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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K
(MARK ONE)
XX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: June 29, 1996
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD FROM TO
---------------- ---------------------

COMMISSION FILE NUMBER: 0-12800
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VIE DE FRANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware 52-0948383
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

85 South Bragg Street, Suite 600, Alexandria, VA 22312
---------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 750-9600
--------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -----------------------

None None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $.01 per Share
----------------------------------------
(TITLE CLASS)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /_/

The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the Common Stock on August
31, 1996 as reported on the NASDAQ National Market System, was approximately
$18,422,086. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of August 31, 1996, there were 13,822,543 shares outstanding of the
----------
Registrant's Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following document are incorporated by reference in Parts III
and IV of this Form 10-K Report: Proxy Statement for Registrant's 1996 Annual
Meeting of Stockholders to be filed - Items 10, 11, 12 and 13.
2





Exhibit Index is located on page 18.





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PART I

ITEM 1. BUSINESS

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company is currently engaged in only one industry segment as of
June 29, 1996. Accordingly, no segment data is included in the Consolidated
Financial Statements for the fiscal year ending June 29, 1996.

GENERAL

The Company develops, produces and markets high-quality frozen
entrees, side dishes and sauces for the foodservice and retail markets. The
Company maintains manufacturing facilities in the United States and Norway, and
sells its product in Asia, North America and Europe. Its customers include
among others, hotels, catering companies, restaurants, airlines, military
facilities, healthcare facilities and retail stores. The Company opened a
USDA-approved food processing plant in Alexandria, Virginia in May 1990 and
began operating another plant in Hjemeland, Norway in August 1994. The Company
uses an advanced system of food preparation, developed in France, which cooks
meats, seafood, poultry, sauces and vegetables over time using low heat.
Before the cooking process begins, the product is vacuum-sealed in special
plastic pouches that better maintain the food's flavor and moisture in
comparison to other methods of cooking. Following the completion of the
cooking process, the product can be either frozen or refrigerated for
distribution. Currently, all of the Company's products are frozen. The Company
also works with equipment manufacturers to provide efficient computer
controlled reheating equipment to its food service providers who effectively
convert their kitchen operations and improve customer satisfaction through
better and consistent product quality, while realizing reductions in their food
and labor costs as a result of this technology.

Vie de France was incorporated in the State of Delaware in 1974. Its
principal executive offices are located at 85 South Bragg Street, Suite 600,
Alexandria, VA 22312 and its telephone number at that location is (703)
750-9600.





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BACKGROUND

The Company commenced operations in 1972 as a wholesale producer of
French bread for daily delivery to the Washington, DC area. The Company
expanded its markets throughout the 1970s. In fiscal year 1979, the Company
began offering its product through Company-owned retail bakeries where the
products could be freshly baked throughout the day. During the 1980s, the
Company expanded its frozen dough product line and developed processes to
facilitate the baking of these products at the point-of-sale. As of May 1994,
the Company owned and operated 31 retail units. The Company sold the Bakery
Division and the Restaurant Division to Vie de France Bakery Yamazaki, Inc. in
1991 and 1994, respectively.

The Company began development of the Culinary division business in
1987, in conjunction with research performed previously by Nouvelle Carte
France, a French Company. As a result of the growth in the application of high
quality frozen products in Europe, the Board authorized the establishment of
the Vie de France Culinary Corporation for the express purpose of the research
into and development of high quality frozen products for the U.S. market. This
Company was formed in 1987, and was later merged into Vie de France
Corporation. In 1989, construction began on a 30,000 square foot plant in
Alexandria, Virginia designed to manufacture its sous vide product line under
the trade name Vie de France Culinary. The Culinary plant began operations in
May 1990, and expanded into a 50,000 square feet building.

During fiscal years 1991 through 1996, the Culinary Division
successfully built its sales volume from zero to over $2.0 million in fiscal
year 1991, $4.6 million in fiscal year 1992, $8.2 million in fiscal year 1993,
$12.8 million in fiscal year 1994, $15.7 million in fiscal year 1995 and $16.0
million in fiscal year 1996. In 1992, the Company started a national direct
sales organization to continue to increase sales. The Company is focusing its
sales efforts on wholesale customers in the hotel industry and
national/regional restaurant chains, as well as large-volume food providers
such as the airline, transportation industries, retail segment and military.
In late 1996 the Company began signing contracts with brokers in the United
States as another means to distribute products and increase sales.

In order to reduce costs, increase quality and increase production
capacity, the Company is pursuing the development and construction of single
product production plants for its high quality entrees located adjacent to, or
in the proximity of suppliers of raw materials. One such plant, located in
Norway, began production in August 1994. The Company currently has capacity in
its plants to support near term sales growth. All new production plants will
be designed to meet International Standards of Operations and European
Community standards.





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PRODUCTS

The Company offers a wide range of high quality frozen entrees, side
dishes, and sauces. The entree items consist of a variety of seafood, pork,
beef and poultry items. Side dishes and sauces range from vegetables and rice
to cream or tomato-based sauces. The products are sealed in either single or
multi-serving packaging and then case-packed. Single-pack items offer the
greatest flexibility to the customer, while multi-pack packaging provides
increased efficiency and economy for large-volume banquets.

During fiscal year 1995, the Company began research on the preparation
of its products for retail consumption. The Company has experimented with
distribution through wholesale clubs and private-labeled products for other
retailers. The Company intends to continue to pursue alternatives in this
market.

DISTRIBUTION

The Company distributes its products in a frozen state to customers
nationwide and internationally primarily to Asian markets. The Company
expanded distribution into the European markets in fiscal year 1995 in
conjunction with the opening of the Norwegian production facility in 1995. Its
products are stored in a number of regional frozen warehouses as well as at the
Alexandria, Virginia plant. The Company improved its distribution of Norwegian
Salmon to US customers by offering "direct ship" capabilities from the
Norwegian plant directly to the customer. The Company intends to adopt
alternative distribution means as their customers need them. Export products
are transported in frozen containers via ship.

RAW MATERIAL STATUS

The Company buys its raw materials from a number of suppliers at
market prices. While these prices may fluctuate during the year, the Company
does not believe that availability poses a material risk to its business. The
majority of product sales are subject to price revision to reflect shifts in
the price of raw materials.

PATENTS AND TRADEMARKS AND OTHER ITEMS IMPORTANT TO OPERATING SEGMENTS

The Company believes that its Vie de France trademark is important to
its business success. Accordingly, it takes the necessary steps to protect it.
The Company and Vie de France Bakery Yamazaki, Inc. entered into a Trademark
and Service Mark License Agreement in 1991 and, in conjunction with the sale of
the Restaurant Division, amended and restated this agreement. In fiscal year
1996 the Company secured a new packaging trademark called MicroRoast(TM). This
new packaging is designed for use in microwave ovens and imparts a roasted
quality to our value-added entrees. The Company holds no patents that are
essential for its continued operations.





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CUSTOMER DEPENDENCY

Food service distributors continued to be the leading market segment
for the Company with fiscal year 1996 sales representing approximately 58% of
total net sales. In fiscal year 1996, sales to food service distributors
representing hotels chains and restaurants accounted for 42% and 11% of total
net sales, respectively. Sales to the airline industry in fiscal year 1996
represented 31% of total net sales. Sales to the retail, healthcare and
Norwegian European and Asian customers accounted for 7.5%, 2% and 1.5%,
respectively.

In fiscal years 1996, 1995 and 1994, sales to food service
distributors representing the Marriott hotel chain amounted to 11%, 21% and 55%
of total net sales. In fiscal year 1996, 1995 and 1994, sales to food service
distributors representing the Hyatt hotel chain amounted to 31%, 32% and 16% of
total net sales. Sales to distributors serving the airline industry
represented 31%, 29% and 17% of total net sales in fiscal year 1996, 1995 and
1994, respectively. The loss of any of the above customers could have an
effect on the Company's results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Sales and Gross
Margins."

SEASONALITY

Culinary sales are seasonally impacted by the hotel banquet industry,
which peaks in September through December and March through June.

COMPETITION

The Company considers itself to be a leader in the sous vide segment
of the food service industry. At present, limited competition exists within the
frozen wholesale component of this segment. Other firms exist within the
retail and refrigerated components of the sous vide segment or cooked food. As
such, the Company primarily competes for sales against the traditional forms of
food preparation, rather than against other sous vide suppliers. The
Company offers value-added products, but must offer these products in a price
range that makes it economically advantageous for its users to convert from
other methods of food preparation. The Company believes its products can
compete against these other methods in price and product performance, as well
as convenience. The Company also offers implementation and menu development
services, as well as equipment, to its customers as another means of building
sales. The Company depends upon its pricing structure, menu items, and
customer service programs as a means of maintaining its leadership position
within the sous vide industry.

RESEARCH & DEVELOPMENT

For continuing operations, the Company invested $139,000, $94,000 and
$95,000 in research and development activities in fiscal years 1996, 1995 and
1994, respectively. The Company invests in development on an ongoing basis in
order to maintain the vitality of its product lines and to build sales.





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REGULATION

The Company is subject to various Federal, state and local laws
affecting its business, including health, sanitation and safety regulations.
The Culinary-U.S. plant operates under USDA supervision over the handling and
labeling of its products. The Company believes its operations comply in all
material respects with applicable laws and regulations.

The Company's Norwegian plant meets European Community standards and
regulations. The Norwegian product, along with certain raw materials, are
subject to import regulations.

EMPLOYEES

The Company employs approximately 80 people including full-time and
part-time workers and corporate staff.

GEOGRAPHIC SALES

The Company's sales are primarily focused in the United States, with
sales representing 96%, 99% and 100% of total sales for fiscal years 1996, 1995
and 1994, respectively.

ITEM 2. PROPERTIES

The Company leases its offices and its two manufacturing facilities.
The Culinary-U.S. plant, located in Alexandria, Virginia, is approximately
50,000 square feet. The Culinary-Norway plant, located in Hjelmeland, Norway,
is approximately 20,000 square feet.

The Company's Norway plant is structured as a twenty-year capital
lease whereby the Company will own the facility at the end of the lease term.

The Company owns substantially all of the equipment used in its
facilities.

Lease commitments and future minimum lease payments are shown in Note
8 to the Consolidated Financial Statements, which is included in this Form
10-K.


ITEM 3. LEGAL PROCEEDINGS

The Company is engaged in ordinary and routine litigation incidental
to its business, but management does not believe that any amounts it may be
required to pay by reason thereof will have a material effect on the Company's
financial position or results of operations.


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

None.





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PART II

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

COMMON STOCK

The Company's capital stock is divided into two classes: Common Stock
and Class B Stock. The Class B Stock, which is reserved for issuance to
employees under stock options plans, is identical in all respects to the Common
Stock except that the holders thereof have no voting rights unless otherwise
required by law. The Company's Common Stock is traded in the over-the-counter
market on the NASD National Market System under the symbol VDEF or Viedefr.
The following table sets forth for the quarters indicating the high and low
sales prices per share as reported on the National Market System:



Year ended June 29, 1996 High Low

First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.500 $ 2.625
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.750 2.625
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.063 1.875
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.125 1.875

Year ended June 24, 1995
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.500 $ 3.375
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.250 3.000
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.375 3.000
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.125 2.875


As of September 15, 1996 there were 771 holders of record of the Company's
Common Stock.

No dividends were paid during fiscal year 1996, 1995 and 1994.





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ITEM 6. SELECTED FINANCIAL DATA

FIVE YEAR SUMMARY
(in thousands, except per share amounts)



1996 1995 1994 1993 1992


Net sales . . . . . . . . . . . . . . . . . . . . . . $16,078 $15,707 $12,786 $ 9,377 $ 6,147

Loss from continuing operations (4) . . . . . . . . . (2,224) (706) (476) (341) (1,982)

Net income (loss) (1); (2); (3); (4) . . . . . . . . (1,714) 24 7,934 261 (2,105)

Loss from continuing operations per share . . . . . . (.16) (.05) (.03) (.03) (.15)

Net income (loss) per share . . . . . . . . . . . . . (.13) .00 .58 .02 (.16)

Total assets . . . . . . . . . . . . . . . . . . . . 27,035 29,911 30,964 19,862 20,855

Long term debt, including current portion . . . . . 2,300 2,981 - - -

Stockholders' equity . . . . . . . . . . . . . . . . 22,782 24,481 24,431 16,016 15,755

Dividends per share . . . . . . . . . . . . . . . . . -- -- -- -- 0.12


(1) Includes benefit from cumulative effect of change in accounting
principle of $197 in 1996.
(2) Includes (loss) income from discontinued operations of ($813), $479
and $17 in 1994, 1993 and 1992, respectively.
(3) Includes gain from sale of discontinued operations of $313, $730, and
$9,233 in 1996, 1995 and 1994, respectively.
(4) Includes loss on equity method investment of $1,500 in 1996.

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

The Private Securities Litigation Reform Act of 1995 (the "Act") was
recently passed by Congress. The Company desires to take advantage of the new
"safe harbor" provisions of the Act. Therefore, the Company wishes to caution
readers that the following important factors, among others, in some cases have
affected, and in the future could affect, the Company's actual results and
could cause the Company's actual results for 1997 and beyond to differ
materially from those expressed in any forward-looking statements made by,
or on behalf of the Company.

RESULTS OF OPERATIONS

Fiscal year 1996 was a year of strategy formulation and focus on cost
containment and productivity issues. The Company formulated a Sales and
Operations Planning team which was successful in reducing inventory levels by
$537,000, after consideration for change in accounting principle, with no
interruptions to customer shipment schedules. The Company also implemented
other costs reductions efforts which will be recognized in fiscal year 1997.

The current year results reflect moderate growth in sales of 2.4% from
fiscal year 1995 for its United States and Norwegian operations. Operations
for fiscal year 1996 resulted in a loss for the Company.

During 1996, the Company determined that its investment of $1,500,000
in Stockwell's Home Meal Market(TM), (Stockwell's) was impaired. The fiscal
year 1996 consolidated financial statements reflect the Company's share of
losses of $405,000 and the additional write-off of the





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investment $1,095,000 which are reported as loss on equity method investment.
During portions of the year the President and Chief Financial Officer served on
the Board of Directors of Stockwell's.

SALES AND GROSS MARGINS

Historically, the Company's sales of high-quality frozen foods have
been to hotels, airlines and other food service providers who order through
their distributor networks. In fiscal year 1996 total sales were comprised of;
total food service sales -58%, airlines -31%, retail -7.5%, healthcare -2.0%
and Norwegian customers, exclusive of intercompany sales -1.5%.

A comparison of net sales, gross margin percentages and losses from operations
are as follows:



Year Ended
June 29, June 24, June 25,
1996 1995 1994
---- ---- ----

Net Sales $16,078,000 $15,707,000 $12,786,000
Gross margin percentage 12% 30% 23%
Loss from operations $(3,353,000) $(1,447,000) $(1,204,000)


Fiscal year 1996 sales increased by 2.4% or $371,000 over fiscal year
1995 to $16,078,000 from $15,707,000. This moderate increase is attributed to
$210,000 for the United States operations and $161,000 for Norway. Fiscal year
1995 sales increased by 23% over fiscal year 1994 to $15,707,000 from
$12,786,000. This increase is attributable to substantial growth within the
airline segment.

Gross margin as a percentage of total net sales decreased to 12% from
30% in fiscal year 1995. The decrease is primarily attributed to the
accounting change under which certain costs such as material handling,
purchasing and receiving, plant administration, factory and equipment
depreciation were treated as product costs instead of period costs. This change
in accounting principle is reflected through a cumulative adjustment on the
consolidated statements of operations. Gross margin as a percentage of sales
for fiscal year 1995 and 1994 would be 11.2% and 5.5%, respectively, had the
Company used the same inventory cost method that was used during fiscal year
1996. Gross margin as a percentage of total sales increased in fiscal year
1995 versus fiscal year 1994 due primarily to lower material costs during the
year along with increased labor productivity, offset somewhat due to the
start-up effects of the Norway plant.





SELLING, DISTRIBUTION AND ADMINISTRATION EXPENSES:

A comparison of selling, distribution and general administrative costs
are as follows:





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Year Ended
June 29, June 24, June 26,
1996 1995 1994
------ ----- -----

Selling and distribution costs . . . . . . . . . . . . . . . . . . $2,077,000 $2,183,000 $1,344,000
General administratvive costs . . . . . . . . . . . . . . . . . . . 1,671,000 3,038,000 2,235,000
--------- --------- ---------
$3,748,000 $5,221,000 $3,579,000


In fiscal year 1996, selling, distribution and administrative costs
decreased as a percentage of net sales to 23% from 33%. This decrease is
partly related to the accounting change under which distribution and the
portion of general administration costs related directly to the plant are now
treated as product costs.

For fiscal year 1995, these costs increased by 46% as compared to the
prior year, to $5,221,000 from $3,579,000. This increase is due to the
selling expenses associated with Norway where operations begin in August,
1994, for which there were few outside sales, additional sales
personnel in the United States who are just beginning to generate sales, and
residual corporate costs that were present within the Company, but were
primarily allocable to the former Restaurant Division in prior years. These
costs decreased as a percentage of sales from 33% to 28% in fiscal year 1994
compared to fiscal year 1993, as the rate of sales growth offset the rate of
real dollar growth in this expense category.


DEPRECIATION AND AMORTIZATION

The Company's change in accounting principle resulted in the inclusion
of production equipment depreciation as part of product costs instead of as
period costs. Actual depreciation and amortization costs increased by
$141,000 over fiscal year 1995 to $1,194,000 for fiscal year 1996, a large
portion of which is included in product and period costs, versus $1,053,000
for fiscal year 1995. This increase is attributable to the depreciation
associated with the United States plant. For fiscal year 1995 as compared to
fiscal year 1994, depreciation and amortization increased by $356,000 from
1994's level of $697,000, which is attributed to the depreciation associated
with the Norway plant.



NONOPERATING INCOME AND EXPENSE

Investment income consists of returns earned on funds received from
the sale of the Restaurant Division, interest income associated with a
$4,900,000 collateralized European bank deposit, and interest income of
$162,000 earned on a related party loan to Food Research Corporation of
$1,966,000.





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Interest expense relates to the borrowings, including a capital lease,
associated with the Company's Norwegian subsidiary. At June 29, 1996, the
Company, through its Norwegian subsidiary, had borrowings of approximately
$2,300,000, bearing interest at rates ranging from 4.85% to 10.0%. It is
anticipated that these borrowings will remain outstanding during the upcoming
fiscal year.

CHANGE IN ACCOUNTING

Effective June 25, 1995, the Company changed its overhead absorption
policy with regard to finished goods inventories. Prior to this change, the
Company had valued its inventories using partial absorption of certain plant
level indirect manufacturing overhead costs. Additional costs, such as
material handling, purchasing and receiving, plant administration and factory
and equipment depreciation, were expensed as period costs. These costs are
treated as product costs in order to better match costs with related revenues
and to better conform to prevailing manufacturing industry practice. The
cumulative effect of this change was an increase to income of $197,000, shown
net of tax expense of $110,000 in fiscal year 1996.

DISCONTINUED OPERATIONS

The gain from sale of discontinued operations for fiscal year 1996
relates to the increase of reserves for the former Restaurant Division offset
by the decrease in reserves for the Bakery Division, and income tax refunds
received during 1996 of $335,000.

Gain from discontinued operations for fiscal year 1995 relates to the
reduction of reserves previously established for the former Restaurant
Division, due to the expiration of certain contingent liabilities.

Gain on the sale of the Restaurant Division in fiscal year 1994 is net
of income taxes of $4,400,000. Net proceeds on the sale amounted to
$17,600,000, after transaction and related direct disposal costs of
approximately $2,800,000. In addition, Yamazaki assumed certain outstanding
liabilities of the Division.

Loss from discontinued operations in fiscal year 1994 reflects the
operating results attributable to the operations of the former Restaurant
Division, net of income tax effects.





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IMPACT OF INFLATION AND THE ECONOMY

Inflation has from time to time had a material impact on the Company's
expenses. Inflation in labor and ingredient costs can significantly affect the
Company's operations. Many of the Company's employees are paid hourly rates
related to, but generally higher than the federal minimum rates.

The Company's sales pricing structure allows for the fluctuation of raw
material prices. As a result, market price variations do not significantly
affect the gross margin realized on product sales. Customer sensitivity to
price changes can influence the overall sales of individual products.

LIQUIDITY AND CAPITAL RESOURCES

The Company has experienced a decline in its liquidity over the past
year. The combined total of the cash and short-term investment balances was
$9,520,000 and $14,209,000 at June 29, 1996 and June 24, 1995, respectively.
Additionally, the Company held investments of $5,598,000 and $2,025,000 at June
29, 1996 and June 24, 1995, respectively, with maturities greater than one
year. In addition to the $500,000 common stock investment in Stockwell's held
at June 24, 1995, an additional investment of $1,000,000 was made during fiscal
year 1996. This total investment of $1,500,000, considered an equity method
investment, was written off in fiscal year 1996 due to the closure of
Stockwell's two retail locations. The decrease in liquidity is also related to
the increased working capital requirements primarily for the Norway plant.

Cash provided by operations in fiscal year 1996 amounted to $1,095,000,
as compared to cash used in fiscal year 1995 and 1994 of $6,056,000 and
$989,000, respectively. The cash provided in fiscal year 1996 relates to the
strong emphasis on reduction of inventory and improved cash collections in
these areas. The use of cash in fiscal year 1995 resulted primarily from the
payment of income taxes related to the sale of the former Restaurant Division,
along with increases in inventory and receivables. The use of cash in fiscal
year 1994 resulted primarily from increases in inventory and receivables
relating to increased sales volumes, as well as income tax payments.

Cash in the amount of $1,050,000 was provided by investing activities
in fiscal year 1996, representing the return of the deposit of $4,900,000 from
the European bank. This deposit was offset by cash used by investing
activities for financing of capital expenditures of $509,000, net purchases of
other debt and equity securities of $2,344,000, and an investment in
Stockwell's of $1,000,000. Cash in the amount of $1,095,000 was provided by
investing activities in fiscal year 1995, representing proceeds from the sale
of investments of $3,085,000 offset by a $500,000 investment in Stockwells and
capital expenditures of $1,490,000. Fiscal year 1995's investments in capital
projects included, approximately $400,000 for the Norway plant and
approximately $700,000 for the Alexandria, Virginia facility. Cash in the
amount of $7,486,000 was generated by investing activities in fiscal year
1994, including $17,626,000 of cash generated from the sale of the Restaurant
Division, which was partially offset by capital expenditures totaling
$3,117,000 for property additions for both continuing and discontinuing
operations. Also, approximately $7,100,000 of the sales proceeds were used to
purchase investments.

In fiscal year 1996 cash in the amount of $597,000 was used by
financing activities which included $585,000 to pay off the line of credit
established for Norway, $96,000 relating to other





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debt service, offset by $84,000 generated through the exercise of stock
options. In fiscal year 1995 cash in the amount of $1,344,000 was generated by
financing activities, representing the debt acquired by the Norway subsidiary,
offset by $890,000 in debt repayments, and $50,000 generated through the
exercise of stock options. Cash in the amount of $448,000 was generated
through the exercise of stock options during fiscal year 1994.

The Company continues to evaluate the possibility of establishing
additional production facilities in order to increase efficiencies. One such
way would be to produce sous vide products closer to the source of supply and
as a means to enter new markets. The cost of such facilities ranges from
approximately $1,000,000 to $5,000,000, depending upon the nature of the
product and the production volume desired. Local governments may provide
subsidies and other assistance in connection with such facilities. It is
possible that the Company may use some of its cash resources to fund these and
other related efforts.

The Company's Norwegian subsidiary has secured a working capital
commitment for its liquidity needs in Norway in the form of an overdraft
facility. As of June 29, 1996 $153,000 was outstanding under this overdraft
facility. Subsequent to year-end, the subsidiary increased its overdraft
facility balance, and can borrow up to $800,000 under this commitment.

The Company returned to the United States its deposit of $4,900,000 and
all accrued interest with a European bank during fiscal year 1996. This
deposit was denominated in U.S. dollars and earned a rate of return in excess
of the prevailing short-term rates in the United States. This loan was pledged
as collateral to the bank so that the bank may loan funds to a French
subsidiary of Setucaf S.A., a French Company which is 21% owned by Food
Research Corporation, the majority stockholder of the Company. The return of
this deposit was transferred to the United States Investment account at the end
of fiscal year 1996 and earns interest at the market prevailing rate of the
securities for which it is held.

FUTURE PROSPECTS

In fiscal 1997 the Company intends to build upon the broader sales
base established in fiscal 1996. While modest growth is expected in sales to
the hotel industry, the Company believes sales growth is evident within the
airline industry, and anticipates sales gains in its emerging markets. The
Company will continue to explore and develop its emerging markets and formats
that show promise of generating significant sous vide sales. Although the
course of the European business is difficult to forecast, it is management's
expectation that its Norwegian operations will continue to reduce its losses
in fiscal 1997.

NEW ACCOUNTING STANDARDS

In June 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-lived Assets and or Long-lived Assets to Be Disposed of ("SFAS No. 121").
SFAS No. 121 requires companies to review long-lived assets and certain
identifiable intangibles to be held, used or disposed of, for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an





14
15
asset may not be recoverable. The Company has not yet determined the impact of
this Statement on its financial statements. The Company is required to adopt
this statement in fiscal year 1997.

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
("Statement 123"). Statement 123 recommends, but does not require, the
adoption of a fair value method of accounting for stock-based compensation to
employees including common stock options, and stock-based compensation to
individuals other than employees. The Company currently intends to continue
recording stock-based compensation to employees under the intrinsic value
method and does not intend to adopt the fair value method of accounting for
stock-based compensation to employees as permitted by Statement 123.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is included at Item 14(a)(1)
and (2).


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

The Company dismissed its former principal accountants, Price
Waterhouse LLP of Falls Church, Virginia and engaged KPMG Peat Marwick LLP, of
Washington, DC, as its principal accountants. The change was made effective
May 13, 1996.

During the two most recent fiscal years of the registrant and each
subsequent interim period preceding May 13, 1996 there were no disagreements
with the former accountants on any matter of accounting principle or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of the former accountants
would have caused them to make reference in connection with their report to the
subject matter of the disagreements.

The reports of the former principal accountants on the financial
statements of the registrant for either of the past two years contained no
adverse opinion or disclaimer of opinion, nor was either qualified or modified
as to uncertainty, audit scope, or accounting principles.

The decision to change auditors was approved by the Board or Directors
of the Company.

Price Waterhouse LLP, the former auditors confirmed their agreement
with the statements presented above, as noted in Exhibit 14 (b).





15
16
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this Item 10 is shown in the Proxy
Statement to be filed under Regulation 14A, under the caption "Election of
Directors", and such information is incorporated herein by reference.

EXECUTIVE OFFICERS

The following list and narrative sets forth the name and age of each
present executive officer of the Company who is not also a director or director
nominee, all positions held by the person with the Company, the year in which
the person first became an officer, and the principal occupations of each
person named since 1988.



NAME AGE OFFICE HELD WITH COMPANY SINCE
- ---- --- ------------------------ -----

Arthur J. Stouffs 52 Vice President, Culinary Sales. 1990

Leara L. Dory 35 Controller, Secretary and Treasurer 1996



Mr. Stouffs has served in the capacity of Vice President of Culinary
Sales since 1990, and was appointed an officer of the Company in 1994.
Previously Mr. Stouffs held various positions in the Company's former Bakery
Division including Director of Operations and Director of Sales - National
Accounts from 1980 through 1990.

Mrs. Dory was appointed to the position of Controller, Secretary and
Treasurer in February, 1996. She came to the Company in November, 1995 as the
Controller. Prior to joining the Company, Mrs. Dory was a Controller/Director
of Finance for Thomas Enterprises and Assistant Controller for
Telecommunications Technique Corporation from 1989 through 1995. Mrs. Dory has
over 13 years of experience in the manufacturing industry. Mrs. Dory is a
Certified Public Accountant and holds a BS degree in Accounting.


ITEM 11. EXECUTIVE COMPENSATION

The information required under this Item 11 is shown in the Proxy
Statement to be filed under Regulation 14A, under the caption "Executive
Compensation", and such information, except for the information required by
Item 402(k) and Item 402(l) of Regulation S-K, is incorporated herein by
reference.





16
17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required under this Item 12 is shown in the Proxy
Statement to be filed under Regulation 14A, under the caption "Voting
Securities and Principal Holders Thereof", and such information is incorporated
herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required under this Item 13 is shown in the Proxy
Statement to be filed under Regulation 14A, under the caption "Certain
Transactions", and such information is incorporated herein by reference.





17
18
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K

(a) Index to Financial Statements



Page
----

(1) Financial Statements:

Reports of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . .
KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
PRICE WATERHOUSE LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Balance Sheets - June 29, 1996 and June 24, 1995. . . . . . . . . . . . . . F-3

Consolidated Statements of Operations - Fiscal Years Ended
June 29, 1996, June 24, 1995, and June 25, 1994 . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statements of Changes in Stockholders' Equity - Fiscal
Years Ended June 29, 1996, June 24, 1995, and June 25, 1994 . . . . . . . . . . . . . F-5

Consolidated Statements of Cash Flows - Fiscal Years Ended
June 29, 1996, June 24, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . F-6

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-7


(2) Financial Statement Schedule: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Schedule II--Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . F-21


All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.





18
19
(3) Exhibits:

The following exhibits are incorporated in this report by
reference from identically numbered exhibits to the Company's
Amendment to its Annual Report for the year ended June 27, 1992
on Form 8 dated February 26, 1993:



Exhibit
No. Description of Exhibit
------ ----------------------

3-A The Certificate of Incorporation of the Company, as amended to date.

3-B The By-Laws of the Company, as amended to date.


The following exhibits are incorporated in this report by
reference from an identically numbered exhibit to the Company's
Annual Report on Form 10-K for the year ended June 29, 1991:

10.46 The Company's Proxy Statement for a Special Meeting
of Stockholders, dated June 7, 1991, together
with a conformed copy of the Asset Purchase
Agreement between Vie de France Corporation and
Vie de France Bakery Yamazaki, Inc. dated May 7,
1991.

The following exhibits are incorporated in this report by
reference from the Company's two Registration Statements on Form
S-8, dated April 5, 1993:

10.52 The Company's 1986 Stock Option Plan, as amended.

10.53 The Company's 1992 Stock Option Plan.

The following exhibits are filed as exhibits to this report in the
indicated sections.

10.54 The Company's Proxy Statement for a Special Meeting
of Stockholders, dated April 28, 1994, together
with a conformed copy of the Asset Purchase
Agreement between Vie de France Corporation and
Vie de France Bakery Yamazaki, Inc. dated March
4, 1994.

10.55 Lease dated March 30, 1989 and as amended, between
the Company and Duke-Shirley Industrial
Development, LP, with respect to the lease of
property at 4106 Wheeler Avenue, Alexandria VA.

10.56 Management contract between the Company and Food
Investors Corporation dated July 31, 1995, with
respect to payment in reimbursement of expenses
and other costs incurred by Food Investors
Corporation on the behalf of the Company.

24 Consent of Independent Accountants.





19
20
(b) Reports on Form 8-K:

Change of former principal accountants Price
Waterhouse LLP, and engagement of new auditors
KPMG Peat Marwick LLP effective May 13, 1996.

(c) Exhibits:

Exhibits required to be filed in response to this paragraph of
Item 14 are listed above in subparagraph (a)(3).


(d) Financial Statement Schedule:

Schedules and reports thereon by independent accountants required
to be filed in response to this paragraph of Item 14 are listed
in Item 14(a)(2).





20
21
SIGNATURES

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 dates indicated.

VIE de FRANCE CORPORATION
(Registrant)


By: /s/ Stanislas Vilgrain
------------------------------
Stanislas Vilgrain
President
and Chief Executive Officer
(Principal Executive Officer)

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 dates indicated.





Signature Title Date
- ---------------------------------- ------------------------------- --------------------------

/s/ Jean-Louis Vilgrain Chairman of the Board September 27, 1996
- ---------------------------------- ---------------------
Jean-Louis Vilgrain

/s/ Stanislas Vilgrain President, September 27, 1996
- ---------------------------------- Chief Executive Officer ---------------------
Stanislas Vilgrain

/s/ Carl Youngman Director September 27, 1996
- ---------------------------------- Chief Financial Officer ---------------------
Carl M. Youngman

/s/ Bruno Goussault Director September 27, 1996
- ---------------------------------- ---------------------
Bruno Goussault

/s/ Alexandre Vilgrain Director September 27, 1996
- ---------------------------------- ---------------------
Alexandre Vilgrain

/s/ George Nadaff Director September 27, 1996
- ---------------------------------- ---------------------
George Nadaff

/s/ James Hackney Director September 27, 1996
- ---------------------------------- ---------------------
James Hackney

/s/ Leara Dory Controller September 27,1996
- ---------------------------------- ---------------------
Leara Dory (Principal Financial and Accounting Official)






21
22



Independent Auditors' Report

The Board of Directors and Stockholders

Vie de France Corporation:
We have audited the accompanying consolidated balance sheet of Vie de France
Corporation and its subsidiary as of June 29, 1996, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. In connection with our audit of the
consolidated financial statements we also have audited the financial statement
schedule for the year ended June 29, 1996, as listed in the accompanying index.
These consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vie de France
Corporation and its subsidiary as of June 29, 1996, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule for the year ended June 29, 1996, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective June
25, 1995, the Company changed its accounting method for certain inventory
costs.




KPMG PEAT MARWICK LLP


Washington, D.C.
September 13, 1996



F-1
23
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
Vie de France Corporation

In our opinion, the consolidated financial statements listed in the index
appearing under items 14(a)(1) and (2) present fairly, in all material
respects, the financial position of Vie de France Corporation and its
subsidiaries at June 24, 1995, and the results of their operations and their
cash flows for each of the two years in the period ended June 24, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of Vie de France Corporation and its subsidiaries for any period
subsequent to June 24, 1995.



PRICE WATERHOUSE LLP

Washington, D.C.
August 25, 1995





F-2
24
VIE de FRANCE CORPORATION
CONSOLIDATED BALANCE SHEETS



--------------------------------------
June 29, June 24,
1996 1995
--------------- ------------------

ASSETS
Current Assets
Cash and cash equivalents $ 6,862,000 $ 5,314,000
Short-term investment, related party - 4,900,000
Investments, current 2,658,000 3,995,000
Accounts receivable, trade 1,486,000 1,646,000
Inventory 2,119,000 2,350,000
Prepaid expenses 137,000 119,000
Current portion of notes receivable, related party 10,000 1,551,000
Other current assets 292,000 689,000
--------------- ------------------
TOTAL CURRENT ASSETS 13,564,000 20,564,000

Investments, noncurrent 5,598,000 2,025,000
Fixed assets, net 5,313,000 5,971,000
Note receivable, related party, including accrued interest,
less current portion 2,178,000 517,000
Other assets 382,000 834,000
--------------- ------------------
TOTAL ASSETS $ 27,035,000 $ 29,911,000
=============== ==================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 948,000 $ 1,314,000
Accrued payroll and related liabilities 577,000 518,000
Current portion of long-term debt 153,000 734,000
Accrued store closings 287,000 367,000
Other accrued taxes 141,000 148,000
Income taxes payable - 102,000
--------------- ------------------
Total current liabilities 2,106,000 3,183,000

Long-term debt, less current portion 2,147,000 2,247,000
--------------- ------------------
Total liabilities 4,253,000 5,430,000
--------------- ------------------
Stockholders' equity
Common stock - $.01 par value, 20,000,000 shares
authorized, 14,078,620 and 14,034,620 shares issued and
13,822,543 and 13,778,543 shares outstanding 141,000 140,000
Class B Stock - $.01 par value, 175,000 shares authorized,
none issued - -
Additional paid-in capital 21,352,000 21,269,000
Retained earnings 2,789,000 4,503,000
Treasury stock, at cost (256,077 shares) (1,440,000) (1,440,000)
Unrealized losses on debt and equity investments (110,000) -
Cumulative translation adjustment 50,000 9,000
--------------- ------------------
Total stockholders' equity 22,782,000 24,481,000
--------------- ------------------
Commitments and contingencies
--------------- ------------------
Total liabilities and stockholders' equity $ 27,035,000 $ 29,911,000
=============== ==================


See accompanying notes to consolidated financial statements.





F-3
25
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS



Year Ended
----------------------------------------------------
June 29, June 24, June 25,
1996 1995 1994
--------------- --------------- ----------------

Net sales $ 16,078,000 $ 15,707,000 $ 12,786,000

Cost of goods sold 14,084,000 11,046,000 9,830,000
--------------- --------------- ----------------
Gross margin 1,994,000 4,661,000 2,956,000

Selling and administration 3,748,000 5,221,000 3,579,000
Depreciation and amortization 107,000 1,053,000 697,000
Other income (8,000) (166,000) (116,000)
Loss on equity method investment 1,500,000 - -
--------------- --------------- ----------------
Loss from operations (3,353,000) (1,447,000) (1,204,000)
--------------- --------------- ----------------

Nonoperating income (expense)
Investment income 1,234,000 1,256,000 615,000
Interest expense (229,000) (192,000) (3,000)
Other income (expense) 14,000 (16,000) -
--------------- --------------- ----------------
Total nonoperating income 1,019,000 1,048,000 612,000
--------------- --------------- ----------------

Income (loss) from continuing operations before income
taxes, discontinued operations, and cumulative effect of
change in accounting principle (2,334,000) (399,000) (592,000)
Provision for income tax (expense) benefit 110,000 (307,000) 116,000
--------------- --------------- ----------------

Loss from continuing operations before discontinued operations
and cumulative effect of change in accounting principle,
net of taxes (2,224,000) (706,000) (476,000)


Loss from discontinued operations, net of taxes - - (813,000)
Gain from sale of discontinued operations, net of taxes 313,000 730,000 9,223,000
Cumulative effect of change in accounting principle, net of taxes 197,000 - -

--------------- --------------- ----------------
Net income (loss) $(1,714,000) $ 24,000 $ 7,934,000
=============== =============== ================

Net income (loss) per common share:
Continuing operations after income taxes, before discontinued
operations and cumulative effect of change in accounting
principle, net of taxes $ (0.16) $ (0.05) $ (.03)
Discontinued operations $ 0.02 $ 0.05 $ 0.61
Cumulative effect of change in accounting principle $ 0.01 $ - $ -
--------------- --------------- ----------------
Net income (loss) per common share $ (0.13) $ - $ 0.58
=============== =============== ================

Weighted average shares outstanding 13,797,492 13,767,852 13,676,762
=============== =============== ================



See accompanying notes to consolidated financial statements.




F-4
26
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY





Additional Retained Cumulative
Common Paid-In Earnings Translation
Stock Capital (Deficit) Adjustment
------------ ------------------- ----------------- -------------

Balance June 26, 1993 $138,000 $ 20,773,000 $ (3,455,000) $ -

Stock options exercised 2,000 446,000 - -
1994 net income - - 7,934,000 -
Translation adjustment - - - 33,000
------------ ------------------------------------------------------------------
Balance, June 25, 1994 140,000 21,219,000 4,479,000 33,000
Stock options exercised - 50,000 - -
1995 net income - - 24,000 -
Translation adjustment - - - (24,000)
------------ ------------------------------------------------------------------
Balance, June 24, 1995 140,000 21,269,000 4,503,000 9,000

Stock options exercised $ 1,000 83,000 - -
1996 net loss - - (1,714,000) -
Unrealized losses on debt and
equity investments - - - -
Translation Adjustment - - - 41,000
------------ ------------------- ----------------- -------------
Balance, June 29,1996 $141,000 $ 21,352,000 $ 2,789,000 $ 50,000
============ =================== ================= =============

Unrealized
Losses on Debt Total
and Equity Treasury Stockholders'
Investments Stock Equity
---------------- ------------------ -------------

Balance June 26, 1993 $ - $ (1,440,000) $16,016,000

Stock options exercised - - 448,000
1994 net income - - 7,934,000
Translation adjustment - - 33,000
--------------------------------------------------------------------
Balance, June 25, 1994 - (1,440,000) 24,431,000

Stock options exercised - - 50,000
1995 net income - - 24,000
Translation adjustment - - (24,000)
--------------------------------------------------------------------
Balance, June 24, 1995 - (1,440,000) 24,481,000

Stock options exercised - - 84,000
1996 net loss - - (1,714,000)
Unrealized losses on debt and
equity investments (110,000) - (110,000)
Translation Adjustment - - 41,000
------------- -----------------------------------------
Balance, June 29,1996 $(110,000) $(1,440,000) $22,782,000
============= =========================================



See accompanying notes to consolidated financial statements.



F-5
27
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS



Year Ended
-----------------------------------------------------------
June 29, June 24, June 25,
1996 1995 1994
---------------- ------------------ -----------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,714,000) $ 24,000 $ 7,934,000
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating activities
Gain from sale of discontinued operations (176,000) (730,000) (9,717,000)
Loss on equity method investment 1,500,000 - -
Depreciation and amortization, including
discontinued operations 1,194,000 1,053,000 1,738,000
Gain on disposal of fixed assets - - (9,000)
Change in cumulative translation adjustment 41,000 (24,000) 33,000
Cumulative effect of change in accounting principle, net (197,000) - -
Income tax benefit (110,000) - -
Changes in assets and liabilities, net of
effects of discontinued operations and non-cash transactions:
Decrease (increase) in accounts receivable trade, net 160,000 (232,000) (687,000)
Decrease (increase) in inventory 537,000 (947,000) (355,000)
(Increase) decrease in prepaid expenses (18,000) 62,000 132,000
(Increase) decrease in notes receivable, related party (120,000) (1,543,000) 323,0
(Increase) decrease in other assets 317,000 (365,000) (155,000)
(Decrease) increase in accounts payable
and accrued expenses (366,000) 362,000 39,000
Increase (decrease) in accrued payroll and related liabilities 59,000 (44,000) (213,000)
Decrease in accrued store closing costs (12,000) (307,000) -
(Decrease) increase in other accrued taxes - (237,000) 317,000
Decrease in income taxes payable - (3,128,000) (369,000)
---------------- ------------------ -----------------
Net cash (used) provided by operating activities 1,095,000 (6,056,000) (989,000)
---------------- ------------------ -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchase) of investments, net 2,556,000 3,085,000 (7,106,000)
Investments in common stock (1,000,000) (500,000) -
Proceeds from sale of discontinued operations,
net of transaction costs - - 17,626,000
Restaurant Dispositions - - 64,000
Proceeds on disposal of fixed assets 3,000 - 19,000
Capital expenditures (509,000) (1,490,000) (3,117,000)
---------------- ------------------ -----------------
Net cash provided by investing activities 1,050,000 1,095,000 7,486,000
---------------- ------------------ -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
Additions to debt - 2,184,000 -
Reductions of debt (681,000) (890,000) -
Proceeds from issuance of stock 84,000 50,000 448,000
---------------- ------------------ -----------------
Net cash provided (used) by financing activities (597,000) 1,344,000 448,000
---------------- ------------------ -----------------
Net increase (decrease) in cash and cash equivalents 1,548,000 (3,617,000) 6,945,000
Cash and cash equivalents, beginning of period 5,314,000 8,931,000 1,986,000
---------------- ------------------ -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,862,000 $ 5,314,000 $ 8,931,000
================ ================== =================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 241,000 $ 153,000 $ -
Income taxes, net $ - 3,486,000 318,000
================ ================== =================
Non-cash activities:
Facility purchased under capital lease $ - $ 1,688,000 $ -
Unrealized losses on debt and equity investments $ 110,000 $ - $ -
================ ================== =================


See accompanying notes to consolidated financial statements


F-6
28
VIE DE FRANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS

The Company develops, produces and markets high-quality frozen entrees,
side dishes and sauces for the foodservice and retail markets.

PRINCIPLES OF CONSOLIDATION

The financial statements include the consolidated accounts of Vie de
France Corporation and its subsidiary (collectively "the Company"). All
significant intercompany transactions have been eliminated in the financial
statements.


FISCAL YEAR

The Company utilizes a 52/53 week fiscal year which ends on the last
Saturday in June. Fiscal year 1996 contained 53 weeks, and fiscal years 1995
and 1994 contained 52 weeks.

FINANCIAL STATEMENT RECLASSIFICATIONS

Certain items in prior year financial statements have been reclassified
to conform to the current year financial statement presentation.

ACCOUNTING CHANGE

Effective June 25, 1995, the Company changed its overhead absorption
policy with regard to finished goods inventories. Prior to this change, the
Company had valued its inventories using partial absorption of certain-plant
level indirect manufacturing overhead costs. Additional costs, such as
material handling, purchasing and receiving, plant administration and factory
and equipment depreciation, were expensed as period costs. These costs will
now be treated as product costs under the method adopted by the Company in
order to better match costs with related revenues and to better conform to
prevailing manufacturing industry practice. Under this method approximately
$1,087,000 of depreciation and amortization costs and $1,848,000 of general and
administrative expenses, have been reclassified as product costs during 1996.
The effect of this change on prior year accounts would be immaterial.





F-7
29
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.

REVENUE RECOGNITION

The Company recognizes revenue at the time products are shipped to
customers.


CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with an original
maturity of three months or less.


INVESTMENTS

Effective June 25, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities," which expands the use of fair value accounting
for those securities, but retains the use of the amortized cost method for
investments in debt securities which management has the positive intent and
ability to hold to maturity.

The Company has recorded its investments into the following category:

AVAILABLE- FOR-SALE

Securities available for sale include securities which could be sold in
response to changes in interest rates or general liquidity needs. Such
securities are carried at estimated fair value with unrealized gains or
losses recorded as a separate component of equity.

Investments in affiliates in which the Company has an ownership position
providing it with significant influence over the investee, are accounted for by
the equity method. Equity method investments are recorded at original cost and
adjusted periodically to recognize the Company's proportionate share of the
investees' income or losses after date of investment, and additional
contributions made.




F-8
30
INVENTORY

Inventories are valued at the lower of cost, determined by the first-in,
first-out method, or market. Included in inventory costs are raw materials,
labor and manufacturing overhead.

General and administrative costs related to the manufacturing facility
approximated $1,848,000, during fiscal year 1996. The portion of general and
administrative costs included in the ending inventory balance at June 29, 1996
approximated $278,000. Prior to the accounting change in fiscal year 1996,
general and adminstrative costs were recorded as period costs, not product
costs.

Inventory consisted of:


JUNE 29, JUNE 24,
1996 1995
----------------- -----------------

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 529,000 $ 193,000
Frozen product & other finished goods . . . . . . . . . . . . . . . . . 1,448,000 1,975,000
Packing materials & supplies . . . . . . . . . . . . . . . . . . . . . 193,000 227,000
---------------- ----------------
2,170,000 2,395,000
Less obsolescence reserve . . . . . . . . . . . . . . . . . . . . . . . (51,000) (45,000)
---------------- ----------------

$ 2,119,000 $ 2,350,000
================ ================


FIXED ASSETS

Machinery, equipment, furniture and fixtures are depreciated using the
straight-line method over estimated useful lives which range from two to eight
years. Leasehold improvements are amortized using the straight-line method
over the shorter of terms of the leases which range from four to twenty years,
or the estimated useful life of the improvement.

Expenditures for maintenance and repairs are charged to expense, and
significant improvements are capitalized. For continuing operations,
maintenance and repairs charged to expense approximated $381,000 in 1996,
$373,000 in 1995 and $313,000 in 1994.





F-9
31
The components of fixed assets were as follows:


JUNE 29, JUNE 24,
1996 1995
----------------- -----------------

Machinery & equipment . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,280,000 $ 5,276,000
Furniture & fixtures . . . . . . . . . . . . . . . . . . . . . . . . . 528,000 181,000
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 2,313,000 2,211,000
Building under capital lease . . . . . . . . . . . . . . . . . . . . . 1,764,000 1,691,000
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . - 82,000
--------------- -----------
9,885,000 9,441,000
Less accumulated depreciation and amortization . . . . . . . . . . . . (4,572,000) (3,470,000)
--------------- ----------------

$ 5,313,000 $ 5,971,000
=============== ===============


INCOME AND OTHER TAXES

The Company computes income taxes using the asset and liability method
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

NEW ACCOUNTING STANDARDS

In June 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-lived Assets and or Long-lived Assets to Be Disposed of ("SFAS No. 121").
SFAS No. 121 requires companies to review long-lived assets and certain
identifiable intangibles to be held, used or disposed of, for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company has not yet determined the
impact of this Statement on its financial statements. The Company is required
to adopt this statement in fiscal year 1997.

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("Statement 123"). Statement 123 recommends, but does not
require, the adoption of a fair value method of accounting for stock-based
compensation to employees including common stock options, and stock-based
compensation to individuals other than employees. The Company currently
intends to continue recording stock-based compensation to employees under the
intrinsic value method and does not intend to adopt the fair value method of
accounting for stock-based compensation to employees as permitted by Statement
123.


F-10
32
EARNINGS PER SHARE

Net income (loss) per share is computed on the basis of the weighted
average number of shares of stock and dilutive stock options outstanding during
each period.

FOREIGN CURRENCY TRANSLATION

The statement of operations of the Company's Norwegian subsidiary (the
"Subsidiary") has been translated to U.S. dollars using the average currency
exchange rates in effect during the year. The Subsidiary's balance sheet has
been translated using the currency exchange rate as of the end of the fiscal
year. The impact of currency exchange rate changes on the translation of the
Subsidiary's balance sheet is charged directly to stockholders' equity.

NOTE 2 - INVESTMENTS

The Company's investments are classified as available-for-sale.
These securities are carried at fair value and unrealized gains and losses are
reported in a separate component of stockholders' equity.

The following is a summary of the Company's investments at June 29,
1996, classified as available-for-sale securities pursuant to SFAS 115:



Estimated
Unrealized Fair
Cost Gains Losses Value
----------------------------------------------------------------------

U.S. Government and agencies
Current $1,113,000 $ - $ (6,000) $1,107,000
Non-current 3,972,000 - (57,000) 3,915,000
Corporate debt
Current 1,549,000 2,000 - 1,551,000
Non-current 1,732,000 - (49,000) 1,683,000
----------------------------------------------------------------------
Total investments $8,366,000 $2,000 $(112,000) $8,256,000
========= ===== ========= =========


The net adjustment to unrealized losses on available-for-sale securities
reduced stockholders' equity by $110,000 in 1996.

The following is a summary of the Company's investments at June 24,
1995, classified as held-to-maturity securities pursuant to SFAS 115:





F-11
33


Cost Fair Value
---- ----------

European bank deposit $ 4,900,000 $ 4,900,000
U.S. Government and agencies 4,025,000 4,027,000
Corporate debt 1,995,000 1,998,000
--------- ---------
Total investments 10,920,000 10,925,000
Less noncurrent portion 2,025,000 2,030,000
--------- ---------
Current portion $ 8,895,000 $ 8,895,000
========= =========


The Company's European bank deposit, which was pledged as collateral in
connection with a loan made to a related party, was returned during the last
quarter of fiscal year 1996 and is recorded as cash equivalents at June 29,
1996.

During 1995, the Company made a $500,000 investment in Stockwell's Home
Meal Market(TM) (Stockwell's), a start-up entity devoted to the development of
a chain of frozen food retail outlets, for a 10 percent ownership interest,
which is included in other assets in the accompanying "Consolidated Balance
Sheets," at June 24, 1995. During 1996, the Company made additional
investments in Stockwell's totaling $1,000,000, increasing its ownership
percentage to 30 percent.

During 1996, Stockwell's incurred substantial losses and decided to
close its two stores in July and August, 1996, respectively. The Company
determined that is was not likely that the investment would be recovered,
therefore the remaining investment balance was written off during the fourth
quarter of 1996. The fiscal year 1996 financial statements reflect the
Company's share of losses of $405,000 and the additional write-off of the
investment of $1,095,000, which are included in loss on equity method
investment in the accompanying Consolidated Statements of Operations. During
portions of 1996, the Chief Financial Officer and President of the Company also
served on the Board of Directors' of Stockwell's.


NOTE 3 - INCOME TAXES

The composition of the provision for income tax expense (benefit)
attributable to continuing operations was:



YEAR ENDED
-----------------------------------------------------
JUNE 29,1996 JUNE 24, 1995 JUNE 25, 1994
-----------------------------------------------------

Current:
Federal $ -- $285,000 $ (99,000)
State -- 22,000 (17,000)
-------------- -------- ---------

Total current provision for income tax expense (benefit) $ -- $307,000 $(116,000)
============= ======= =========



The deferred tax benefit for the year ended June 29, 1996 was $110,000.





F-12
34
The provision (benefit) for income taxes for fiscal years 1996, 1995 and 1994
has been presented in the consolidated statements of income as continuing
operations, discontinued operations and cumulative effect of change in
accounting principle as follows:





JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
----------------------------------------

Tax Provision (benefit) allocated to:
Continuing operations $(110,000) $307,000 $ (116,000)
--------- ------- ----------
Discontinued operations:
Loss from discontinued operations - - (687,000)
Gain from sale of discontinued operations (335,000) - 4,438,000
--------- ------- ----------
(335,000) - 3,751,000
Cumulative effect of change in accounting principle 110,000 - -
--------- ------- ----------

Total provision for income tax expense (benefit) $(335,000) $307,000 $3,635,000
========= ======= ==========


The taxable gain recorded in fiscal year 1994 on the sale of
discontinued operations was reduced by the Company's available operating loss
carryforwards by $2,349,000. As a result, as of June 25, 1994 the Company had
no available unused net operating loss carryforwards.

The differences between amounts computed by applying the
statutory federal income tax rates to income from continuing operations and the
total income tax provision applicable to continuing operations were as follows:



YEAR ENDED
-----------------------------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
----------- ------------ -----------

Federal tax benefit at statutory rates $(793,000) $(136,000) $(201,000)
Loss from foreign operations 231,000 252,000 69,000
Non-deductible items 5,000 5,000 20,000
Period effect of U.S. valuation allowance 497,000 156,000 -
State income taxes, net (12,000) 38,000 7,000
Other, net (38,000) (8,000) (11,000)
----------- ------------ -----------
Total provision for income tax expense
(benefit) applicable to continuing operations $(110,000) $ 307,000 $(116,000)
=========== ============ ===========






F-13
35
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The
deferred tax assets at June 29, 1996 and June 24, 1995 are fully offset by a
valuation allowance of approximately $1,378,000 and $891,000, respectively, due
to uncertainties surrounding the ultimate realizability of the assets.

The significant components of deferred tax assets are were as follows:



June 29, June 24,
1996 1995
Deferred tax assets: ---- ----

Net foreign operating loss carryforwards $ 495,000 $ 289,000
Accrued losses on discontinued operations 112,000 264,000
Inventory adjustment 163,000 228,000
Accrued losses on equity method investment 585,000 -
Other 76,000 110,000
----------- -------
Total deferred tax assets 1,431,000 891,000

Less valuation allowance (1,378,000) (891,000)
----------- ----------

Net deferred tax asset $ 53,000 $ -
----------- ----------
Deferred tax liabilities:
Property and equipment 53,000 -
----------- ----------
Net deferred income taxes $ - $ -
=========== ==========



The valuation allowance for deferred tax assets as of June 25, 1994 was
$714,000. The net changes in total valuation allowance for the years ended
June 29, 1996 and June 24, 1995 were increases of $487,000 and $177,000,
respectively.

The net operating loss carryforward can only be used to offset taxable
income in the country where the carryforward was generated. These operating
loss carryforwards expire as follows:

Fiscal Year 2004 $219,000

Fiscal Year 2005 832,000

Fiscal Year 2006 716,000


NOTE 4 - DISCONTINUED OPERATIONS

The gain from sale of discontinued operations for fiscal year 1996
relates to reversal of certain accruals related to the former Restaurant
Division, and income tax refunds received during 1996 of $335,000.

During fiscal year 1996, the Company completed Internal Revenue Service
audits relating to the disposition of the Bakery division in fiscal year 1991
and 1992. The audit resulted in an increase in tax for alternative minimum tax
purposes of $353,000, which is treated as a credit against tax in future years.
Based on the combination of the alternative minimum taxes and


F-14
36
credits previously paid, the Company had an alternative minimum tax
carryforward refund of $640,000. As a result of this, during 1996 the Company
received a federal income tax refund of $404,000, of which $280,000 is included
in the gain on discontinued operations, the remaining offset accruals
established in previous years. The Company also received state income tax
refunds of $58,000 which are included in the gain on discontinued operations.
As a result of the disposition of the bakery and restaurant division, several
state income tax audits are in process. The Company has provided an accrual of
$141,000 for these audits at the end of fiscal year 1996.

During the third and fourth quarters of fiscal year 1995, the Company
reduced its accruals related to the sale of the former Restaurant Division.
This reduction was possible due to the expiration of certain contingent
liabilities.

In March 1994, the Board of Directors of the Company approved the sale
of substantially all of the net assets of the Restaurant Division pursuant to
an asset purchase agreement entered into with Vie de France Bakery Yamazaki,
Inc., a subsidiary of Yamazaki Baking Company, Ltd., a Japanese Company.
Effective May 25, 1994, the Company completed the sale for approximately
$20,400,000 in cash, which resulted in a gain of approximately $9,200,000, net
of income taxes of $4,400,000. The gain on sale of discontinued operations is
stated net of operating pre-tax losses from March 4, 1994 to the sale date of
May 25, 1994 of approximately $469,000.

Operating results of the Restaurant Division for fiscal year 1994 up to
the measurement date of March 4, 1994 consisted of a pre-tax loss of
approximately $1,250,000 which is reported in the Consolidated Statements of
Operations under the caption "(Loss) income from discontinued operations."
Also reported under the caption "(Loss) income from discontinued operations"
are $250,000 in additional expenses associated with a claim made in 1994 by the
U.S. Environmental Protection Agency relating to an ammonia leak at one of the
Company's former bakery locations which was reported as a discontinued
operation in 1991.




YEAR ENDED
------------------------------------------------
JUNE 29, JUNE 24, JUNE 25,
1996 1995 1994
------------ ----------- ------------

Net sales - Restaurant Division $ - $ - $24,604,000
============ =========== ============
Income (loss) from discontinued operations,
before income taxes $ (22,000) $ 730,000 $ 7,723,000

Tax benefit 335,000 - 687,000
------------ ----------- ------------
Total $ 313,000 $ 730,000 $ 8,410,000
============ =========== ============


F-15
37
NOTE 5 - LONG-TERM DEBT

Long-term debt, net of current maturities, at June 29, 1996 and June 24,
1995 was as follows:



1996 1995
Principal Principal
Lender Description Maturity Outstanding Outstanding
- ------ ----------- -------- ----------- -----------

Overdraft Six months, $ - $ 603,000
Den norske Bank Facility renewable
Den norske Bank Term Loan February 28, 2000 297,000 378,000
SND Term Loan February 1, 2004 321,000 312,000
Hjelmeland Kommune Capital Lease June 1, 2014 1,682,000 1,688,000
---------------- ------------

Total $ 2,300,000 $ 2,981,000
Less-current portion 153,000 734,000
---------------- ------------
Non-current portion $ 2,147,000 $ 2,247,000
================ ============



Borrowings under the Den norske Bank ("DnB") Overdraft Facility are
limited to a percentage of the Subsidiary's inventories and receivables, up to
a maximum of $1,000,000 with a floating interest rate equal to the prevailing
Norwegian overnight funds rate plus two percentage points. The Den norske Bank
Overdraft Facility interest rate at June 29, 1996 and June 24, 1995 was 4.85%
and 5.68%, respectively.

The term loan from DnB has a stated interest rate of 7.25% and will be
repaid through ten semi-annual payments of principal and interest beginning
August 30, 1995 and ending February 28, 2000.

Statens Narings-OgDistriktutvikiingsfond ("SND"), a governmental
development agency in Norway, issued to the Subsidiary an eight-year term loan
whose terms require the establishment of a working plant facility. The loan
has a variable interest rate which at June 29, 1996 was 10.0%, and will be
repaid through sixteen semi-annual payments of principal and interest beginning
August 1, 1996 and ending February 1, 2004.

The Subsidiary entered into a twenty-year capital lease obligation with
an initial principal amount of $1,691,000 and with quarterly payments of
$49,000, including principal and interest. The interest rate on the lease is
7.27%. At the end of the lease term, ownership of the facility will transfer
to the Subsidiary. The Company has issued no guarantees with respect to this
lease.

During fiscal year 1995, the Subsidiary was not in compliance with
certain of the covenants set forth by DnB. In 1996, DnB agreed to temporarily
waive such covenants in exchange for certain guarantees on the part of the
Company. These included a guaranty in the form of a renewable six-month
stand-by letter of credit issued by the Company in the amount of $600,000,
along with the subordination of a $300,000 loan from the Company to the
Subsidiary.

F-16
38
Subsequent to year-end, the stand-by letter of credit was increased to
$800,000. Accordingly, DnB has agreed to maintain the overdraft facility and
waive its covenant requirements for as long as the stand-by letter of credit is
in effect, but has limited borrowings up to the amount of the guaranty of
$800,000.

Maturities for the renewable overdraft facility, of the two term loans
and the capital lease during the next five fiscal years on an aggregate basis
at June 29, 1996 were as follows: 1997 - $153,000; 1998 - $177,000; 1999 -
$180,000; 2000 - $138,000; 2001 - $103,000 and $1,549,000 thereafter. The
maturities for 1997 of $153,000 do not include any amounts borrowed under
the overdraft facility which Company paid in full at the end of fiscal year
1996.


NOTE 6 - STOCKHOLDERS' EQUITY

The Company's capital stock is divided into two classes: Common Stock
and Class B Stock. The Class B Stock, which is reserved for issuance to
employees under certain stock option plans, is identical in all respects to the
Common Stock except that the holders thereof have no voting rights unless
otherwise required by law.


NOTE 7 - EMPLOYEE BENEFITS

The Company sponsors a qualified employee savings plan under which
employees who meet certain minimum age and service requirements are eligible to
participate. The Company matches one-third of the first 6% of eligible
employees' voluntary contributions to the plan. The Company expensed, as a
component of continuing operations, $13,000, $11,000 and $16,000 in fiscal
years 1996, 1995 and 1994, respectively, for contributions to the savings and
profit sharing plan.

In fiscal year 1994, the Company implemented a non-qualified employee
savings plan under which senior management employees are eligible to
participate. The Company matches one-third of the first 6% of eligible
employees' voluntary contributions to the plan. The Company's matching
contribution is limited to 6% of the combined contributions into both the
qualified and the non-qualified plan. The Company expensed, as a component of
continuing operations, $13,000 for fiscal year 1996 and $14,000 in both fiscal
years 1995 and 1994 for this plan.

The Company expensed $37,000 for a separate retirement for the
President of the Company in fiscal year 1996.




F-17
39
During fiscal year 1993, the Company established, upon stockholder
approval, the 1992 Stock Option Plan which provides for up to 300,000 shares of
the Company's Common Stock to be made available to employees at various prices
as established by the Board of Directors at the date of grant. Upon the
adoption of the 1992 Stock Option Plan, two previous plans, the 1986 Stock
Option Plan and the 1982 Stock Option Plan, were terminated except with respect
to 373,000 options issued and outstanding under these plans. During fiscal
year 1996, the Company granted 82,250 options under the 1992 Stock Option Plan.
The outstanding options expire through fiscal year 2005.


Changes in outstanding options were as follows:


Number of
Price Range Options
----------- -------

Outstanding at June 26, 1993 $1.63-$2.75 446,000
Options granted 3.88- 4.00 131,000
Options exercised 1.63- 3.88 (184,500)
Options canceled 1.63- 3.88 (13,375)
-----------

Outstanding at June 25, 1994 1.63- 4.00 379,125
Options granted 3.50 77,000
Options exercised 1.94- 3.88 (26,250)
Options canceled 1.94- 3.88 (58,875)
-----------

Outstanding at June 24, 1995 1.63- 4.00 371,000
Options granted 2.13- 3.13 82,250
Options exercised 1.63- 2.38 (64,000)
Options canceled 1.63- 4.00 (78,500)
-----------

Outstanding at June 29, 1996 1.63- 4.00 310,750
===========


As of June 29, 1996, options to purchase 210,688 shares of common
stock were currently exercisable at prices ranging from $1.63 to $4.00 per
share. The exercise prices equal the fair market value of the stock at the
date of grant.





F-18
40
NOTE 8 - COMMITMENTS

The Company leases office and plant space under operating leases which
expire on various dates through 1999. Certain leases provide for escalations
in rent based upon increases in the lessor's annual operating costs or the
consumer price index. Future minimum lease payments under these agreements at
June 29, 1996 were as follows:



Fiscal Year
-----------

1997 . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,000
1998 . . . . . . . . . . . . . . . . . . . . . . . . . 380,000
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 331,000
--------

Total . . . . . . . . . . . . . . . . . . . . . . . $ 1,121,000
===============


Rent expense for continuing operations approximated $405,000, $371,000
and $458,000 for fiscal years 1996, 1995 and 1994, respectively.


NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

During fiscal year 1996 the Company received the deposit and all
accrued interest it had with a European bank of $4,900,000 at June 24, 1995.
This deposit had been pledged as collateral to the Bank with respect to funds
loaned to a party affiliated with the principal stockholder of the Company.
The Company incurred no costs as a result of the collateralization. These
funds are included as a cash equivalent at June 29, 1996.

At June 29, 1996 and June 24, 1995, loans outstanding to the principal
stockholder of the Company amounted to $2,188,000 and $2,068,000, which
includes accrued interest of $222,000 and $101,000 respectively. The loans have
maturity dates of up to two years and at June 29, 1996 and June 24, 1995,
carried a weighted-average interest rate of 8.0%. In addition to this loan,
two related party loans in the amount of $36,000 and $62,000 were outstanding
at the end of fiscal year 1996. The Board of Directors agreed to pay one of
its Directors a $15,000 annual fee less the amount of consulting fees paid to
the member during the fiscal year for services provided on behalf of the
Company's Technology Committee. The board member provides engineering
consulting services to the Company through the member's own Company at his
normal billing rates.

At June 29, 1996 and June 24, 1995, the Company has an employee loan
outstanding in the amount of $56,000, which bears no interest through April,
1997. Effective May, 1997 this loan will begin to bear interest at the rate of
1% over the published prime rate, and shall be paid quarterly. This loan was
established as a part of the employee's employment contract. The principal is
payable one year following termination of employment, or the sale of employee's

F-19
41
residence whichever occurs first. A second employee loan was outstanding in
the amount of $20,000 which bears no interest, and is expected to be paid by
the end of the first quarter fiscal 1997.

NOTE 10 - SALES TO MAJOR CUSTOMERS

Food service distributors continued to be the leading market segment
for the Company with fiscal year 1996 sales representing approximately 58% of
total net sales. In fiscal year 1996, sales to food service distributors
representing hotels chains and restaurants accounted for 42% and 11% of total
net sales, respectively. Sales to the airline industry in fiscal year 1996
represented 31% of total net sales. Sales to the retail, healthcare and
Norwegian European and Asian customers accounted for 7.5%, 2% and 1.5%,
respectively.

In fiscal years 1996, 1995 and 1994, sales to food service
distributors representing the Marriott Hotel chain amounted to 11%, 21% and 55%
of total net sales. In fiscal year 1996, 1995 and 1994, sales to food service
distributors representing the Hyatt Hotel chain amounted to 31%, 32% and 16% of
total net sales. Sales to distributors serving the airline industry represented
31%, 29% and 17% of total net sales in fiscal year 1996, 1995 and 1994,
respectively. The loss of any of the above customers could have an effect on
the Company's results of operations.

NOTE 11 - LITIGATION

The Company is engaged in ordinary and routine litigation incidental
to its business. Management does not anticipate that any amounts which it may
be required to pay by reason thereof will have a material effect on the
Company's financial position or results of operations.





F-20
42
SCHEDULE II

VIE de FRANCE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES




Additions
---------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
of Period Expenses Accounts Deductions of Period
------------ ----------- -------- ------------- ---------

Year ended June 25, 1994
Allowance for doubtful accounts $ 18,429 $ - $ (16,552)(1) $ 1,877
========== ========= ========= ==========

Provision for losses on unit closings 475,938 323,835 (265,941)(2) 533,832
========== ========= ========= ==========

Allowance for obsolete inventory 26,500 87,774 (17,116) 97,158
========== ========= ========= ==========

Tax Valuation allowance - 714,000 - 714,000
========== ========= ========= ==========

Year ended June 24, 1995
Allowance for doubtful accounts $ 1,877 $ 3,543 $ (219)(1) $ 5,201
========== ========= ========= ==========

Provision for losses on unit closings 533,832 - (167,050)(3) 366,782
========== ========= ========= ==========

Allowance for obsolete inventory 97,158 - (51,924) 45,234
========== ========= ========= ==========

Tax Valuation allowance 714,000 177,000 891,000
========== ========= ========= ==========


Year ended June 29, 1996
Allowance for doubtful accounts $ 5,201 $ - $ (5,201)(1) $ -
========== ========= ========= ==========

Provision for losses on unit closings 366,782 91,737 (171,500)(3,4) 287,019
========== ========= ========= ==========

Allowance for obsolete inventory 45,234 5,876 - 51,110
========== ========= ========= ==========

Tax Valuation allowance 891,000 487,000 - 1,378,000
========== ========= ========= ==========



(1) Write-off of uncollectible customer accounts, net of recoveries.

(2) Write-off of assets of closed units and related closing costs associated
with the former Restaurant Division.

(3) Lease termination costs associated with the former Restaurant Division.

(4) Recovery of reserves associated with the former Bakery Division.


F-21
43
CONSENT OF INDEPENDENT ACCOUNTANTS


The Board of Directors
Vie de France Corporation:


We consent to the incorporation by reference in the registration statements,
(Nos. 33-60614 and 33-60616) on Form S-8 of Vie de France Corporation of our
report dated September 13, 1996, relating to the consolidated balance sheet of
Vie de France Corporation and subsidiary as of June 29, 1996, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for the fiscal year ended June 29, 1996, and related schedule, which
report appears in the June 29, 1996 annual report on Form 10-K of Vie de France
Corporation.


KPMG Peat Marwick LLP



Washington, D.C.
September 27, 1996





F-22
44
CONSENT OF INDEPENDENT ACCOUNTANTS


The Board of Directors
Vie de France Corporation:


We hereby consent to the incorporation by reference in the registration
statements on form S-8 (Nos. 33-60614 and 33-60616) of Vie de France
Corporation of our report dated August 25, 1995 appearing on page F-2 of this
Form 10-K


Price Waterhouse LLP



Washington, D.C.
September 27, 1996





F-23