base
salary based on the achievement of exceptional performance against the
targets. The Goddu Agreement also provides that Mr. Goddu will be provided
with a supplemental pension benefit on the same terms as his arrangement
with his prior employer with an actuarial present value at age 60 of $3.9
million. The Company also agreed to pay Mr. Goddu $2,221,948 as
compensation for benefits accrued with Mr. Goddu's prior employer which
were lost by Mr. Goddu in connection with the termination of his employment
with such former employer.

In the Goddu Agreement, the Company agreed that, subject to stockholder
approvals which were obtained in May 1997, Mr. Goddu would be granted an
option to purchase Series 3 Shares representing 5% of the outstanding
shares of Common Stock (on a fully-diluted basis). For purposes of this
calculation, the number of Series 3 Shares underlying such options is to be
adjusted upwards from time to time until the last day of the Company's 1998
fiscal year to give effect to grants of stock options after December 20,
1996 to management employees of Wards covering up to 10% of the outstanding
shares of Common Stock on a fully-diluted basis. Pursuant to the Goddu
Agreement, Mr. Goddu's options are to have an exercise price of $7.32 per
share and become exercisable on the basis of cumulative installments of 25%
of the underlying Series 3 Shares on the last day of each of the Company's
1997, 1998, 1999 and 2000 fiscal years, provided that no portion of the
option shall become exercisable unless, at the applicable date of
determination, Mr. Goddu is, and has been at all times since the grant of
the option, employed by Wards.

The exercisable portion of the option shall remain exercisable until the
earliest of (i) three (3) months following the date of cessation of Mr.
Goddu's employment with Wards, which occurs due to his voluntary
termination or the termination of his employment by Wards for cause; (ii)
the third anniversary of the date of cessation of Mr. Goddu's employment
with Wards for any other reason; or (iii) the tenth anniversary of the date
of grant of the option. Mr. Goddu's option was initially granted in May
1997 with respect to 2,596,219 Series 3 Shares, subject to upward
adjustment as described above.

The Goddu Agreement also provides that, subject to certain limitations, the
Company has certain rights to purchase the shares received by Mr. Goddu
upon exercise of his options and that, subject to certain limitations, Mr.
Goddu has certain rights to require the Company to purchase up to an
aggregate amount of $75 million purchase price of such shares from and
after December 31, 1997. The Goddu Agreement also provides that Wards would
provide Mr. Goddu a loan in the principal amount of $2,000,000, payable in
five years, and bearing interest at LIBOR plus 25 basis points payable in
arrears on each January 8 during the loan term. The Company provided such
loan to Mr. Goddu on January 8, 1997, and Mr. Goddu executed a Promissory
Note (the "Goddu Note") with respect thereto on that date. As of March 7,
1998, the outstanding balance of the loan including interest accrued
thereon was $2,019,807.

Item 11. Executive Compensation (continued)

Certain Arrangements (continued)

The Goddu Agreement provides that in the event his employment is terminated
due to his death or disability, he (or his estate, as applicable) would be
entitled to unpaid base salary through the month in which his death or
disability occurs, an amount equal to 50% of his base salary in effect on
the date of his death or disability (in lieu of any bonus), and a
restatement of the Goddu Note to provide a maturity date of the third
anniversary of Mr. Goddu's death or disability. In the event his employment
is terminated by Wards for cause (as defined in the Goddu Agreement), he
would be entitled to unpaid base salary through the month in which the
termination of his employment occurs, and amounts outstanding under the
Goddu Note will become immediately due and payable 90 days after such
termination.

In the event that his employment is terminated without cause or through a
constructive termination, as provided in the Goddu Agreement, he would be
entitled to a prorated bonus through the date of termination of employment,
continuation of his then-current base salary for a period of 24 months and,
in lieu of further bonus, an amount equal to $700,000 (which salary
continuation and amount may be paid in a lump sum) and cancellation of Mr.
Goddu's obligations under the Goddu Note.

In the event his employment is terminated by the expiration of the Goddu
Agreement, Mr. Goddu would be entitled to continuation of his then-current
base salary for a period of 24 months and, in lieu of further bonus, an
amount equal to $700,000 (which salary continuation and amount may be paid
in a lump sum).

Also in connection with Mr. Goddu's employment with Wards, Mr. Goddu and GE
Capital entered into a letter agreement dated as of December 20, 1996 (the
"Goddu Letter Agreement"). The Goddu Letter Agreement provides that on or
before January 6, 1997, General Electric Company ("GE"), the indirect
parent of GE Capital, would grant to Mr. Goddu 60,000 shares of common
stock of GE, with restrictions lapsing on 12,000 of such shares on each
December 31, beginning on December 31, 1997, and would grant to Mr. Goddu
options to purchase 60,000 shares of common stock of GE with an exercise
price equal to the NYSE closing price of such shares on the date of grant
(which was $102.25 per share), which options will vest in cumulative annual
installments of 20,000 underlying shares on January 6, 1999, January 6,
2001 and January 6, 2003. Such shares and options were granted to Mr. Goddu
on December 20, 1996. The Goddu Letter Agreement also provides that on an
annual basis beginning in 1997, GE will grant to Mr. Goddu, at such time as
similar grants are made to its employees, options to purchase up to 25,000
shares of common stock of GE, up to an aggregate of 125,000 such shares,
with exercise prices equal to the NYSE closing price of such shares on the
applicable date of grant, and which options will vest 50% three years from
the date of grant and 50% five years from the date of grant. In accordance
with the terms of his letter agreement, options were granted to Mr. Goddu
on September 12,1997. Such options will vest 50% on September 12, 2000 and
50% on September 12, 2002. On April 28, 1997, after the date of the Goddu
Letter Agreement, the shares of GE Common Stock split 2-for-1.

In addition, in the Goddu Letter Agreement, GE Capital granted to Mr. Goddu
an option to purchase from GE Capital that number of shares of Common Stock
which equals 5% of the issued and outstanding shares of Common Stock on a
fully-diluted basis. For purposes of this calculation, the number of shares
of Common Stock underlying such options is to be adjusted upwards from time
to time until the last day of the Company's 1998 fiscal year to give effect
to the future grant of stock options to management employees of Wards
covering up to 10% of the outstanding shares of Common Stock on a fully-
diluted basis. Pursuant to the Goddu Letter Agreement, such options are to
have an exercise price of $7.32 per share (the Fair Market Value per Share
of a Class A Share, as determined pursuant to the Stockholders' Agreement)
and become exercisable on the basis of cumulative installments of 25% of
the underlying shares on December 31 of each year, beginning on December
31, 1997, provided that no portion of the option shall become exercisable
unless, at the applicable date of determination, Mr. Goddu is, and has been
at all times since the grant of the option, employed by Wards.

Item 11. Executive Compensation (continued)

Certain Arrangements (continued)

The Goddu Letter Agreement also provides that none of such options shall be
exercisable unless the fair market value of the consolidated common equity
of the Company (determined pursuant to the Stockholders' Agreement) is
greater than $1 billion at any time during the period of Mr. Goddu's
employment and for a period of twelve months thereafter. The exercisable
portion of the option shall remain exercisable until the last day of the
third month following the date of termination of Mr. Goddu's employment
with Montgomery Ward. The Goddu Letter Agreement also provides that,
subject to certain limitations, GE Capital has certain rights to purchase
the shares received by Mr. Goddu upon exercise of such options and that,
subject to certain limitations, Mr. Goddu has certain rights to require GE
Capital to purchase up to an aggregate amount of $75 million purchase price
of such shares from and after December 31, 1997.

The Goddu Letter Agreement also provides that, to the extent that the
Company cannot purchase the shares received by Mr. Goddu upon exercise of
his options granted by the Company pursuant to limitations set forth in the
Stockholders' Agreement, GE Capital would purchase such shares, up to an
aggregate amount of $75 million purchase price of such shares.

Mr. Donoho joined the Company as Chief Operating Officer and as Vice
Chairman and Chief Operating Officer of Wards effective January 31, 1997.
In connection with his employment, Mr. Donoho, the Company and Wards
entered into an Employment Agreement dated as of January 31, 1997 ("Donoho
Agreement"). The term of the Donoho Agreement was to expire on January 31,
2001. Pursuant to the Donoho Agreement, Mr. Donoho was to receive a base
salary of $750,000 per annum and be eligible to receive an annual cash
bonus of up to 40% of his base salary. For each of 1997 and 1998, Mr.
Donoho's bonus was guaranteed to be at least $250,000. In addition, the
Donoho Agreement provided Mr. Donoho with a retention payment of $100,000
for every full six months of active employment up to a maximum of $500,000
total, all or any earned part of which would be paid on December 31, 1999.
Under the Donoho Agreement, if Mr. Donoho was terminated without cause or
in the event of a constructive termination, Mr. Donoho would be entitled
to, among other things, 24 months of base salary and the greater of two
years bonus or $500,000 (such payments to be discounted if paid in a lump
sum) as well as earned benefits and for two years, outplacement services,
reimbursement of COBRA health care premiums and personal, financial and
legal counseling services up to $10,000.

The Donoho Agreement provided, in part, that the Company would grant to Mr.
Donoho an option to purchase 1,000,000 Series 3 Shares. Such options had an
exercise price of $7.32 per share and were exercisable based on the
following schedule -- 400,000 Series 3 Shares on February 1, 1998; 300,000
Series 3 Shares on February 1, 1999; and 300,000 Series 3 Shares on
February 1, 2000, provided that no portion of the option would become
exercisable unless Mr. Donoho is, on the applicable date of determination,
and has been at all times since the grant of the option, employed by Wards.
Mr. Donoho was granted such options in May 1997. Mr. Donoho's employment
with Wards terminated in December 1997 and therefore no portion of the
option ever became exercisable.

In connection with his termination of employment with Wards and in exchange
for a general release and waiver of the Company, Wards and its affiliates
(including with respect to his employment agreement) as well as noncompete
and nonsolicitation provision effective through January 31, 2000, Mr.
Donoho received a lump sum payment of $1,562,500 representing base salary
through January 31, 2000, a lump sum payment of $500,000 representing
guaranteed bonuses for 1997 and 1998, a payment of $200,000 representing
the retention plan payment through January 31, 1998, continuation of
executive health care coverage at the associate rate through January 31,
2000, earned vacation in the amount of $57,692 and $20,000 in lieu of
outplacement services. $1,909,910 of these amounts were paid by GE Capital.

Item 11. Executive Compensation (continued)

Certain Arrangements (continued)

The Wards Executive Committee Severance Plan ("Severance Plan") provides that
if the employment of certain senior executives is terminated other than for
Cause (as defined in the Severance Plan), the executive will receive a lump
sum payment equal to the greater of the executive's base salary for the
remainder of the executive's employment agreement or the executive's base
salary for 24 months. In addition, the executive will receive executive
outplacement services and continue to participate in executive benefit plans.
If such termination occurs within three years of a Change of Control (as
defined in the Severance Plan), the lump sum payment is increased to three
years base salary plus three times the executives' target bonus. Amounts
otherwise payable under the Severance Plan are reduced dollar for dollar for
any additional amounts representing base salary or bonus payable under the
executive's employment contract or other severance plan.

Certain senior executives of Wards were participants in each of a retention
plan and a security plan. The retention plan provided that each participant
would receive a retention award if such participant remained employed by Wards
through March 1, 1997 or was terminated for any reason other than voluntary
resignation or cause. In addition, in the event of a change of control of
Wards prior to such date, the retention award would be payable at such time.
The security plan, provided that in the event of a sale or change of control
of Wards, each participant who was, at such time, actively employed by Wards
or who was terminated for reasons other than voluntary resignation or cause
within one year of such date would receive: (i) a bonus payable at the time of
such date or change of control; (ii) an award supplement, at the discretion of
the Board of Directors based on the recommendation of the Chief Executive
Officer, with respect to the participant's contribution and cooperation in the
transaction; (iii) enhanced severance of an additional twelve months base
salary above the amount to which the participant would have been entitled
under the severance plan described above if, during the first two years
following the sale or change of control, the participant is either (x)
terminated for any reason other than voluntary termination or cause or (y)
demoted without the participant's prior written approval; (iv) continuation of
benefits for the entire severance payment period; (v) out placement services;
and (vi) certain tax preparation and financial planning services. The bonuses
payable upon a change of control under the retention plan and the security
plan were paid by Wards in January 1997 in connection with certain amendments
to the Stockholders' Agreement which changed the makeup of the Board of
Directors of the Company. The participants in the retention plan and the
security plan consisted of eight (8) senior officers of the Company, including
Mr. DiGangi, whose award under the retention plan was $281,250 and whose bonus
under the security plan was $140,625.

Director Compensation Arrangements

Prior to the filing by the Company and a number of its direct and indirect
subsidiaries (including Wards) of petitions under Chapter 11 of the U.S.
Bankruptcy Code in July 1997 (the "Bankruptcy Filing"), Messrs. Cathcart and
Myron Lieberman, a former director, were paid director fees of $6,000 per
fiscal quarter, plus $1,500 for each meeting such director attended of the
Board of Directors of the Company and Wards, plus $1,500 for each meeting such
director attended of a committee of the Company and Wards of which such
director was a member, provided that for meetings of the Board of Directors of
the Company held jointly with or immediately prior to or following meetings of
the Board of Directors of Wards, the aggregate fees for such meetings were
$1,500, and provided further that for meetings of committees of the Company
held jointly with or immediately prior to or following meetings of committees
of Wards the aggregate fees for such meetings were $1,500. Such directors fees
were converted into Series 1 Shares pursuant to the Directors Fee Plan
described below.

Item 11. Executive Compensation (continued)

Director Compensation Arrangements (continued)

The Directors Plan (the "Directors Fee Plan") permits directors (as designated
by the Directors Fee Plan Committee, as defined below) to receive Series 1 and
Series 2 Shares. The plan provides for the establishment of a committee (the
"Directors Fee Plan Committee") to (i) administer the Directors Fee Plan, (ii)
estimate director fees payable to directors for the fiscal year and (iii)
permit directors to elect to receive Class A Shares with a value determined by
the Directors Fee Plan Committee not to exceed the estimated fees.

Under the Directors Fee Plan, participating directors are automatically
granted rights ("Conversion Rights") after the end of each fiscal quarter of
the Company in a number determined by dividing the director fees for the
fiscal quarter by the fair market value per share of the Company's Common
Stock. The number of Class A Shares acquired pursuant to accelerated
Conversion Rights (as described below) reduces the number of automatically
granted Conversion Rights. The acquisition of Class A Shares by directors
pursuant to Conversion Rights does not require any direct payment by a
director, but the director fees which otherwise would be payable to the
director are reduced by such fair market value of the Class A Shares acquired.
If directors acquire Class A Shares pursuant to Conversion Rights, the Company
will pay the directors an amount sufficient to pay all applicable federal and
state taxes payable by the directors with respect to the Class A Shares
acquired pursuant to Conversion Rights and the amount attributable to this
payment. The Directors Fee Plan Committee decides based on the past service of
the director whether there should be an acceleration of the grant of
Conversion Rights based on an estimate of director fees for the fiscal year.
If the grant of Conversion Rights is accelerated by the Directors Fee Plan
Committee, the Directors Fee Plan Committee determines the number of Class A
Shares to which the Conversion Rights relate, the value of the Class A Shares,
the duration of the Conversion Rights and the limitations on the Class A
Shares acquired pursuant to the Conversion Rights. It is currently anticipated
that any Class A Shares acquired pursuant to accelerated Conversion Rights
would be forfeited to the extent a director does not earn the anticipated
director fees for the fiscal year.

Directors of the Company or Wards other than members of the Directors Fee Plan
Committee are eligible to participate in the Directors Fee Plan if designated
by the Directors Fee Plan Committee. The Directors Fee Plan Committee is
comprised of not fewer than two directors who are appointed by the Board of
Directors and who serve at the pleasure of the Board of Directors. The current
members of the Directors Fee Plan Committee are Messrs. Brennan and Stewart.
Of the seven eligible directors, the Directors Fee Plan Committee has
designated only Mr. Cathcart as a participant in the Directors Fee Plan.
Pursuant to an irrevocable election made in 1992, Mr. Cathcart elected to
receive all of the fees earned for service as a director of the Company and of
Wards in Series 1 Shares. Through the date of the bankruptcy filing, Mr.
Cathcart had acquired 8,987 Series 1 Shares and Mr. Lieberman, a former
director, had acquired 10,235 Series 1 Shares, pursuant to Conversion Rights
under the Directors Fee Plan. No shares have been distributed under the
Directors Fee Plan since the bankruptcy filing.

The Board of Directors may amend or terminate the Directors Fee Plan, except
that no such action by the Board of Directors may change the terms and
conditions of any Conversion Rights previously granted in a manner adverse to
the holder of the Conversion Right without the consent of such holder. The
Directors Fee Plan Committee has the right to make adjustments with respect to
Conversion Rights if Wards or the Company dissolves or is liquidated or upon
the occurrence of a public offering of shares of the Company.

Item 11. Executive Compensation (continued)

Director Compensation Arrangements (continued)

In connection with the termination of the employment of Bernard F. Brennan as
Chief Executive Officer of the Company and as Chairman and Chief Executive
Officer of Wards, Mr. Brennan, the Company, Montgomery Ward and GE Capital
entered into a Relationship Agreement dated as of December 10, 1996 (the
"Relationship Agreement"). The Relationship Agreement provided the terms of
Mr. Brennan's separation from the Company and Wards, including with respect to
his continued participation as Chairman of the Company and a director of each
of the Company and Wards. Pursuant to the Relationship Agreement, the Company
loaned to Mr. Brennan $12.5 million in cash, without interest, for which the
Company's sole recourse is the shares of Common Stock owned by Mr. Brennan and
his permitted transferees. In the Relationship Agreement, Mr. Brennan agreed
that within five business days after he or any permitted transferee sells any
such shares or receives any proceeds with respect to any such shares (other
than as a result of certain charity loans), such proceeds would be applied
toward any outstanding balance of such loan, provided that if proceeds are
received pursuant to the "put" provisions of the Stockholders' Agreement, only
75% of such proceeds need be so applied. The Relationship Agreement also
provides that amounts outstanding under the loan, if not paid sooner, shall be
due and payable on the last to occur of the deaths of Mr. Brennan, his wife
and his children.

The Relationship Agreement provides that Mr. Brennan is engaged as a
consultant to the Company and Wards for the lesser of five years or until the
date on which he and his permitted transferees no longer own any shares of
Common Stock. The Company and Wards agreed to make annual cash consulting
payments totaling $1.5 million to Mr. Brennan in installments not less
frequently than semi-monthly throughout the consulting period. During the
Company's 1997 fiscal year, the Company and Wards paid $794,057 to Mr. Brennan
in such consulting fees. Wards ceased payment of the consulting fees as of the
Bankruptcy date. Also in the Relationship Agreement, the Company and Wards
agreed to provide to Mr. Brennan certain other benefits. During the Company's
1997 fiscal year, the Company and Wards paid $9,424 in such benefits. Mr.
Brennan was also paid director fees of $12,935. Also in connection with his
resignation, Mr. Brennan, the Company and GE Capital entered into an Amendment
Agreement dated as of December 10, 1996 with respect to certain amendments to
the Stockholders' Agreement and the Company's By-laws (the "Amendment
Agreement"). Pursuant to the Amendment Agreement, Mr. Brennan's right to
require the Company to purchase his shares of Common Stock will become
effective on January 1, 1999. The Amendment Agreement also amended the
Stockholders' Agreement to provide the director designation rights described
herein and the supermajority requirements described herein. See Item 10.
Finally, the Amendment Agreement provides Mr. Brennan and his affiliates with
certain rights to participate in transfers of shares of Common Stock by GE
Capital, provides for Mr. Brennan's and his affiliates' participation in
certain sales of the stock or assets of the Company, and provides GE Capital,
Mr. Brennan and their respective affiliates with a right of first refusal on
new securities issued by the Company.

Compensation Committee Interlocks And Insider Participation

Mr. Brennan, Chairman of the Company and a former executive officer of the
Company, serves as a member of the Compensation Committee of Wards' Board of
Directors. Robert A. Kasenter, Executive Vice President of the Company and
Executive Vice President, Human Resources of Wards, serves as Secretary of the
Compensation Committee of Wards' Board of Directors, although Mr. Kasenter is
not a director of the Company or of Wards.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the beneficial ownership, as of March 16, 1998,
of Class A Shares (i) by each person who is a director of the Company (none of
whom except the individuals identified beneficially owns any shares of the
Company's equity securities), (ii) by each of the Named Executive Officers
(none of whom except the individuals identified beneficially owns any shares
of the Company's equity securities), (iii) by each person who is known to be a
holder of more than 5% of Class A Shares and (iv) by all directors and
executive officers of the Company as a group.

Individual or Group Shares %
--------------------------- ---------- ------

Bernard F. Brennan (a) 16,122,247 88.0%
Edwin G. Pohlmann (b) 2,892,500 15.8%
Tommy T. Cato (c) 227,875 1.2%
Silas S. Cathcart (c) 18,987 0.1%
Roger V. Goddu (d) 649,055 3.4%
Thomas G. Grimes (e) 200,000 1.1%
Alan E. DiGangi (c) (f) 36,550 0.2%
Tamara Brennan (g) 2,200,000 12.0%
All directors and executive
officers as a group (20
persons) (h) 15,109,817 77.1%

(a) Comprised of 13,025,750 Class A Shares (71.1% of the Class A Shares and
30.1% of the Company's common stock ("Common Stock") outstanding as of
March 16, 1998) owned of record by Mr. Brennan and with respect to which
Mr. Brennan has sole investment and voting power, and 3,096,497 Class A
Shares (16.9% of the Class A Shares and 7.1% of the Common Stock
outstanding as of March 16, 1998) owned of record by Mr. Brennan as voting
trustee and with respect to which Mr. Brennan has sole voting power as
voting trustee but no investment power. Does not include 2,200,000 Class A
Shares (12.0% of the Class A Shares and 5.1% of the Common Stock
outstanding as of March 16, 1998) which are owned by Edwin G. Pohlmann, as
trustee of a trust (the "Family Trust") for the benefit of members of Mr.
Brennan's family with respect to which Mr. Brennan has no voting or
investment power, but with respect to which Tamara Brennan, Mr. Brennan's
wife, may acquire shared voting and dispositive power. See Note (g) below.
Mr. Brennan disclaims beneficial ownership of such 2,200,000 Class A
Shares. Mr. Brennan's business address is 5000 Sawgrass Village Circle,
Suite Five, Ponte Vedra, FL 32082.

(b) Does not include 200,000 Class A Shares held by trusts for the benefit of
members of Mr. Pohlmann's family, with respect to which Mr. Pohlmann has
no voting or investment power. Includes 2,200,000 Class A Shares with
respect to which Mr. Pohlmann has sole voting and investment power as
trustee of the Family Trust. Such 2,200,000 Class A Shares are not
deposited in the voting trust under which Mr. Brennan serves as voting
trustee. See Note (c) below. All shares other than the 2,200,000 Class A
Shares as to which Mr. Pohlmann has beneficial ownership are represented
by Voting Trust Certificates and such shares are held in a voting trust
(the "Voting Trust") as to which Mr. Brennan, as voting trustee, has sole
voting power. Such voting trust will expire by its terms on June 21, 1998.
Mr. Pohlmann's business address is 9300 Sante Fe Springs Road, Sante Fe
Springs, CA 90670.

(c) Represents ownership of Voting Trust Certificates with respect to shares
held in the Voting Trust as to which Mr. Brennan, as voting trustee, has
sole voting power and the persons indicated have sole investment power.
Such voting trust will expire by its terms on June 21, 1998.

Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)

(d) Includes 649,055 Class A Shares which may be acquired by Mr. Goddu
pursuant to options exercisable on March 16, 1998. Does not include
649,055 Class B Shares which may be acquired by Mr. Goddu from GE Capital
pursuant to options exercisable on December 31, 1997, as described herein.
See Item 11 above. Mr. Goddu's business address is Montgomery Ward Plaza,
Chicago, IL 60671.

(e) Represents 200,000 Class A Shares which may be acquired by Mr. Grimes
pursuant to options currently exercisable.

(f) Includes 29,300 Class A Shares which may be acquired by Mr. DiGangi
pursuant to exercisable options.

(g) Represents Class A Shares with respect to which Mrs. Brennan, if she were
to elect to become an advisor to the trustee of the Family Trust, may
acquire shared power to vote or direct the vote of, and shared power to
dispose or direct the disposition of, such shares. See Notes (a) and (b)
above.

(h) Represents all Class A Shares with respect to which executive officers and
directors have investment power, which is in each case sole investment
power. Does not include 4,483,085 Class A Shares with respect to which Mr.
Brennan has sole voting power as voting trustee, but with respect to which
neither he nor any other executive officer or director of the Company has
investment power. Includes 1,270,655 Class A Shares which may be acquired
by executive officers or directors at purchase prices ranging from $0.20
to $24.50 per share pursuant to options exercisable on March 16, 1998 or
on April 1, 1998 (date within 60 days after March 16, 1998).

GE Capital owns 100% of the 25,000,000 Class B Shares currently outstanding.
Such shares represented 57.7% of the outstanding Common Stock as of March 16,
1998. GE Capital has granted to Mr. Goddu an option, 25% of which is
exercisable as of March 16, 1998, to purchase from GE Capital that number of
shares of Common Stock which equals 5% of the issued and outstanding shares of
Common Stock of the Company on a fully-diluted basis. For purposes of this
calculation, the number of shares of Common Stock underlying such options is
to be adjusted upwards from time to time until the last day of the Company's
1998 fiscal year to give effect to the grant of stock options after December
20, 1996 to management employees of Wards covering up to 10% of the
outstanding shares of Common Stock on a fully-diluted basis. As of March 16,
1998, pursuant to the foregoing, such option is exercisable with respect to
649,055 Class B Shares (2.6% of the outstanding Class B Shares and 1.5% of the
outstanding Common Stock). GE Capital's address is 260 Long Ridge Road,
Stamford, Connecticut 06927.

GE Capital owns 100% of the 1,750 shares of Senior Preferred Stock of the
Company, having a liquidation value of $100,000 per share (the "Senior
Preferred Stock") outstanding as of the date hereof, and 100.0% of the 352
shares of Series C Preferred Stock of the Company, having a liquidation value
of $100,000 per share (the "Series C Preferred Stock") outstanding as of the
date hereof.

Item 13. Certain Relationships and Related Transactions

In 1996, Wards and the Northern Trust Company (the "Bank"), arranged a line of
credit which was available to certain executive officers of the Company (the
"Line of Credit Program"). A committee of the Board of Directors of the
Company determined which associates were eligible to borrow money under the
Line of Credit program and the maximum amounts which each, respectively, could
borrow. The bank held as collateral a number of Class A Shares of vested stock
of the Company held by the individual, the fair market value of which was to
be equal to twice the amount the individual borrowed. All loans are payable on
June 21, 1998, and interest is payable monthly. Any loan may be prepaid
without penalty. Interest accrues at the Bank's prime rate.

Item 13. Certain Relationships and Related Transactions (continued)

The Company has agreed with the Bank that, in the event any individual should
default upon his or her repayment obligations, the Company will purchase the
note from the Bank or purchase the pledged stock from the Bank at the fair
market value with the entire amount defaulted upon to be paid by the Company
if, and to the extent, the defaulted amount exceeds the amount of the payment
for the Class A Shares. This default remedy has been stayed by the Chapter 11
filing. As of March 30, 1998, one loan is outstanding under the Line of Credit
Program: Robert A. Kasenter, Executive Vice President of the Company, for
$148,250.

Wards entered into a Bank Credit Card Program Agreement ("Card Agreement")
effective April 1, 1996 with Monogram Credit Card Bank of Georgia
("Monogram"), and an Account-Related Agreement ("Account Related Agreement")
effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery
Ward Credit") (collectively referred to as the "Agreements") pursuant to which
Monogram and Montgomery Ward Credit (collectively referred to as the
"Montgomery Ward Credit Companies"), both of which are affiliates of GE
Capital, make payments to Wards as to their receivables generated by sales to
customers of Wards, its affiliates and licensees who utilize the Wards'
private label credit card, and provide services to Wards, all of which are
guaranteed by GE Capital. Set forth below is a description of various
transactions entered into in connection with the Agreements. Unless otherwise
specified, information given is for aggregate transactions under both the Card
Agreement and the Account Related Agreement. As of January 3, 1998, there were
$4.2 billion of Wards' private label credit card receivables owned by the
Montgomery Ward Credit Companies. During the 1997, 1996 and 1995 fiscal years,
the Credit Companies paid to Wards, pursuant to the Agreements and predecessor
agreements, approximately $2.6 billion, $3.6 billion and $3.9 billion,
respectively, in respect of such receivables. As of March 16, 1998, the Credit
Companies have paid approximately $360 million to Wards in respect of such
receivables during the current fiscal year. Wards generally bears the risk of
credit losses due to non-payment by cardholders to the extent of (i) the
amount of credit losses that are between 3.9% and 5.0% of average outstanding
receivables, plus (ii) 50% of credit losses that are between 5.0% and 8.0% of
average outstanding receivables, subject to offsets described below relating
to Wards' share of certain incremental increases in finance charges and late
fees payable by cardholders.

Wards' net unpaid liability for credit losses for 1991 through 1997 are to be
payable to Montgomery Ward Credit pursuant to a note ("Continuation Note") due
in early 2003, provided that the outstanding balance of such note cannot
exceed $300 million. A remaining note in the amount of $15,123,200, consisting
of losses unused after July 7, 1997, is to be executed which provides for
monthly principal payments in the amount of 5% of the scheduled monthly
principal payments for the Continuation Note. Starter card losses are payable
currently. Interest on Wards' unpaid liability for credit losses is to be
payable at a rate equal to rates on comparable borrowings of Wards. Interest
on notes outstanding as of July 7, 1997, has been stayed by the Chapter 11
proceeding.

Wards has executed notes for its unpaid share of credit losses which totaled
$412 million with respect to credit losses through 1997. The incremental
finance charges and late fee assessments earned by Wards at the end of 1997
were $112 million for a net obligation of $300 million. As Wards' net unpaid
liability for credit losses for 1991 through 1997 exceeded the $300 million
threshold, a payment of $28 million with respect to the excess was made in
early 1998. At January 3, 1998, $288 million of the net obligation is included
in Liabilities subject to compromise, and $40 million of the obligation is
included in Accrued liabilities and other obligations. As the $300 million
threshold has been reached, it is expected that future payments may be
required depending upon the level of credit card losses.

In exchange for Wards' agreement to allow the Montgomery Ward Credit Companies
to increase finance charge rates and late fees in selected states, Wards
receives a share of incremental finance charges and late fees resulting from
such increases. Such amount is available for offset against Wards' unpaid
liability for its share of credit losses. To the extent not currently paid or
offset, such amounts earn interest at the same rate as amounts owned by Wards
to Montgomery Ward Credit. The Montgomery Ward Credit Companies also provide
administrative services in connection with Signature products.

Item 13. Certain Relationships and Related Transactions (continued)

Fees paid by Signature to the Montgomery Ward Credit Companies were
approximately $5 million, $6 million and $6 million for Wards' 1997, 1996 and
1995 fiscal years, respectively.

Lechmere Inc., a wholly-owned subsidiary of Wards ("Lechmere"), entered into an
Interim Consumer Credit Card Program Agreement (the "Lechmere Agreement")
effective as of March 13, 1996 with Monogram pursuant to which Monogram (among
other things) made payments to Lechmere in respect of Monogram's receivables
generated by sales to customers of Lechmere who utilized the Lechmere private
label credit card issued by Monogram pursuant to the Lechmere Agreement. Such
payments were equal to the face amount of such receivables. The Lechmere
Agreement, as executed, was scheduled to expire on the earlier of August 31,
1996 or the execution by the parties thereto of a long-term agreement. The long-
term agreement never was executed and the Lechmere Agreement was extended by
numerous letter agreements between the parties. Pursuant to an order of the
Bankruptcy Court overseeing Lechmere's bankruptcy (which, like the bankruptcy
Filing, was filed on July 7, 1997), Lechmere and Monogram continued to perform
under the Lechmere Agreement as though such agreement had been assumed by
Lechmere. On or around August 1, 1997 (before any assumption or rejection of the
Lechmere Agreement), Lechmere announced that its assets would be sold and
liquidated. Shortly thereafter, Monogram, Lechmere and Wards entered into a
stipulation and order for adequate protection defining the parties' respective
rights during the wind-down of the Lechmere credit card program and the
liquidation of receivables that arose in connection therewith. Pursuant to that
stipulation and order, purchases made using Lechmere cards ceased on or around
August 8, 1997. Lechmere, to date, has neither assumed or rejected the Lechmere
Agreement.

Wards and Lechmere also entered into an agreement on April 3, 1996 for the sale
of certain commercial customer receivables to Montgomery Ward Credit. During
1997, Montgomery Ward Credit paid $4.8 million to Wards and Lechmere pursuant to
this agreement and, as of March 16, 1998, Montgomery Ward Credit has paid
$485,000 to Wards in respect of such receivables during the current fiscal year.

Wards and Lechmere have entered into a Program Agreement dated October 12, 1989,
as amended on March 6, 1997, with GE Capital, under which GE Capital pays
certain manufacturers and distributors a discounted invoice price of products
acquired by Wards and Lechmere and whereby Wards and Lechmere reimburse GE
Capital for such payments according to an agreed-upon schedule. The aggregate
amount of outstanding payments and other amounts payable under the Program
Agreement is not to exceed $650 million at any one time. During the Company's
1997 fiscal year, Wards and Lechmere reimbursed approximately $147 million to GE
Capital under the Program Agreement and the largest amount payable at any time
during such fiscal year was approximately $650 million.

Wards entered into the Post-Petition Loan and Guaranty Agreement ("DIP
Facility") with GE Capital as agent and lender; and various other lenders, on
July 8, 1997, which was approved by the Bankruptcy Court on July 31, 1997. Under
the DIP Facility, the lenders have agreed to provide a revolving credit and
letter of credit facility, the maximum amount of which is based on the book
value of eligible inventory (as defined in the DIP Facility), the fair market
value of eligible real property (as defined in the DIP Facility) and the
earnings of Signature. In no case may borrowings exceed $1 billion. Total
letters of credit outstanding were $52 million at January 3, 1998. The Company
had $811 million of borrowing availability under the DIP Facility at January 3,
1998. Under the DIP Facility, Wards may select among several interest rate
options, all of which are based on market rates plus a margin. A commitment fee
is payable based on the unused amount of the facility. The facility expires on
July 7, 1999, or earlier in the case of an event of default. GE Capital's
portion of the commitment under the DIP Facility is $300 million.

GE, the indirect parent of GE Capital, is, in the ordinary course of its
business, a major supplier of consumer goods to Wards for sale at Wards' stores
in the ordinary course of its business.

As more fully described above, Mr. Goddu is indebted to the Company under the
Goddu Note in the initial principal amount of $2,000,000 and Mr. Brennan is
indebted to the Company in connection with the loan provided him pursuant to the
Relationship Agreement in the initial principal amount of $12,500,000. See Item
11 above.

In July 1997, Messrs. Austin and Caporale received loans at a 8-1/2% interest
rate from Wards aggregating $654,000 and $656,425, respectively. Messrs. Austin
and Caporale repaid within ninety days of such loans principal of $279,000 and
$222,300, respectively, and interest thereon. The remaining balances of such
loans is due July 11, 1999. The outstanding balance as of March 7, 1998 of the
loans to Messrs. Austin and Caporale is $394,288.63 and $457,074.16,
respectively.

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

(a) 1. Financial Statements

Page
------

Report of Independent Public Accountants 20
For the 53-Week Periods Ended January 3, 1998,
and the 52-Week Periods Ended December 28,
1996 and December 30, 1995
Consolidated Statements of Income 21
Consolidated Statements of Shareholders' Equity 23
Consolidated Statements of Cash Flows 26
Consolidated Balance Sheets at January 3, 1998
and December 28, 1996 22
Notes to Consolidated Financial Statements 28

2. Financial Statement Schedules

Schedules have been omitted because they are not applicable, not required, not
material, or the required information is given in the financial statements or
notes thereto or combined with the information presented in other schedules or
exhibits.

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

3. Exhibits

3.1 Third Restated Certificate of Incorporation of the Company,
filed June 28, 1994, incorporated by reference to Exhibit 3.2
(ii) of the Company's Registration Statement on Form S-1
(Registration No. 33-33252).

3.1 (i) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated October 25, 1994,
incorporated by reference to Exhibit 3.2 (iv) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.

3.1 (ii) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated March 29, 1996,
incorporated by reference to Exhibit 3.1 (ii) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.

3.1 (iii) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated May 29, 1997,
incorporated by reference to Exhibit 3.1 (iii) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter quarterly period ended June 28, 1997.

3.1 (iv) Certificated of Stock Designation of Montgomery Ward Holding
Corp. dated May 29, 1997, incorporated by reference to
Exhibit 3.1 (iv) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended June 28, 1997.

3.3 Amended and Restated By-laws of the Company, dated as of
December 29, 1994, incorporated by reference to Exhibit 3.3
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995.

3.3 (i) Amendment to By-laws of Montgomery Ward Holding Corp., dated
as of December 10, 1996, incorporated by reference to Exhibit
3.3 (i) of the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996.

9. Voting Trust Agreement dated as of June 21, 1988,
incorporated by reference to Exhibit 3(a) of the Company's
Registration Statement on Form S-1 (Registration No. 33-
23403).

9. (i) Voting Trust Agreement dated as of October 21, 1994,
incorporated by reference to Exhibit 9. (i) of the Company's
quarterly report on Form 10-Q for the fiscal quarterly period
ended October 1, 1994.

10. (i)(A)(1) Stockholders' Agreement dated as of June 17, 1988, as amended
and restated as of December 29, 1994, incorporated by
reference to Exhibit 4. (e) to the Company's Registration
Statement on Form S-8 (Registration No. 33-57075).

10. (i)(A)(2) Amendment Agreement dated as of December 10, 1996,
incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K for an event occurring January 6,
1997.

10. (i)(A)(3) Montgomery Ward & Co., Incorporated Stock Ownership Plan
Terms and Conditions, as amended and restated, as of December
29, 1994, incorporated by reference to Exhibit 4. (f) of the
Company's Registration Statement on Form S-1 (Registration
No. 33-57075).

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

3. Exhibits (continued)

10. (i) (A) (4) Amendment No. 17 to Stockholders' Agreement, dated as
of March 31, 1997, incorporated by reference to Exhibit
10. (i) (A) (3) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended March
19, 1997.

10. (i) (B) Stock Purchase Agreement dated March 6, 1988 between
Mobil Corporation, Marcor Inc. and BFB Acquisition
Corp. incorporated by reference to Exhibit 10. (i) (B)
of the Company's Registration Statement on Form S-1
(Registration No. 33-23403).

10. (i) (C) Subscription Agreement dated as of December 29, 1995
between General Electric Capital Corporation,
Montgomery Ward & Co., Montgomery Ward Holding Corp.,
and Bernard F. Brennan, incorporated by reference to
Exhibit 10. (i) (C) of the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 1995.

10. (i) (F) Note Purchase Agreements dated March 1, 1993 between
Montgomery Ward & Co., Incorporated and various
lenders, incorporated by reference to Exhibit 10. (i)
(F) of the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993.

10. (i) (F) (1) Amendment dated June 30, 1995 to Note Purchase
Agreements dated March 1, 1993 between Montgomery Ward
& Co., Incorporated and various lenders, incorporated
by reference to Exhibit 10. (i) (F) (1) of the
Company's quarterly report on Form 10-Q for the fiscal
quarterly period ended July 1, 1995.

10. (i) (F) (2) Limited waiver and First Amendment to Note Purchase
Agreements dated as of March 29, 1997 among Montgomery
Ward & Co., Incorporated and various lenders,
incorporated by reference to Exhibit 10. (i) (F) (2) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended March 29, 1997.

10. (i) (G) U.S. $1,000,000,000 Post-Petition Loan and Guaranty
Agreement dated as of July 8, 1997, among Montgomery
Ward & Co., Incorporated and Lechmere, Inc. as
borrowers and various guarantors and General Electric
Capital Corporation as agent and lender and various
lenders, incorporated by reference to Exhibit 10. (i)
(G) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarterly period ended June 28, 1997.

10. (i) (G) (1) Waiver and First Amendment to Post-Petition Loan and
Guaranty Agreement dated as of July 30, 1997,
incorporated by reference to Exhibit and 10. (i) (G)
(1) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarterly period ended June 28, 1997.

10. (i) (G) (2) Waiver to Post-Petition Loan and Guaranty Agreement
among Montgomery Ward & Co., as borrower; Montgomery
Ward Holding Corp. and other debtor subsidiaries of
Montgomery Ward Holding Corp., as guarantors; General
Electric Capital Corporation, as agent and lender; and
various lenders dated as of August 12, 1997,
incorporated by reference to Exhibit 10. (i) (G) (2) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended September 27, 1997.

10. (i) (G) (3) Waiver to Post-Petition Loan and Guaranty Agreement
among Montgomery Ward & Co., as borrower; Montgomery
Ward Holding Corp. and other debtor subsidiaries of
Montgomery Ward Holding Corp., as guarantors; General
Electric Capital Corporation, as agent and lender; and
various lenders dated as of September 24, 1997,
incorporated by reference to Exhibit 10. (i) (G) (3) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended September 27, 1997.

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

3. Exhibits (continued)

10. (i)(G)(4) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery Ward
Holding Corp., as guarantors; General Electric Capital
Corporation, as agent and lender; and various lenders dated
as of November 7, 1997.

10. (i)(H) Long Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks, The
First National Bank of Chicago, as Documentary Agent, The
Bank of Nova Scotia, as Administrative Agent, The Bank of New
York, as Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10. (i) (G) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.

10. (i)(H)(1) Amended Schedule 1 to the Long Term Credit Agreement dated as
of September 15, 1994 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent incorporated by reference to
Exhibit 10. (i) (H) (1) of the Company's Quarterly Report on
Form 10-Q, for the fiscal quarterly period ended September
30, 1995.

10. (i)(H)(2) Amendment dated March 19, 1996 to the Long Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust and
Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (H) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended March 30, 1996.

10. (i)(H)(3) Amendment to Long Term Credit Agreement dated as of September
15, 1994 among Montgomery Ward & Co., Incorporated, various
banks, The First National Bank of Chicago, as Documentary
Agent, The Bank of Nova Scotia, as Administrative Agent, The
Bank of New York, as Negotiated Loan Agent and Bank of
America National Trust and Savings Association, as Advisory
Agent, which became effective September 6, 1996, incorporated
by reference to Exhibit 10. (i) (H) (3) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended September 28, 1996.

10. (i)(H)(4) Amendment to Long Term Credit Agreement dated as of December
23, 1996 among Montgomery Ward & Co., Incorporated, various
banks, The First National Bank of Chicago, as Documentary
Agent, The Bank of Nova Scotia, as Administrative Agent, The
Bank of New York, as Negotiated Loan Agent and Bank of
America National Trust and Savings Association, as Advisory
Agent, incorporated by reference to Exhibit 10. (i) (H) (5)
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.

10. (i)(H)(5) Waiver and Fourth Amendment to Long Term Credit Agreement
dated as of March 29, 1997 among Montgomery Ward & Co.,
Incorporated and various banks, incorporated by reference to
Exhibit 10. (i) (H) (5) of the Company's Annual Report on
Form 10-Q for the fiscal quarterly period ended March 29,
1997.

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

3. Exhibits (continued)

10. (i)(I) Short Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks, The
First National Bank of Chicago, as Documentary Agent, The
Bank of Nova Scotia, as Administrative Agent, The Bank of New
York, as Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10. (i) (H) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.

10. (i)(I)(1) Amended Schedule 1 to the Short Term Credit Agreement dated
as of September 15, 1994 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, the Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent, incorporated by reference to
Exhibit 10. (i) (I) (1) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended September 30,
1995.

10. (i)(I)(2) Amendment dated March 19, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust and
Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended March 30, 1996.

10. (i)(I)(3) Amendment dated September 6, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust and
Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I) (3) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended September 28, 1996.

10. (i)(I)(4) Confirmation of New Bank executed by The Industrial Bank of
Japan, Limited, Chicago Branch and The Bank of Nova Scotia,
as Administrative Agent, pursuant to Section 2.6(c) of the
Short Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks, The
First National Bank of Chicago, as Documentary Agent, The
Bank of Nova Scotia, as Administrative Agent, The Bank of New
York, as Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent, as amended
and extended, and (b) a letter dated October 24, 1996 from
The Bank of Nova Scotia, as Administrative Agent, to the
Banks and other Agents who are parties to said Short Term
Credit Agreement transmitting an attached revised Schedule 1
to such Agreement, incorporated by reference to Exhibit 10.
(i) (I) (4) of the Company's Quarterly Report on Form 10-Q
for the fiscal quarterly period ended September 28, 1996.

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

3. Exhibits (continued)

10. (i)(I)(5) Amendment dated December 23, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust and
Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I) (5) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996.

10. (i)(I)(6) Waiver and Fourth Amendment to Short Term Credit Agreement
dated as of March 29, 1997 among Montgomery Ward & Co.,
Incorporated and various banks, incorporated by reference to
Exhibit 10. (I) (I) (6) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended March 29,
1997.

10. (i)(J) Note Purchase Agreement dated July 11, 1995 between
Montgomery Ward & Co., Incorporated and various lenders,
incorporated by reference to Exhibit 10. (i) (J) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended July 1, 1995.

10. (i)(J)(1) Limited waiver and First Amendment to Note Purchase
Agreements dated as of March 29, 1997 among Montgomery Ward &
Co., Incorporated and various lenders, incorporated by
reference to Exhibit 10. (i) (F) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended March 29, 1997.

10. (i)(L) Credit Agreement dated as of September 27, 1996 as amended
and restated as of October 21, 1996, among Signature
Financial/Marketing, Inc., various lenders, The Bank of New
York, as Documentation Agent and The Bank of Nova Scotia, as
Administrative Agent, incorporated by reference to Exhibit
10. (i) (L) of the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1996.

10. (i)(L)(1) Amendment to Credit Agreement dated as of December 23, 1996
among Signature Financial/Marketing, Inc., various lenders,
The Bank of New York, as Documentation Agent and The Bank of
Nova Scotia, as Administrative Agent, incorporated by
reference to Exhibit 10. (i) (L) (1) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996.

10. (i)(L)(2) Waiver Letter dated as of March 27, 1997 addressed to
Signature Financial/Marketing, Inc. from the Bank of New York
and The Bank of Nova Scotia, incorporated by reference to
Exhibit 10. (i) (L) (2) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended March 29,
1997.

10. (i)(L)(3) Correction Letter Agreement dated as of March 27, 1997 among
Signature Financial/Marketing, Inc., The Bank of New York and
The Bank of Nova Scotia, incorporated by reference to Exhibit
10. (i) (L) (3) of the Company's Quarterly Report on Form 10-
Q for the fiscal quarterly period ended March 29, 1997.

10. (i)(L)(4) Waivers and Recision of Acceleration dated July 15, 1997,
among The Bank of New York, The Bank of Nova Scotia and
Signature Financial/Marketing, Inc., incorporated by
reference to Exhibit 10. (i) (L) (4) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly period
ended June 28, 1997.

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

3. Exhibits (continued)

10. (i)(L)(5) Waiver, Amendment and Extension Agreement dated as of August
29, 1997, among Signature Financial Marketing, Inc., various
lenders, The Bank of New York, as Documentation Agent and The
Bank of Nova Scotia, as Administrative Agent.

10. (i)(M) Credit Agreement dated October 4, 1996 among Montgomery Ward
& Co., Incorporated, various lenders, The Bank of Nova
Scotia, as Administrative Agent, and The Bank of New York, as
Documentation Agent, incorporated by reference to Exhibit 10.
(i) (M) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarterly period ended September 28, 1996.

10. (i)(M)(1) Amendment to Credit Agreement dated as of December 23, 1996
among Montgomery Ward & Co., Incorporated, various lenders,
The Bank of Nova Scotia, as Administrative Agent, and The
Bank of New York, as Documentation Agent, incorporated by
reference to Exhibit 10. (i) (M) (1) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996.

10. (i)(M)(2) Second Amendment to Credit Agreement dated as of December 23,
1996 among Montgomery Ward & Co., Incorporated, various
lenders, The Bank of Nova Scotia, as Administrative Agent,
and The Bank of New York, as Documentation Agent,
incorporated by reference to Exhibit 10. (i) (M) (2) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.

10. (i)(M)(3) Waiver and Third Amendment to Credit Agreement dated as of
March 29, 1997 among Montgomery Ward & CO., Incorporated and
various lenders, incorporated by reference to Exhibit 10. (i)
(M) (3) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarterly period ended March 29, 1997.

10. (i)(N) Asset Purchase, License & Agency Agreement for the Purchase
of Certain Assets of Lechmere, Inc. and Montgomery Ward &
Co., Incorporated, by Schottenstein Bernstein Capital Group
LLC dated August 14, 1997, incorporated by reference to
Exhibit 10. (i) (N) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended September 27,
1997.

10. (i)(O) Agency Agreement between Schottenstein Bernstein Capital
Group LLC and Montgomery Ward & Co., Incorporated, as of
August 14, 1997, incorporated by reference to Exhibit 10. (i)
(O) of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended September 27, 1997.

10. (i)(P) Agency Agreement dated as of October 31, 1997 between the
joint venture composed of Gordon Brothers Partners, Inc.,
Hilco Trading, Inc./Garcel, Inc. D/B/A Great American Asset
Management and Alco Capital Group, Inc., as agent and
Montgomery Ward & Co., Incorporated.

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

3. Exhibits (continued)

10. (ii)(A)* Interim Consumer Credit Card Program dated as of April 1,
1996, as amended, restated and renamed the Bank Credit Card
Program Agreement dated as of April 1, 1996 by and between
Monogram Credit Card Bank of Georgia and Montgomery Ward &
Co., Incorporated, incorporated by reference to Exhibit 10.
(ii) (A) of the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1996.

10. (ii)(B)* Account Purchase Agreement dated as of June 24, 1988, as
amended, restated and renamed the Account-Related Agreement
and dated as of April 1, 1996 by and between Montgomery
Ward Credit Corporation and Montgomery Ward & Co.,
Incorporated, incorporated by reference to Exhibit 10. (ii)
(B) of the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996.

10. (ii)(C)(1) Letter Agreement dated as of April 1, 1996 between
Signature Financial/Marketing, Inc., Monogram Credit Card
Bank of Georgia, Montgomery Ward Credit Corporation, and
Montgomery Ward & Co., Incorporated, incorporated by
reference to Exhibit 10. (ii) (C) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.

10. (ii)(C)(2) Letter Agreement dated as of April 1, 1996 between
Signature Financial/Marketing, Inc. and Montgomery Ward
Credit Corporation, incorporated by reference to Exhibit
10. (ii) (C) (2) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.

10. (ii)(C)(3) Letter Agreement dated September 17, 1996 between
Montgomery Ward & Co., Incorporated, Monogram Credit Card
Bank of Georgia and Montgomery Ward Credit Corporation,
incorporated by reference to Exhibit 10. (ii) (C) (3) of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.

10. (ii)(C)(4)* Letter Agreement dated as of August 2, 1995 between
Monogram Retailer Credit Services, Inc. and Montgomery Ward
& Co., Incorporated, incorporated by reference to Exhibit
10. (ii) (C) (4) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.

10. (ii)(D)* Interim Consumer Credit Card Program Agreement dated as of
March 13, 1996 between Monogram Credit Card Bank of Georgia
and Lechmere, Inc., incorporated by reference to Exhibit
10. (ii) (D) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.

10. (ii)(D)(1)* Letter Agreement dated January 23, 1996 between Montgomery
Ward & Co., Incorporated, Montgomery Ward Credit and
General Electric Capital Corporation, incorporated by
reference to Exhibit 10. (ii) (D) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.

10. (ii)(D)(2) Letter Agreement dated March 13, 1996 between Montgomery
Ward & Co., Incorporated, Lechmere, Inc., General Electric
Capital Corporation and Montgomery Ward Credit Corporation,
incorporated by reference to Exhibit 10. (ii) (D) (2) of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.

* Confidential treatment has been requested from the Secretary of the
Commission, with respect to portions of this document.

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

3. Exhibits (continued)

10. (ii)(E)* MWCC Program Agreement dated as of April 3, 1996 between
Montgomery Ward Credit Corporation, Montgomery Ward & Co.,
Incorporated and Lechmere, Inc., incorporated by reference
to Exhibit 10. (ii) (E) of the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996.

10. (ii)(F) Letter Agreement dated July 7, 1997, among Montgomery Ward &
Co., Incorporated, Monogram Credit Card Bank of Georgia,
Montgomery Ward Credit Corporation and Lechmere, Inc.,
incorporated by reference to Exhibit 10. (ii) (F) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended June 28, 1997.

10. (iii)(A) Program Agreement dated October 12, 1989 between Montgomery
Ward & Co., Incorporated and General Electric Capital
Corporation, incorporated by reference to Exhibit 10. (iii)
(A) of the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996.

10. (iii)(B) Amendment to Program Agreement dated March 4, 1997 between
General Electric Corporation, Montgomery Ward & Co.,
Incorporated and Lechmere, Inc., incorporated by reference
to Exhibit 10. (iii) (B) of the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996.

10. (iii)(C) Waiver letter of General Electric Capital Corporation dated
March 27, 1997, incorporated by reference to Exhibit 10.
(iii) (C) of the Company's Quarterly Report on Form 10-Q
for the fiscal quarterly period ended March 27, 1997.

10. (iii)(D) Letter Agreement dated June 25, 1997 among General Electric
Capital Corporation, Montgomery Ward Holding Corp.,
Montgomery Ward & Co., Incorporated and Lechmere, Inc.,
incorporated by reference to Exhibit 10. (iii) (D) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended June 28, 1997.

10. (iv)(A) Montgomery Ward & Co., Incorporated Stock Ownership Plan,
amended and restated as of May 20, 1994, incorporated by
reference to Exhibit 10. (iv) (A) (ii) (A) of the Company's
Registration Statement on Form S-1 (No. 33-33252).

10. (iv)(A)(1) Amendment No. 1 to the Amended and Restated Montgomery Ward
& Co. Stock Ownership Plan dated October 20, 1994,
incorporated by reference to Exhibit 10. (iv) (A) (iii) of
the Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.

10. (iv)(A)(2) Amendment No. 2 to the Amended and Restated Montgomery Ward
& Co., Incorporated Stock Ownership Plan, dated as of May
29, 1997, incorporated by reference to Exhibit 10. (iv) (A)
(2) of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended June 28, 1997.

* Confidential treatment has been requested from the Secretary of the
Commission, with respect to portions of this document.

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

3. Exhibits (continued)

10. (iv)(B) Montgomery Ward & Co., Incorporated Long-Term Incentive
Plan, incorporated by reference to Exhibit 10. (iv) (B) of
the Company's Registration Statement on Form S-1
(Registration No. 33-23403).

10. (iv)(B)(i) Montgomery Ward & Co., Incorporated Executive Long-Term
Incentive Plan, incorporated by reference to Exhibit 10.
(iv) (B) (1) of the Company's Registration Statement on Form
S-1 (No. 33-33252).

10. (iv)(C) Montgomery Ward & Co., Incorporated Performance Management
Program, incorporated by reference to Exhibit 10. (iv) (C)
of the Company's Registration Statement on Form S-1
(Registration No. 33-23403).

10. (iv)(C)(i) Montgomery Ward & Co., Incorporated Senior Executive
Performance Management Program, incorporated by reference to
Exhibit 10. (iv) (C) (i) of the Company's Registration
Statement on Form S-1 (No. 33-33252).

10. (iv)(D) Montgomery Ward & Co., Incorporated Retirement Security Plan
(as amended and restated effective as of January 1, 1994),
incorporated by reference to Exhibit 10. (iv) (D) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.

10. (iv)(D)(1) First Amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan dated October 9, 1995, incorporated
by reference to Exhibit 10. (iv) (D) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.

10. (iv)(D)(2) Second Amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan dated October 31, 1996,
incorporated by reference to Exhibit 10. (iv) (D) (2) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.

10. (iv)(D)(3) Third Amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan, incorporated by reference to
Exhibit 10. (iv) (D) (3) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended March 27,
1997.

10. (iv)(D)(4) Fourth amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan, incorporated by reference to
Exhibit 10. (iv) (D) (4) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended June 28,
1997.

10. (iv)(D)(5) Fifth amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan effective September 17, 1997.

10. (iv)(E) Montgomery Ward & Co., Incorporated Supplemental Retirement
Plan, incorporated by reference to Exhibit 10. (iv) (E) of
the Company's Registration Statement on Form S-1
(Registration No. 33-23403).

10. (iv)(F) Montgomery Ward Holding Corp. Directors Fee and Stock
Ownership Plan, incorporated by reference to Exhibit 10.
(iv) (F) of the Company's Registration Statement on Form S-1
(Registration No. 33-41161).

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

3. Exhibits (continued)

10. (iv)(G) Montgomery Ward Holding Corp. Senior Officer Severance Plan,
incorporated by reference to Exhibit 10. (iv) (G) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993.

10. (iv)(G)(1) Montgomery Ward & Co., Incorporated Executive Committee
Severance Plan.

10. (iv)(H) Montgomery Ward & Co., Incorporated Savings and Profit
Sharing Plan (as amended and restated as of January 1,
1994), incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994.

10. (iv)(H)(1) First Amendment to the Montgomery Ward & Co., Incorporated
Savings and Profit Sharing Plan dated as of October 31,
1996, incorporated by reference to Exhibit 10. (iv) (H) (1)
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.

10. (iv)(H)(2) Second Amendment to the Montgomery Ward & Co., Incorporated
Savings and Profit Sharing Plan, incorporated by reference
to Exhibit 10. (iv) (H) (2) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
June 28, 1997.

10. (iv)(I) Montgomery Ward & Co., Incorporated Success Plan,
incorporated by reference to Exhibit 10. (iv) (I) of the
Company's Registration Statement on Form S-1 (No.33-33252).

10. (iv)(J) Form of Montgomery Ward Special Retention Plan document
entered into with the following persons: Alan E. DiGangi,
Spencer H. Heine, Carol J. Harms, Robert A. Kasenter,
Frederick E. Meiser, Edwin G. Pohlmann, Robert J. Stevenish
and John Workman, incorporated by reference to Exhibit 10.
(iv) (J) of the Company's Quarterly Report on Form 10-Q for
the fiscal quarterly period ended March 30, 1996.

10. (iv)(L) Form of Montgomery Ward Change of Control Security Plan
document entered into with the following persons: Alan E.
DiGangi, Spencer H. Heine, Carol J. Harms, Robert A.
Kasenter, Frederick E. Meiser, Edwin G. Pohlmann, Robert J.
Stevenish and John Workman, incorporated by reference to
Exhibit 10. (iv) (L) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended March 30,
1996.

10. (v) Relationship Agreement effective December 10, 1996 between
Bernard F. Brennan, Montgomery Ward Holding Corp.,
Montgomery Ward & Co., Incorporated and General Electric
Capital Corporation, incorporated by reference to Exhibit
10. (v) of the Company's Annual Report on Form 10-K for the
fiscal year ended December 28, 1996.

10. (vi)(A) Employment Agreement effective December 20, 1996 between
Montgomery Ward & Co., Incorporated, Montgomery Ward Holding
Corp., and Roger V. Goddu, incorporated by reference to
Exhibit 10. (vi) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.

10. (vi)(B) Letter Agreement dated December 20, 1996 between General
Electric Capital Corporation and Roger V. Goddu.

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

3. Exhibits (continued)

10. (vi)(C) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Roger V. Goddu, regarding Court
Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (vii)(A) Employment Agreement effective January 31, 1997 between
Montgomery Ward & Co., Incorporated, Montgomery Ward Holding
Corp., and Burnett Donoho, incorporated by reference to
Exhibit 10. (vii) of the Company's Annual Report on Form 10-
K for the fiscal year ended December 28, 1996.

10. (vii)(B) General Release and Agreement Not to Sue dated January 23,
1998 between Montgomery Ward & Co., Incorporated and Burnett
Donoho.

10. (viii) Line of Credit Agreement effective December 19, 1996 between
Montgomery Ward & Co., Incorporated and The Northern Trust
Company, incorporated by reference to Exhibit 10. (viii) of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.

10. (ix)(A) Employment Agreement effective November 3, 1997, between
Montgomery Ward & Co., Incorporated and Alan E. DiGangi.

10. (ix)(B) Letter agreement dated November 3, 1997, between Montgomery
Ward & Co., Incorporated and Alan E. DiGangi, regarding
court approval of Executive Compensation Plan for Executive
Committee members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (x)(A) Employment Agreement effective January 28, 1997, between
Montgomery Ward & Co., Incorporated and Thomas Grimes,
incorporated by reference to Exhibit 10. (x) of the
Company's Annual Report of Form 10-K for the fiscal year
ended December 28, 1996.

10. (x)(B) Letter Agreement dated February 18, 1997 between General
Electric Capital Corporation and Thomas Grimes.

10. (x)(C) Letter Agreement dated November 3, 1997, between Montgomery
Ward & Co., Incorporated and Thomas Grimes, regarding court
approval of Executive Compensation Plan for Executive
Committee members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (xi)(A) Employment Agreement effective April 15, 1997, between
Montgomery Ward & Co., Incorporated and Thomas J. Austin.

10. (xi)(B) Letter Agreement dated April 30, 1997 between General
Electric Capital Corporation and Thomas J. Austin.

10. (xi)(C) Letter Agreement dated November 3, 1997, between Montgomery
Ward & Co., Incorporated and Thomas J. Austin, regarding
court approval of Executive Compensation Plan for Executive
Committee members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

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

3. Exhibits (continued)

10. (xii) (A) Employment Agreement effective April 15, 1997, between
Montgomery Ward & Co., Incorporated and Louis J. Caporale.

10. (xii) (B) Letter Agreement dated April 30, 1997 between General
Electric Capital Corporation and Louis. J. Caporale.

10. (xii) (C) Letter agreement dated November 3, 1997, between Montgomery
Ward & Co., Incorporated and Louis J. Caporale, regarding
court approval of Executive Compensation Plan for Executive
Committee members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (xiv) Employment Agreement dated April 11, 1997 between Montgomery
Ward & Co., Incorporated and Spencer H. Heine, incorporated
by reference to Exhibit 10. (xiv) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
March 29, 1997.

10. (xv) Employment Agreement dated March 6, 1998 between Montgomery
Ward & Co., Incorporated and Worthington Linen.

11. Not applicable.

12. Not applicable.

13. Not applicable.

16. Not applicable.

18. Not applicable.

19. Not applicable.

21. Subsidiaries of the Registrant, incorporated by reference to Exhibit
21 of the Company's Registration Statement on Form S-1 (Registration
No. 33-33252).

22. Not applicable.

23. Consent of independent public accountants.

24. Not applicable.

27. Financial data schedule.

28. Not applicable.

(b) Reports on Form 8-K.

None during the fiscal quarter ended January 3, 1998.

SIGNATURES

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

REGISTRANT MONTGOMERY WARD HOLDING CORP.

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Thomas J. Paup, Executive Vice President, Chief Financial
Officer
DATE April 2, 1998

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.

BY /s/ Roger V. Goddu
-------------------------------------------------------------
NAME AND TITLE Roger V. Goddu, Director and Chief Executive Officer
DATE April 2, 1998

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Thomas J. Paup, Executive Vice President, Chief Financial
Officer
DATE April 2, 1998

BY
-------------------------------------------------------------
NAME AND TITLE Bernard F. Brennan, Director
DATE _____, 1998

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Silas S. Cathcart*, Director
DATE April 2, 1998

BY
-------------------------------------------------------------
NAME AND TITLE Tommy T. Cato, Director
DATE _____, 1998

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Denis J. Nayden*, Director
DATE April 2, 1998

* By power of attorney.

SIGNATURES (continued)

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE James A. Parke*, Director
DATE April 2, 1998

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Edward D. Stewart*, Director
DATE April 2, 1998

BY /s/ Thomas J. Paup
-------------------------------------------------------------
NAME AND TITLE Gary C. Wendt*, Director
DATE April 2, 1998

* By power of attorney.

EXHIBIT INDEX
-------------

10. (i) (G) (4) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery Ward
Holding Corp., as guarantors; General Electric Capital
Corporation, as agent and lender; and various lenders dated
as of November 7, 1997.

10. (i) (L) (5) Waiver, Amendment and Extension Agreement dated as of August
29, 1997, among Signature Financial Marketing, Inc., various
lenders, The Bank of New York, as Documentation Agent and
The Bank of Nova Scotia, as Administrative Agent.

10. (i) (P) Agency Agreement dated as of October 31, 1997 between the
joint venture composed of Gordon Brothers Partners, Inc.,
Hilco Trading, Inc./Garcel, Inc. D/B/A Great American Asset
Management and Alco Capital Group, Inc., as agent and
Montgomery Ward & Co., Incorporated.

10. (iv) (D) (5) Fifth Amendment to the Montgomery Ward & Co., Incorporated
Retirement Security Plan effective September 17, 1997.

10. (iv) (G) (1) Montgomery Ward & Co., Incorporated Executive Committee
Severance Plan.

10. (vi) (B) Letter Agreement dated December 20, 1996 between General
Electric Capital Corporation and Roger V. Goddu.

10. (vi) (C) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Roger V. Goddu, regarding Court
Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (vii) (B) General Release and Agreement Not to Sue dated January 23,
1998 between Montgomery Ward & Co., Incorporated and Burnett
Donoho.

10. (ix) (A) Employment Agreement effective November 3, 1997, between
Montgomery Ward & Co., Incorporated and Alan E. DiGangi.

10. (ix) (B) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Alan E. DiGangi, regarding
Court Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (x) (B) Letter Agreement dated February 18, 1997 between General
Electric Corporation and Thomas Grimes.

10. (x) (C) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Thomas Grimes, regarding Court
Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (xi) (A) Employment Agreement effective April 15, 1997 between
Montgomery Ward & Co., Incorporated and Thomas J. Austin.

10. (xi) (B) Letter Agreement dated April 30, 1997 between General
Electric Corporation and Thomas J. Austin.

10. (xi) (C) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Thomas J. Austin, regarding
Court Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (xii) (A) Employment Agreement effective April 15, 1997 between
Montgomery Ward & Co., Incorporated and Louis J. Caporale.

10. (xii) (B) Letter Agreement dated April 30, 1997 between General
Electric Corporation and Louis J. Caporale.

10. (xii) (C) Letter Agreement dated November 3, 1997 between Montgomery
Ward & Co., Incorporated and Louis J. Caporale, regarding
Court Approval of Executive Compensation Plan for Executive
Committee Members and Montgomery Ward & Co., Incorporated
Special Emergence Bonus Plan.

10. (xv) Employment Agreement effective March 6, 1998 between
Montgomery Ward & Co., Incorporated and Worthington W.
Linen.

23. Consent of Independent Public Accountants.

27. Financial Data Schedule.