<PAGE>

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

                                    FORM 10-K
(Mark One)

[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1998
                                             ------------------
                                       OR
[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number 1-9145
                                                 -------

                           ML MACADAMIA ORCHARDS, L.P.
             -----------------------------------------------------
             (Exact Name of registrant as specified in its charter)

          DELAWARE                                    99-0248088
-------------------------------                   -------------------
(State or other jurisdiction of                   (I.R.S. Employer
 incorporation or organization)                   Identification No.)

                     828 FORT STREET, HONOLULU, HAWAII            96813
               ---------------------------------------         ----------
               (Address of principal executive offices)        (Zip Code)

       Registrant's telephone number, including area code: (808) 532-4130
                                                           --------------

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

                                                Name of Each Exchange
           Title of Each Class                   on Which Registered     
 -----------------------------------           -----------------------
    Depositary Units Representing
 Class A Limited Partners' Interests           New York Stock Exchange

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve 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 10-K or any amendment to this
10-K. /X/

As of March 15, 1999, 7,500,000 shares of the registrant's Class A Units were
outstanding, and the aggregate market value of such Units held by non-affiliates
was $28,125,000 (based on the closing price on that date of $3.75 per Unit).


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                                       2
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                                     PART I

ITEM 1.  BUSINESS OF THE PARTNERSHIP

GENERAL DESCRIPTION OF THE BUSINESS

ML Macadamia Orchards, L.P. (the "Partnership") is a publicly-traded 
partnership, organized under the laws of the State of Delaware, and engaged 
in the business of growing macadamia nuts in Hawaii. It is one of the world's 
largest growers of macadamia nuts. The Partnership owns or leases 
approximately 4,027 tree acres of macadamia nut orchards in three locations 
within a 50-mile radius on the island of Hawaii, where macadamia nut yields 
are among the world's highest. ("Tree acres" are acres of the Partnership's 
owned or leased lands utilized for macadamia nut orchards. "Gross acres" 
includes areas not utilized for orchards.) The Partnership is managed by its 
sole general partner, ML Resources, Inc. ("MLR" or the "Managing Partner"). 
The Managing Partner is owned by Mauna Loa Macadamia Nut Corporation ("Mauna 
Loa"). Mauna Loa is a wholly owned subsidiary of C. Brewer and Company, 
Limited ("CBCL"), which in turn is wholly owned by Buyco, Inc. ("Buyco").

Ownership of Class A Units confers no direct or indirect interest in Buyco, 
CBCL, Mauna Loa or any of their affiliated corporations.

The Partnership commenced operations in June 1986, following its acquisition 
of interests in approximately 2,423 tree acres of macadamia nut orchards from 
Mauna Loa and one of Mauna Loa's affiliates. In December 1986 and October 
1989, respectively, the Partnership acquired from affiliates of Mauna Loa 
interests in approximately 266 and 1,260 additional tree acres of macadamia 
orchards. In September 1991 the Partnership acquired approximately 78 tree 
acres of producing macadamia orchards.

NARRATIVE DESCRIPTION OF THE BUSINESS

The Partnership sells all of its macadamia nuts to Mauna Loa, under four 
long-term nut purchase contracts. Mauna Loa processes and markets the nuts 
under the MAUNA LOA-Registered Trademark- brand name and is the largest 
processor and marketer of macadamia nuts in the world. The Partnership is 
Mauna Loa's largest single supplier of macadamia nuts. All farming activities 
are performed for the Partnership by CBCL subsidiaries under long-term 
farming contracts.

NUT PURCHASE CONTRACTS.

The Partnership is a party to four nut purchase contracts with Mauna Loa. 
They cover all nuts produced by the orchards acquired in June 1986, December 
1986, October 1989, and September 1991, respectively. The first two contracts 
expire in 2006, while the third contract expires in 2019 and also provides 
for the exclusion of unusable nuts from those purchased by Mauna Loa. The 
first three contracts are identical in all other material respects. The 
fourth contract was acquired by assignment with the purchase in September 
1991 of the Lot 10 orchard and expires in 2003. The fourth contract is 
similar to the first three contracts, but the nut price is calculated on a 
crop year (July 1 through June 30) rather than a calendar year basis, which 
results in a slightly different nut price. All four contracts use a pricing 
formula based 50% on a two-year trailing average of the macadamia nut price 
published annually by the United States Department 

                                       3
<PAGE>

of Agriculture and 50% on Mauna Loa's "netback component." The netback 
component is calculated by subtracting Mauna Loa's processing and marketing 
costs per pound and a "capital charge" of 20% from its nut revenues per 
pound. The first three nut purchase contracts may be terminated by Mauna Loa 
upon thirty days' notice if the Managing Partner is involuntarily removed as 
the managing general partner and replaced by a person or entity not 
affiliated with Mauna Loa. The fourth nut purchase contract may be terminated 
at any time by mutual agreement in writing, or it may be terminated by the 
Partnership as of the end of any calendar year by giving Mauna Loa at least 
twelve months advance notice of its intention to terminate.

COMPETITION

Because the Partnership's revenues from nut sales (and therefore its overall 
financial results) are tied to a formula dependent in large part upon Mauna 
Loa's market performance, the Partnership bears certain risks associated with 
Mauna Loa's marketing of the nuts, including the likelihood of increased 
future competition.

Mauna Loa considers its primary competition to be other premium nut products, 
except in Hawaii where its products compete with those of other macadamia nut 
producers and other food and non-food tourist items. As a premium nut, 
macadamia nuts compete with cashews, almonds and pistachios.

Mauna Loa sells macadamia nuts as "retail" nuts and "commercial" nuts and 
produces and sells various macadamia nut products. These include pristine 
salted and unsalted roasted macadamia nuts, packages of diced macadamia nuts 
and macadamia oil (for cooking and baking), value-added products such as 
candy-glazed macadamia nuts, chocolate-covered macadamia nuts, chocolate 
macadamia nut candy bars, honey-roasted macadamia nuts and macadamia nut 
brittle.

Macadamia nuts comprised less than 5% of the sales of branded premium nuts 
sold through mass merchandisers, drug and grocery stores on the U.S. 
mainland. Cashews and mixed nuts represent the bulk of the dollar sales in 
this segment, followed by pistachios. Macadamia nuts are the highest priced 
of all premium nuts, and, therefore, they may be sensitive to price 
competition from other nuts.

Approximately fifty percent of sales of the MAUNA LOA-Registered 
Trademark- brand are made in the U.S. mainland, where Mauna Loa sells its 
products through brokers to food stores, club stores, drug store chains, mass 
merchandisers and commercial customers.

Approximately thirty percent of sales of the MAUNA LOA-Registered 
Trademark- brand are made in Hawaii where Mauna Loa sells through its own 
direct sales force primarily to retailers. Substantial portions of the 
macadamia nut products sold are purchased by visitors for gifts and 
souvenirs. Mauna Loa believes that it is the largest seller of macadamia 
products in the State of Hawaii.

Outside the United States, Mauna Loa's other major market is Japan and the 
Far East. Approximately fifteen percent of sales of the MAUNA LOA-Registered 
Trademark- brand are made in Japan and the Far East.

The remaining sales are comprised of ingredient nuts, visitor center sales, 
and mail order sales.

                                       4
<PAGE>


In addition to the State of Hawaii, mature macadamia nut orchards are located 
in Australia, Africa, and Central America. For the 1998/99 crop year, Hawaii 
is expected to supply 30% of the world crop, and Australia, the world's 
largest producer, is expected to supply 44%.

A general decline in nut prices would adversely affect the prices which Mauna 
Loa could charge for its macadamia nut products and could have a negative 
effect on its profitability. Since the purchase price for the Partnership's 
nuts under all of its nut purchase contracts is based in part on nut prices 
reported by the industry and in part on the marketing success of Mauna Loa, a 
general decline in macadamia nut prices could also adversely affect the 
Partnership's revenues.

FARMING CONTRACTS

All of the Partnership's orchards are farmed by two subsidiaries of CBCL 
under four long-term farming contracts. The orchards are located at three 
separate locations on the island of Hawaii ("Keaau", "Ka'u" and "Mauna Kea"). 
Because each area has different terrain and weather conditions, farming 
methods vary somewhat among the three locations.

FARMING CONTRACTS. The Partnership is a party to four farming contracts with 
two affiliates of CBCL, Ka'u Agribusiness Company, Inc. ("KACI") and Mauna 
Kea Agribusiness Company, Inc. ("MKACI"). Services under these contracts 
include cultivation, weed and pest control, fertilization, pruning and 
hedging, replanting, harvesting, husking and related services for the 
Partnership's orchards. In return, the Partnership reimburses KACI and MKACI 
for their direct and indirect costs incurred in providing such services, 
including an equipment utilization charge and an annual farming fee. The 
first two contracts (the "1986 contracts") expire in 2006, while the third 
contract (the "1989 contract") expires in 2019. The fourth contract (the "Lot 
10 contract") was acquired with the purchase of the Lot 10 orchard in 1991 
and expires in 2006. The four contracts are identical in all other material 
respects. The contracts are terminable if the Managing Partner is 
involuntarily removed and replaced by a person or entity not affiliated with 
Mauna Loa.

Each of the farming contracts was amended effective January 1, 1998 to 
provide that farming fees would equal 2 1/2% of the Partnership's gross 
profits from farming operations, rather than 3% of the Partnership's 
operating cash flow, attributable to the relevant orchard.

ORCHARD MAINTENANCE. Maintenance of an orchard is essential to macadamia nut 
farming. Pruning and hedging of trees is necessary to allow space for 
mechanical harvesting and cultivating equipment to operate safely and 
efficiently and to remove dead branches. Where mechanical equipment is used, 
the orchard floor must be maintained in a condition that will permit its 
operation. Soil and gravel are used to repair mud holes and other surface 
irregularities caused by soil erosion from heavy rain and by farming 
equipment, though this operation is not performed as frequently due to 
current cost controls. Pruning and surface maintenance are usually performed 
after the harvest season.

Orchard management also requires the proper selection and application of 
fertilizers, pesticides (to control rodents, insects and fungi) and 
herbicides (to control weeds). Insects, rodents and fungi, as well as wild 
pigs, if not controlled, can cause losses to nut production.

                                       5
<PAGE>


HARVESTING. The harvest period begins in the late summer and runs through the 
spring. Mature nuts fall from the trees and are harvested using mechanized 
harvest equipment when the orchard floor is level enough to permit its use. 
Nuts are harvested by hand when the orchard floor is too uneven to permit 
mechanical harvesting, when the nut drop is very light and when nuts remain 
after harvesting. At Keaau, Ka'u and Mauna Kea, seasonal labor for hand 
harvesting and other operations is generally available from nearby Hilo and 
adjacent communities.

Mechanical harvesting is less costly than hand harvesting, but mechanical 
harvesting is possible only where the orchard floor is relatively flat. 
Approximately 56% of the orchards acquired in 1986, 81% of the orchards 
acquired in 1989 and all of the orchard acquired in 1991 are currently 
mechanically harvested. The remaining acreage of the 1986 and 1989 orchards 
is too uneven for mechanical harvesting and must be harvested by hand.

During the harvest season, the nuts are collected every six to ten weeks. 
Nuts suffer loss in quality if they remain on the ground too long. The 
harvested nuts are then transported to the husking facility. The Keaau and 
Ka'u areas have husking facilities, which are not owned by the Partnership. 
Nuts harvested in the Mauna Kea area are transported to the husking facility 
in the Keaau area. At the husking facility, the outer husk is removed and the 
nuts, still in their shell, are weighed and sampled to determine moisture 
content and kernel quality. Title to the nuts passes to Mauna Loa after 
weighing, and the nuts are then moved to a drying facility.

PROCESSING. The nuts purchased from the Partnership by Mauna Loa are 
primarily processed at Mauna Loa's processing plant located adjacent to the 
orchards located in the Keaau area. The plant was built in 1966 and is 
presently capable of handling approximately 210,000 pounds of dry-in-shell 
(commonly abbreviated "DIS") nuts per day. Processing at the plant includes 
drying, cracking, roasting, inspecting and packaging. The plant also includes 
separate warehouses, a machine shop, storage facilities, husking facilities, 
nut drying facilities, a generator and a 10,000 square foot chocolate 
processing plant. None of these processing facilities are owned by the 
Partnership.

At Mauna Loa's plant in Keaau, the harvested nuts pass by conveyors over 
metal screens, blowers and rock separators that remove everything but the 
in-husk nuts. The husks are then split and removed by pressing the nuts 
between steel roller bars and a rubber pad. At this stage, the nut kernels 
are still encased in their hard round shells and roughly 20% of their weight 
is attributable to moisture content. At this point, the nuts are referred to 
as wet-in-shell (commonly abbreviated "WIS"). The WIS weight of the nuts is 
used to determine payments to be made by Mauna Loa under the Nut Purchase 
Contracts. Approximately 20% of the WIS weight of the nuts will become dry 
salable kernels when all further processing is completed.

After the nuts are weighed the moisture content of the nuts is reduced by 
blowing warm air over them, producing DIS nuts. The nuts are then cracked by 
metal rollers to remove the shell. Mechanical and optical equipment, as well 
as hand sorting, are used to separate the nut kernels from pieces of broken 
shell.

The dry nut kernels are roasted and then sorted into retail and commercial 
grades. At this stage, less than half of the nuts are bulk-packed and sent to 
four co-packers on the U.S. mainland for packaging. At Mauna Loa's plant in 
Keaau the nuts may be salted, or covered with chocolate or one of several 
candy glazes, and finally packaged, labeled and readied for shipment.

                                       6


<PAGE>

STABILIZATION PAYMENTS 

In December 1986, the Partnership acquired a 266 acre orchard that was 
several years younger than other orchards of the Partnership. Because of the 
relative immaturity of the newer orchard, its productivity (and therefore its 
cash flow) was expected to be correspondingly lower for the first several 
years than for the other older orchards.

Accordingly, the seller of this orchard (KACI) agreed to make cash 
stabilization payments to the Partnership for each year through 1993 in which 
the cash flow (as defined) from this orchard fell short of the target cash 
flow level, which equaled $507,000. Stabilization payments for any given year 
were limited to the lesser of the amount of the shortfall or a maximum 
payment amount. For the years from 1987 through 1993, inclusive, the 
Partnership received a total of $1,628,000 (including a 4% Hawaii general 
excise tax) in stabilization payments under this agreement.

The Partnership accounted for stabilization payments (net of the 4% Hawaii 
general excise tax) as a reduction in the cost basis of the orchard. As such, 
these payments are being reflected in the Partnership's net income ratably 
through 2019 as a reduction to the depreciation expense reported for this 
orchard.

In return, the Partnership is obligated to pay the seller 100% of any year's 
cash flow from this orchard in excess of the target cash flow as additional 
percentage rent until the aggregate amount of the additional percentage rent 
paid equals 150% of the total amount of stabilization payments previously 
received. Thereafter, the Partnership is obligated to pay the seller 50% of 
this orchard's cash flow in excess of the target cash flow as additional 
incentive rent. The Partnership paid KACI $54,000 under these provisions for 
1996 and $297,000 for 1997. No additional rent was due in 1998, and no 
amounts were payable with respect to prior years.

RISKS INVOLVED IN OPERATING MACADAMIA ORCHARDS 

Macadamia nut trees are subject to damage or destruction from diseases, 
pests, floods, droughts, windstorms, hurricanes, volcanic activity and other 
natural causes. Partnership tree replacements for all orchards from all 
causes were 1.3% in 1996, 2.0% in 1997 and 0.9% in 1998.

DISEASES AND PESTS. The Partnership's Keaau orchards have experienced tree 
replacements of 2.1% in 1996, 2.7% in 1997 and 1.9% in 1998. Other macadamia 
growers in the vicinity have also experienced higher than normal tree losses 
due to a problem known as "Macadamia Quick Decline" ("MQD"). Based upon 
research by the University of Hawaii and other experts, it is believed that 
the situation is due to fungi associated with high moisture conditions. It is 
also believed that a particular variety of macadamia nut tree (variety 333) 
is most susceptible to MQD. Another tree variety (variety 344) has also been 
identified as being more susceptible to MQD than other varieties. Based on 
the latest research, Mauna Loa and the University of Hawaii are working to 
identify the specific causes of the problem and potentially to develop 
feasible control measures. There is no assurance, however, that a feasible 
control measure can be developed. Approximately 9% of the Partnership's 
orchards are variety 333 and 45% are variety 344. Both the Keaau and Mauna 
Kea orchards are areas with high moisture conditions, and may be more 
susceptible to the MQD problem. MQD is present in the Ka'u orchards, but tree 
losses to date have been less than 1% in the Ka'u area.

                                       7
<PAGE>


There are also two types of fungal diseases, which can affect nut production 
but are not fatal to the trees themselves. One of these is Phytophthora, 
which affects the macadamia flowers and nutlets, and the other is Botrytis 
cinerea. These types of fungal disease were generally controllable with 
fungicides, but many of these fungicides are no longer available. 
Historically, these fungi have attacked the orchards located in Keaau every 
three or four years. There was a Phytophthora occurrence in the Keaau and 
Mauna Kea orchards in the spring of 1994 and, as there are currently no 
feasible methods available to treat Phytophthora, the 1995-96 crop year 
production for these orchards was affected.

WINDSTORMS AND INSURANCE. The Partnership's orchards are located in areas on 
the island of Hawaii that are susceptible to windstorms. Twenty-four major 
windstorms have occurred on the island of Hawaii since 1961, and four of 
those caused material losses to Partnership orchards. Several of the 
Partnership's orchards are surrounded by windbreak trees, which provide 
limited protection. Younger trees that have not developed extensive root 
systems are particularly vulnerable to windstorms.

On February 24, 1997, high winds hit the Hilo side of the island of Hawaii, 
resulting in the loss of 5,381 trees (about 1.5% of all of the Partnership's 
trees) in the Mauna Kea and Keaau orchards. Clean-up and replanting costs 
were approximately $275,000. There was no insurance recovery because losses 
were below the deductible amount.

For 1999, the Partnership has secured tree and crop insurance coverage under 
a federally subsidized program. The tree insurance provides coverage up to a 
maximum of approximately $36 million against loss of trees due to wind, fire 
or volcanic activity. The crop insurance provides coverage up to a maximum of 
approximately $7.5 million against loss of nuts due to wind, fire, volcanic 
activity, earthquake, adverse weather, wildlife damage and failure of 
irrigation water supplies.

VOLCANOES. The orchards are located on the island of Hawaii, where there are 
two active volcanoes. To date, no lava flows from either volcano have 
affected or threatened the orchards.

RAINFALL. The productivity of orchards depends in large part on moisture 
conditions. Inadequate rainfall can reduce nut yields significantly, while 
excessive rain without adequate drainage can foster disease and hamper 
harvesting operations. While rainfall at the orchards located in the Keaau 
and Mauna Kea areas has generally been adequate, the orchards located in the 
Ka'u area generally receive less rainfall and, as a result, a portion of the 
Ka'u orchards is presently irrigated. Irrigation can mitigate the effects of 
a drought, but it cannot completely protect a macadamia nut crop from the 
effect of a drought. Recorded rainfall at each of the three locations of the 
Partnership's orchards for the past five years is shown below:

<TABLE>
<CAPTION>

        Year                          Ka'u          Keaau      Mauna Kea
        ----                         ------        -------     ---------
        <S>                           <C>          <C>            <C>
        1994                          68.7"        173.3"         249.7"
        1995                          27.0"         88.6"         123.1"
        1996                          69.3"        125.2"         146.6"
        1997                          54.9"        142.3"         157.5"
        1998                           8.8"        115.5"         153.7"
</TABLE>

                                       8
<PAGE>


For the first eleven months of 1995 very dry conditions prevailed in the 
Partnership's orchards, with the Ka'u area being particularly affected. 
Though the rainfall returned to more normal levels in the second half of 1996 
and 1997, the Partnership's 1995-96 crop year production was adversely 
affected by this drought.

The heavy rainfall experienced in January and February 1994 in the Keaau 
orchards (forty inches compared to a historical average of twenty-one) 
induced flower disease and limited pollination. The 1994-95 crop year 
production for the Keaau orchards was adversely impacted by these unusual wet 
conditions.

The 1998 El Nino related drought affected all of Hawaii for the first three 
months of 1998 and continued for the full year in Ka'u. The Ka'u region 
recorded the lowest rainfall in the Partnership's history, with less than 
nine inches of rain. The 1998-99 crop year will be substantially reduced for 
Ka'u orchards, and the 1999-2000 crop year may also be affected. Production 
in Keaau and Mauna Kea was not adversely affected by the drought.

WATER SUPPLY FOR IRRIGATION

In June 1986, the Partnership and KACI entered into an agreement (the "Water 
Agreement") pursuant to which KACI agreed to supply water to that portion of 
the June 1986 Orchards located at Ka'u ("Ka'u I") which had been irrigated 
historically. In 1989, the Water Agreement was amended to supply water to 
that portion of the October 1989 Orchards at Ka'u ("Ka'u II") which had been 
irrigated historically. The Water Agreement, as amended, provides that KACI 
will supply water to such portion of the Ka'u I Orchards and the Ka'u II 
Orchards (the "Irrigated Orchards") from a well (the "Sisal Well") located on 
property owned by KACI as requested by the Partnership from time to time in 
an amount equal to, at the time of request, the lesser of (i) the amount 
necessary to irrigate the Irrigated Orchards in accordance with prudent 
farming practices or (ii) 95% of the Sisal Well's present operating capacity 
of 1,700 gallons per minute, provided that the amount of water required to be 
provided under clause (ii) will not exceed approximately 643 million gallons 
of water per year. The cost to the Partnership for receiving such water is a 
pro rata share of the cost incurred by KACI in providing such water.

If the amount of water provided to the Irrigated Orchards by the Sisal Well 
becomes insufficient to irrigate the Irrigated Orchards in accordance with 
prudent farming practices as determined by the Partnership in good faith, 
KACI will be obligated, at the request of the Partnership, to use reasonable 
efforts to increase the capacity of the Sisal Well, to drill an alternative 
well into the historical source which provides water to the Sisal Well or to 
obtain water from other sources in order to provide such amount of water. If 
KACI incurs capital costs in connection with any such actions, the 
Partnership will be required to pay its pro rata shares of such costs. If 
water is not supplied to the Partnership as required under the Water 
Agreement, the Partnership will be entitled to drill for water on the portion 
of the Ka'u I Orchards which is held in fee by the Partnership. The Water 
Agreement also provides that, if KACI sells or otherwise transfers all or any 
portion of the retained water rights beneath the Irrigated Orchards or the 
property containing the Sisal Well, the right of the Partnership to receive 
water under the Water Agreement will be reasonably provided for.

                                       9
<PAGE>


On a historical basis, the quantity of water available under the Water 
Agreement to the irrigated portion of the Ka'u I Orchards has been generally 
sufficient to irrigate these orchards in accordance with prudent farming 
practices. The irrigated portion of the Ka'u II Orchards is expected to need 
greater quantities of water as the orchards mature. The Managing Partner 
anticipates that the amount of water available under the Water Agreement, as 
amended, will be generally sufficient, assuming average levels of rainfall, 
to irrigate the Irrigated Orchards in accordance with prudent farming 
practices for the next several years. If no irrigation water is available to 
the Irrigated Orchards, then, based on historical average rainfall levels, 
diminished yields of macadamia nut production can be expected.

EMPLOYEES

The Partnership presently has no employees. Instead, the employees, officers 
and directors of the Managing Partner perform all management functions for 
the Partnership. As of December 31, 1998, the Managing Partner employed three 
people.

ITEM 2.  PROPERTIES.

LOCATION. The Partnership owns or leases approximately 4,027 tree acres of 
macadamia orchards on the island of Hawaii. The orchards are located in three 
areas: Ka'u, Keaau and Mauna Kea. The Ka'u area is located in the south part 
of the island about fifty miles from Hilo. The Keaau area is located six 
miles south of Hilo on the east side of the island, and the Mauna Kea area is 
located three miles north of Hilo on the east side of the island.

The majority of macadamia nut trees grown in the State of Hawaii are grown on 
the island of Hawaii in volcanic soil that permits drainage during heavy 
rainfall. While the orchards are located approximately within a 50-mile 
radius, the climate and other conditions which affect the growing of 
macadamia nuts are different. These differences are the result of prevailing 
wind patterns and island topography which produce a variety of microclimates 
throughout the island.

                                       10
<PAGE>

                             [MAP OF STATE OF HAWAII]


AGE AND DENSITY. The productivity of macadamia nut orchards depends on 
several factors including, among others, the age of the trees, the number of 
trees planted per acre, soil condition, climate, rainfall and/or irrigation. 
The most significant characteristic affecting yields is maturity. The trees 
in a macadamia nut orchard generally begin to produce nuts at a commercially 
acceptable level at around nine years of age. Thereafter, nut yields increase 
gradually until the trees reach maturity, after which the nut yield remains 
relatively constant except for variances produced by rainfall, cultivation 
practices, pest infestation and disease.

Macadamia orchards normally reach peak production after fifteen to eighteen 
years of age. Of the 4,027 tree acres of macadamia orchards owned or leased 
by the Partnership, 2,721 tree acres are over eighteen years of age and 
roughly 1,306 tree acres are under eighteen years of age. Around 2% of trees 
are lost to various causes each year and are replaced.

RAINFALL. Macadamia trees grow best in climates with substantial and evenly 
distributed rainfall (or equivalent irrigation) and in soil that provides 
good drainage. Inadequate rainfall can significantly reduce nut yields, while 
excessive rain without adequate drainage can impede healthy tree growth, 
promote the growth of harmful fungal diseases and produce mud holes that 
require repair of the orchard floor.

At Keaau, normal rainfall is adequate without irrigation, and the volcanic 
soil provides good drainage. However, short droughts and occasional flooding 
have occurred. At Mauna Kea, 

                                       11
<PAGE>


normal rainfall is adequate without irrigation and the volcanic soil provides 
adequate drainage. In the event of a very long drought, production at Keaau 
and Mauna Kea might be affected. At Ka'u, located on the drier side of the 
island, the rainfall averages substantially less than at Keaau, particularly 
at the lower elevations. Approximately 652 acres at the lower elevations of 
Ka'u are irrigated to provide for additional water when required. Under 
extremely dry conditions at Ka'u, such as a prolonged drought, irrigation is 
not sufficient, and production will be affected negatively.

At the time of the conveyance of these orchards to the Partnership, Mauna Loa 
and KACI reserved the water rights to the land underlying the orchards. To 
supply water to that portion of the orchards located at Ka'u which had been 
irrigated historically, KACI and the Partnership entered into a water 
agreement whereby KACI agreed to supply water to the Partnership from a well 
which is on property retained by KACI to irrigate this property. The water 
agreement has been amended to provide for water to be supplied for irrigation 
purposes to the portion of the October 1989 Ka'u Orchards which have 
historically been irrigated.

ORCHARDS.  The following  table lists each of the  orchards,  the year  
acquired,  gross and tree acres, tenure, and lease rents:

<TABLE>
<CAPTION>

                                      TREE                           LEASE        MIN. RENT
      ORCHARD           ACQUIRED      ACRES         TENURE        EXPIRATION      PER ANNUM
---------------------  -----------  ---------- ------------------ ------------   ------------
<S>                   <C>              <C>        <C>                 <C>          <C>
Keaau I                June 1986       1467        Fee simple
Ka'u I                 June 1986        456        Fee simple
     "                 June 1986        500       Leasehold (1)       2019         $10,500
Ka'u Green Shoe I      Dec. 1986        266       Leasehold (1)       2019         $ 5,586
Keaau II               Oct. 1989        220        Fee simple
Ka'u II                Oct. 1989        327       Leasehold (2)       2034         $32,702
     "                 Oct. 1989        175       Leasehold (1)       2028         $17,314
     "                 Oct. 1989         26       Leasehold (3)       2029         $ 1,020
     "                 Oct. 1989        137       Leasehold (1)       2031         $12,757
     "                 Oct. 1989         49       Leasehold (1)       2031         $ 5,828
Mauna Kea              Oct. 1989        326       Leasehold (2)       2034         $32,560
Keaau Lot 10          Sept. 1991         78        Fee simple
                                       ----
  Total acres                          4027     

</TABLE>


(1)  Lease of land only; trees may be removed at termination of lease.
(2)  Lease of land only; lessor may purchase trees from lessee at any time after
     June 30, 2019.
(3)  Lease of land; trees revert to lessor upon termination of lease.

For certain additional information concerning farming leases, see Item 13, 
page 41.

In addition to the minimum annual lease payment amount, all the leases 
require the Partnership to pay various expenses with respect to the leased 
premises as well as an additional rental payment based on the market price 
per pound of macadamia nuts sold in Hawaii.

                                       12



<PAGE>

With respect to the Ka'u Green Shoe I Orchard, the lease requires the 
Partnership to pay KACI, the seller and lessor, additional rent equal to 100% 
of any year's cash flow generated by such orchard in excess of a target level 
of $507,000 until the aggregate amount paid equals 150% of the aggregate 
amount of the stabilization payments previously received by the Partnership. 
Thereafter, the Partnership is required, with respect to any year prior to 
the expiration of the lease, to pay as additional rent, 50% of the cash flow 
generated by such orchard for such year in excess of a target level of 
$507,000 of cash flow.

CERTAIN INFORMATION REGARDING LEASES. The 715 tree acres comprising the Ka'u 
II Orchards are situated on approximately 1,424 actual acres of land. Such 
1,424 acres of land are located on larger tracts of land which cover an 
aggregate of approximately 10,358 acres. Under a Hawaii county subdivision 
ordinance, in order to transfer or lease a discrete portion of a tract if the 
entire tract is not being transferred or leased, certain government approvals 
must be obtained. Because such approvals were not obtained prior to the 
consummation of the acquisition of the Ka'u II Orchards in 1989 with respect 
to the transfer to the Partnership of leasehold interests relating to only a 
portion of such tracts containing the Ka'u II Orchards, the Partnership 
acquired (i) a lease of an undivided interest in the larger tracts of land 
within which the property relating to the Ka'u II Orchards are located, (ii) 
an undivided interest in the entire leasehold estate relating to the larger 
tracts of land within which a portion of the property relating to the Ka'u II 
Orchards are located and (iii) the entire leasehold estate of the remaining 
portion of the property relating to the Ka'u II Orchards Leasehold Interest. 
The acquisition of such interests by the Partnership did not require any 
government approvals. Mauna Loa and the KACI agreed that they would use all 
reasonable efforts to obtain preliminary county subdivision approval for the 
larger tracts of land prior to July 1, 1992. Mauna Loa and KACI met this 
deadline and received final subdivision approval in January 1995. Upon 
obtaining all necessary approvals to partition such larger tracts, the 
Partnership will be required to revest in Mauna Loa and KACI the 
Partnership's undivided leasehold interest in the 8,934 additional acres not 
related to the land upon which the Ka'u II Orchards are located, at which 
time the Partnership's undivided leasehold interest in the remaining portions 
of such larger tracts will be converted to a leasehold interest of the 
entirety of such remaining portions. That work is proceeding.

ITEM 3. LEGAL PROCEEDINGS.

On November 6, 1997, the Partnership announced a proposed merger with C. 
Brewer Homes, Inc. Waterside Partners, which alleged that it was a limited 
partner who owned 1,000 units at the time, filed a derivative complaint in 
the Delaware Chancery Court on January 5, 1998, asking for (1) an injunction 
enjoining the proposed merger; (2) a rescission of the merger if it was 
consummated; (3) an accounting to the Partnership for any damages sustained 
by the Partnership; and (4) an award to plaintiff for its attorney's fees and 
costs. The Plaintiff did not obtain an injunction, but commenced a letter and 
telephone campaign for the purpose of persuading unitholders to vote against 
the proposed merger at the unitholders' meeting. The meeting took place as 
scheduled on June 26, 1998, and the proposed merger failed to secure the 
necessary favorable vote of a majority of the unitholders. The lawsuit was 
dismissed on July 14, 1998. The plaintiff filed a motion on July 13, 1998 
asking that it be awarded its costs and expenses, for prosecution of the 
lawsuit and the proxy contest. Plaintiff claimed $450,000 in attorney's fee, 

                                       13
<PAGE>

representing approximately triple the amount of its claimed attorney's time 
of $146,905, plus expenses of $79,276.95. Exhibits to the Plaintiff's motion 
indicate that the great majority of the time spent by attorneys and more than 
90% of the costs related to the proxy contest rather than the litigation. A 
hearing was held on the Motion for attorney's fees and expenses on January 
29, 1999, and the court has ruled that the Plaintiff is not entitled to any 
attorney fees or expenses.

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

No matters were submitted during the fourth quarter of the fiscal year 
covered by this report to a vote of security holders.



                                          PART II

ITEM 5.  MARKET FOR REGISTRANT'S CLASS A UNITS AND RELATED UNITHOLDER MATTERS.

The Partnership's Class A Depositary Units are listed for trading on the New 
York Stock Exchange (symbol = NUT). There were 1,741 registered holders Class 
A Depositary Units on December 31, 1998.

Distributions declared and high and low sales prices of the Class A 
Depositary Units, based on New York Stock Exchange daily composite 
transactions, are shown in the table below:

<TABLE>
<CAPTION>

----------------------------------------------------------------------
                            Distribution         High          Low 
----------------------------------------------------------------------
<S>     <C>                   <C>               <C>           <C>
1998:   4th Quarter           $0.075            3 11/16       3 1/4
        3rd Quarter            0.075            4             3 1/2
        2nd Quarter            0.075            4 3/16        3 1/8
        1st Quarter            0.075            4             3

1997:   4th Quarter           $0.075            4 3/8         3 1/2
        3rd Quarter            0.075            4 1/4         3 11/16
        2nd Quarter            0.075            4 1/8         3 5/8
        1st Quarter            0.075            4 5/8         3 1/8

</TABLE>

                                       14
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.
     (In thousands, except per pound and per unit data)

<TABLE>
<CAPTION>

                                                    1998         1997          1996          1995          1994
                                                    ----         ----          ----          ----          ----
   <S>                                           <C>            <C>           <C>           <C>           <C>
   Financial:
        Total revenue                             $12,408       $12,128       $13,216       $10,590       $10,107
        Net cash provided by
          operating activities (1)                  3,675         4,613         2,062         3,370         1,568
        Income before taxes                         1,039         1,831         3,033         1,192           157
        Net income                                    963        15,581         3,033         1,192           486
        Distributions declared                      2,273         2,273         1,515         1,515         2,273
        Total working capital                       5,785         5,213         4,342         1,235           219
        Total assets                               64,842        66,727        65,953        64,455        67,544
        Long-term debt                                  -             -             -             -           264
        Total partners' capital                    59,655        60,965        47,656        46,138        46,461
        Class A limited partners' capital          59,058        60,355        47,179        45,676        45,996
        Net cash flow (2)                           2,566         3,435         4,635         2,793         3,206

   Operations (3):
        Macadamia nuts harvested (lbs.) (4)        19,463        20,315        22,110        18,820        18,943
        Net price $/lb. (4)(5)                    $0.6375       $0.5970       $0.5977       $0.5627       $0.5363

   Per Class A Unit (6):
        Income before taxes                       $  0.14       $  0.24       $  0.40       $  0.16       $  0.02
        Net income                                   0.13          2.06          0.40          0.16          0.06
        Net cash flow                                0.34          0.45          0.61          0.37          0.42
        Distributions                                0.30          0.30          0.20          0.20          0.30
        Partners' capital                            7.87          8.05          6.29          6.09          6.13
</TABLE>

(1)  See "Statement of Cash Flows" in the financial statements for method of
     calculation.
(2)  See Footnote 5 in the notes to financial statements for method of
     calculation.
(3)  During all periods presented there were 4,027 acres of trees harvested.
(4)  Wet-in-shell at 25% moisture.
(5)  Weighted average for all orchards.
(6)  7,500,000 Class A Units were issued and outstanding for all periods
     presented.

                                       15
<PAGE>

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

This discussion should be read in conjunction with the financial statements 
and the related notes included elsewhere in this report.

RESULTS OF OPERATIONS - 1998, 1997 AND 1996

PRODUCTION AND YIELDS

Production and yield data for the seven orchards are summarized below 
(expressed in wet-in-shell pounds at 25% moisture):

<TABLE>
<CAPTION>
                                                                                      Average Yield per Acre
                                                                     1998         -----------------------------
      Orchard                      Acquired          Acreage      Production       1998        1997        1996
------------------------          ----------         -------      ----------       ----        ----        ----
<S>                               <C>                 <C>         <C>             <C>         <C>         <C>
Keaau I                            June 1986          1,467       7,122,987       4,855       4,212       5,104
Keaau II                           Oct. 1989            220         733,894       3,336       2,686       3,513
Keaau Lot 10                      Sept. 1991             78         285,589       3,661       3,551       3,884
Ka'u I                             June 1986            956       6,872,976       7,189       6,168       7,029
Ka'u Green Shoe I                  Dec. 1986            266         864,329       3,249       8,617       6,063
Ka'u II                            Oct. 1989            714       2,720,933       3,811       5,746       4,829
Mauna Kea                          Oct. 1989            326         862,193       2,645       2,994       5,420
                                                      -----       ---------  
  Totals (except yields
    which are averages)                               4,027      19,462,901       4,833       5,045       5,490
                                                      -----      ----------
                                                      -----      ----------
</TABLE>


For 1998, overall nut production was down 4%. The Keaau orchards, affected by 
the drought only through March 1998, increased production by 16% compared to 
1997. The combined Ka'u orchards, where the El Nino related drought had the 
most effect, were down 15%. The Ka'u Green Shoe I orchard is without 
irrigation and suffered the most, down 62%. However, its 1997 harvest was 
exceptionally large due to the timing difference of an early 1997 winter 
harvest and a late 1996 winter harvest. Although from two different crop 
years (the crop year being from July 1 to June 30), both harvests occurred in 
the same calendar year, thereby increasing its 1997 reported production.

For 1997, yields were down 18% for the combined Keaau orchards and down 55% 
for Mauna Kea compared to 1996. This was partly the result of high winds that 
hit the Hilo side of the island of Hawaii in February 1997 causing a loss of 
5,381 trees.

The Ka'u Green Shoe I orchard and the Mauna Kea orchard are not yet fully 
mature. As a result, the yields from these orchards are expected to be lower 
on average over the next few years than for the Partnership's mature 
orchards. At full maturity under favorable growing conditions, a macadamia 
orchard can produce between 5,500 and 7,500 WIS pounds of macadamia nuts per 
acre each year at Ka'u and between 4,000 and 6,000 WIS pounds of macadamia 
nuts per acre each year at Keaau. No trees have reached full maturity in the 
Mauna Kea area, but we expect that production at maturity at the Mauna Kea 
orchard will approximate Keaau levels.

                                       16
<PAGE>

REVENUE

Macadamia nut revenues depend on the number of producing acres, yields per 
acre and the nut purchase price. The impact of these factors is summarized in 
the following table:

<TABLE>
<CAPTION>

                                                                                  1998        1997
                                                                                  over        over
                                          1998            1997          1996      1997        1996
                                          ------         ------       ------      ----        ----
<S>                                       <C>            <C>          <C>          <C>         <C>
Trees acres harvested                      4,027          4,027        4,027       -           -
Average yield (WIS lbs./acre)              4,833          5,045        5,490       - 4%        - 8%
                                          ------         ------       ------
Nuts harvested (000's WIS lbs.)           19,463         20,315       22,110       - 4%        - 8%
Nut price ($/WIS lbs. @ 25%)              0.6375         0.5970       0.5977       + 7%        -
                                          ------         ------       ------
Gross nut sales ($000's)                  12,408         12,128       13,216       + 2%        - 8%
                                          ------         ------       ------
                                          ------         ------       ------
</TABLE>

All of the Partnership nut production is sold under long-term contracts to 
Mauna Loa Macadamia Nut Corporation ("Mauna Loa"). The price for these nuts 
is based 50% on the two-year trailing average of USDA published macadamia nut 
prices and 50% on a "netback component". The netback component is determined 
by subtracting from Mauna Loa's gross revenues from the sale of macadamia 
products (i) allocable processing, packaging, marketing, selling and 
advertising costs and (ii) a 20% capital charge on the difference between 
those aggregate gross revenues and aggregate allocable costs.

The following table sets forth the manner in which the nut purchase price per 
pound was determined for 1998, 1997 and 1996 ($/lb.):

<TABLE>
<CAPTION>

                                                      1998         1997         1996
                                                      ----         ----         ----
<S>                                                  <C>          <C>          <C>
USDA price - two years prior (a)                     0.6886       0.6413       0.6391
USDA price - one year prior (a)                      0.7125       0.6886       0.6413
                                                     ------       ------       ------
USDA price - two year trailing average               0.7006       0.6650       0.6402
                                                     ------       ------       ------
                                                     ------       ------       ------

Gross revenues                                       2.2741       2.1673       2.0544
Less allocable processing, packaging,
  marketing, sales and advertising costs             1.5654       1.5150       1.3692
Less 20% capital charge                              0.1417       0.1305       0.1370
                                                     ------       ------       ------
Net-back component                                   0.5670       0.5218       0.5482
                                                     ------       ------       ------
                                                     ------       ------       ------

USDA price - two year trailing average               0.7006       0.6650       0.6402
Net-back component                                   0.5670       0.5218       0.5482
                                                     ------       ------       ------
Average of USDA two year trailing
  average price and net-back component               0.6338       0.5934       0.5942
Plus Hawaii general excise tax (0.5%)                0.0032       0.0030       0.0030
                                                     ------       ------       ------
Net purchase price (b)                               0.6369       0.5964       0.5972
                                                     ------       ------       ------
                                                     ------       ------       ------
</TABLE>

(a)  Mauna Loa's own purchases comprise a substantial portion of nut purchases
     reported to the USDA. Therefore, the USDA price component of the purchase
     price is, to a substantial 

                                       17
<PAGE>

     degree, the average price that Mauna Loa has paid to purchase macadamia 
     nuts from the Partnership and from third parties during the previous two 
     years.

(b)  The nut purchase contract covering nut production from the 78 acre Keaau
     Lot 10 orchard acquired in September 1991 defines the "two-year trailing
     average" provision slightly differently from the other nut purchase
     contracts, and thus, results in a slightly different nut price. This
     orchard accounts for less than 2% of the Partnership's nut production.

The 1998 average nut price of $0.6375 per pound was 6.8% higher than 1997. 
The USDA trailing average component increased by $0.0357, and the netback 
component increased by $0.0451. The netback increase is attributable mostly 
to a 5% increase in Mauna Loa's revenues per pound.

The 1997 average nut price of $.5970 per pound was nearly the same as the 
price for 1996. Although the USDA trailing average increased by $.0248, the 
netback component decreased by $.0264. This decrease is attributable to a 10% 
increase in Mauna Loa's processing costs and a 13% increase in marketing 
costs. Mauna Loa's revenues increased by 6%, but not enough to offset the 
higher expenses.

The USDA published price for the 1997-98 crop year was $0.6996 per pound (WIS 
at 25% moisture), which is 1.8% lower than the 1996-97 price of $0.7125 and 
1.6% higher than the 1995-96 of $0.7125. The USDA two-year trailing average 
which affects the Partnership's 1999 nut price will be $0.7061, a 0.8 % 
increase over the 1998 two-year average.

COST OF GOODS SOLD

Agricultural unit costs depend on the operating expenses required to maintain 
the orchards and to harvest the crop as well as on the quantity of nuts 
actually harvested.

The Partnership's unit costs (expressed in dollars per wet-in-shell pound at 
25% moisture), which are calculated by dividing all agricultural costs for 
each orchard (including lease rent, property tax and tree insurance) by the 
number of pounds of macadamia nuts produced by that orchard, are summarized 
below ($/lb.):

<TABLE>
<CAPTION>

                                                      Cost per pound
                                              -------------------------------
      Orchard              Acquired            1998         1997        1996
-----------------         ----------           ----         ----        ----
<S>                       <C>                 <C>          <C>         <C>
Keaau I                   June 1986           0.4557       0.4972      0.4374
Keaau II                  Oct. 1989           0.5640       0.6385      0.5170
Keaau Lot 10             Sept. 1991           0.3297       0.3145      0.2662
Ka'u I                    June 1986           0.4270       0.4429      0.3992
Ka'u Green Shoe I         Dec. 1986           0.4669       0.3881      0.3115
Ka'u II                   Oct. 1989           0.5387       0.3819      0.4089
Mauna Kea                 Oct. 1989           0.8802       0.8059      0.5468

All Orchards                                  0.4787       0.4623      0.4192

</TABLE>

                                       18



<PAGE>

Total production costs charged to the income statement decreased by $69,000 
in 1998, but increased by 3.5% in cost per pound. Production costs were 
generally down due to the overall lower production, but irrigation costs were 
higher by $300,000 in 1998 due to the drought. Total production costs were 
higher in 1997 compared to 1996 by $238,000. The higher costs were mostly due 
to the additional percentage rent of $297,000 incurred on the Ka'u Green Shoe 
I lease.

GENERAL AND ADMINISTRATIVE COSTS

General and administrative expenses are comprised of accounting and reporting 
costs, reimbursements to the Managing Partner for compensation, directors' 
fees, office expenses and liability insurance, and the management fee. These 
costs were $95,000 higher in 1998 than in 1997. Until 1998, the general 
partner and Partnership offices were located in the corporate offices of C. 
Brewer and Company, Limited ("CBCL"), and office costs, such as office rent, 
telephone and postage, were absorbed by CBCL. CBCL moved their headquarters 
to Hilo, Hawaii, in early 1998, and these occupancy costs were incurred for 
the first time by the Partnership. Total general and administrative costs in 
1997 were $47,000 higher than in 1996. The management fee was $57,000 for 
1998, $75,000 for 1997 and $102,000 for 1996.

INTEREST INCOME AND EXPENSE

The Partnership funds its working capital needs through funds on hand and, 
when needed, from short-term borrowings, generating interest expense in the 
process. Net interest income or expense, therefore, is partly a function of 
any balance carried over from the prior year, the amount and timing of cash 
generated and distributions paid to investors in the current year, as well as 
the current level of interest rates. Throughout 1998 the Partnership had cash 
on hand, earned $244,000 in interest income (net of line of credit fees), and 
incurred no interest expense. Interest income was $171,000 in 1997 and 
$33,000 in 1996, which was offset by interest expense and line of credit fees 
totaling $33,000.

MERGER TRANSACTION COSTS

The Partnership incurred special charges of $1.1 million in the second 
quarter of 1998 resulting from the write off of costs related to the 
cancelled merger of the Partnership with Hawaii Land and Farming (formerly C. 
Brewer Homes, Inc.).

INFLATION AND TAXES

In general, prices paid to macadamia nut farmers fluctuate independently of 
inflation. Macadamia nut prices are influenced strongly by prices for 
finished macadamia products, which depend on competition and consumer 
acceptance. Farming costs, particularly labor and materials, and general and 
administrative costs do generally reflect inflationary trends.

The Partnership is subject to a gross income tax as a result of its election 
to continue to be taxed as a partnership rather than to be taxed as a 
corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is 
calculated at 3.5% on partnership gross income (net revenues less cost of 
goods sold) beginning in 1998. With this election, the deferred tax liability 
was reduced in the third quarter 1997 from $14,982,000 to $1,232,000, 
creating a deferred tax credit of $13,750,000.

                                       19
<PAGE>


SEASONALITY, CAPITAL RESOURCES AND LIQUIDITY

Macadamia nut farming is seasonal, with production peaking late in the fall. 
However, farming operations continue year round. As a result, additional 
working capital is required for much of the year. The Partnership meets its 
working capital needs with cash on hand, and when necessary, through 
short-term borrowings under a $4.0 million revolving line of credit. The line 
was extended for one year on June 1, 1997, again on June 1, 1998, and may be 
extended for additional one-year intervals upon the payment of extension fees.

The Partnership had a cash balance of $4.3 million at year-end 1998, and 
there were no line of credit drawings during 1998 or 1997. Line of credit 
borrowings were $430,000 in 1996. It is the opinion of management that the 
Partnership has adequate cash on hand and borrowing capacity available to 
meet anticipated working capital needs for operations as presently conducted.

ASSESSMENT OF YEAR 2000

The issue of Year 2000 concerns the situation that many computer systems may 
not be able to distinguish the year 2000 from the year 1900 unless 
modifications are made. Many experts fear that this programming flaw could 
debilitate computer systems worldwide.

The Partnership is in the process of assessing the issue of Year 2000 to 
determine its state of readiness and if adverse consequences will have a 
material effect on business, results of operations, or financial condition.

The Partnership has determined that it has no internal information technology 
("IT") or non-IT systems that could have adverse consequences if not 
modified. There are, however, numerous third parties having a material 
relationship with the Partnership, and the assessment of the Year 2000 
readiness of these third parties is still in process. The key third parties 
to be assessed are the managing partner, the contract farmers, the exclusive 
customer, the CPA firm doing tax accounting and tax returns, the stock 
exchange, stockbrokers and their agents, and our transfer agent. Most of 
these third parties have announced their schedules of Year 2000 testing and 
dates of modification for IT systems applicable to the Partnership.

The cost to the Partnership to address Year 2000 issues is not anticipated to 
be material. If some third party suppliers have not become Year 2000 
compliant, the reporting of buy and sell transactions from stockbrokers or 
reporting agencies could be inaccurate or incomplete. Any delay in the 
completion of this task could delay the completion of our Year 2000 tax 
return and related K-1 schedules to unitholders.

RECENT DEVELOPMENTS

The Ka'u region received 8.8 inches of rainfall in 1998, compared to 43 
inches of rainfall in 1997. Production in Ka'u, which accounts for 48% of the 
Partnership's orchards, was lower by 15% in 1998 compared to 1997, and may be 
negatively impacted in 1999 due to the drought. So far in 1999, Ka'u has 
received approximately 10 inches of rainfall.

                                       20
<PAGE>

LEGAL PROCEEDINGS

On November 6, 1997, the Partnership announced a proposed merger with C. 
Brewer Homes, Inc. Waterside Partners, which alleged that it was a limited 
partner who owned 1,000 units at the time, filed a derivative complaint in 
the Delaware Chancery Court on January 5, 1998, asking for (1) an injunction 
enjoining the proposed merger; (2) a rescission of the merger if it was 
consummated; (3) an accounting to the Partnership for any damages sustained 
by the Partnership; and (4) an award to plaintiff for its attorney's fees and 
costs. The Plaintiff did not obtain an injunction, but commenced a letter and 
telephone campaign for the purpose of persuading unitholders to vote against 
the proposed merger at the unitholders' meeting. The meeting took place as 
scheduled on June 26, 1998, and the proposed merger failed to secure the 
necessary favorable vote of a majority of the unitholders. The lawsuit was 
dismissed on July 14, 1998. The plaintiff filed a motion on July 13, 1998 
asking that it be awarded its costs and expenses, for prosecution of the 
lawsuit and the proxy contest. Plaintiff claimed $450,000 in attorney's fee, 
representing approximately triple the amount of its claimed attorney's time 
of $146,905, plus expenses of $79,276.95. Exhibits to the Plaintiff's motion 
indicate that the great majority of the time spent by attorneys and more than 
90% of the costs related to the proxy contest rather than the litigation. A 
hearing was held on the Motion for attorney's fees and expenses on January 
29, 1999, and the court has ruled that the Plaintiff is not entitled to any 
attorney fees or expenses.











                                       21
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND SCHEDULES.


                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------
                                                                           Page
                                                                          Number
                                                                          ------
Report of Independent Accountants                                           23

Balance Sheets, December 31, 1998 and 1997                                  24

Income Statements, for the Years Ended December 31, 1998, 1997 and 1996     25

Statements of Partners' Capital, for the Years Ended December 31, 1998,
     1997 and 1996                                                          26

Statements of Cash Flows for the Years Ended December 31, 1998,
     1997 and 1996                                                          27

Notes to Financial Statements, Including Supplementary Data                 28









                                       22
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


Limited Partners
ML Macadamia Orchards, L.P.


In our opinion, the accompanying balance sheets and the related income 
statements, statements of partners' capital and statements of cash flows 
present fairly, in all material respects, the financial position of ML 
Macadamia Orchards, L.P. at December 31, 1998 and 1997, and the results of 
its operations and its cash flows for each of the three years in the period 
ended December 31, 1998, in conformity with generally accepted accounting 
principles. These financial statements are the responsibility of the 
Partnership's management; our responsibility is to express an opinion on 
these financial statements based on our audits. We conducted our audits 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, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP

Honolulu, Hawaii
February 5, 1999





                                       23



<PAGE>

                           ML MACADAMIA ORCHARDS, L.P.
                                 BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                    DECEMBER 31,
                                                                1998           1997
   ASSETS
   ------
   <S>                                                         <C>           <C>
   Current assets
     Cash and cash equivalents                                 $ 4,317       $ 2,914
     Accounts receivable, primarily from related parties         5,435         6,809
     Other current assets                                            -            20
                                                               -------       -------
       Total current assets                                      9,752         9,743
   Land, orchards and equipment, net                            55,090        56,692
   Capitalized acquisition costs                                     -           292
                                                               -------       -------
     Total assets                                              $64,842       $66,727
                                                               -------       -------
                                                               -------       -------


   LIABILITIES AND PARTNERS' CAPITAL
   ---------------------------------
   Current liabilities
     Accounts payable to related parties                       $ 3,021       $ 3,681
     Cash distributions payable                                    568           568
     Other current liabilities                                     378           281
                                                               -------       -------
       Total current liabilities                                 3,967         4,530
   Deferred income tax liability                                 1,220         1,232
                                                               -------       -------
       Total liabilities                                         5,187         5,762
                                                               -------       -------
   Commitments and contingencies
   Partners' capital
     General partner                                               597           610
     Class A limited partners, no par or assigned value,
        7,500 units issued and outstanding                      59,058        60,355
                                                               -------       -------
       Total partners' capital                                  59,655        60,965
                                                               -------       -------
       Total liabilities and partners' capital                 $64,842       $66,727
                                                               -------       -------
                                                               -------       -------

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                     24
<PAGE>




                           ML MACADAMIA ORCHARDS, L.P.
                                INCOME STATEMENTS
                      (In thousands, except per unit data)

<TABLE>
<CAPTION>

                                                    1998            1997            1996
                                                    ----            ----            ----
   <S>                                            <C>             <C>            <C>
   Macadamia nut sales to related party           $ 12,408        $ 12,128       $ 13,216
   Cost of goods sold
     Costs expensed under farming contracts
      with related parties                           7,466           7,301          7,316
     Depreciation and amortization                   1,603           1,604          1,602
     Other                                             369             602            351
                                                  --------        --------       --------
         Total cost of goods sold                    9,438           9,507          9,269
                                                  --------        --------       --------
         Gross income                                2,970           2,621          3,947
   General and administrative expenses
     Costs expensed under management
      contract with related party                      584             503            493
     Other                                             472             458            421
                                                  --------        --------       --------
         Operating income                            1,914           1,660          3,033
   Merger transaction costs                         (1,119)              -              -
   Interest income                                     244             171              -
                                                  --------        --------       --------
         Income before tax                           1,039           1,831          3,033
   Income tax benefit (expense)                        (76)         13,750              -
                                                  --------        --------       --------
         Net income                               $    963        $ 15,581       $  3,033
                                                  --------        --------       --------
                                                  --------        --------       --------

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

   Net cash flow (as defined in the
     Partnership Agreement)                       $  2,566        $  3,435       $  4,635
                                                  --------        --------       --------
                                                  --------        --------       --------

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

   Net income per Class A Unit                    $   0.13        $   2.06       $   0.40
                                                  --------        --------       --------
                                                  --------        --------       --------

   Net cash flow per Class A Unit                 $   0.34        $   0.45       $   0.61
                                                  --------        --------       --------
                                                  --------        --------       --------

   Cash distributions per Class A Unit            $   0.30        $   0.30       $   0.20
                                                  --------        --------       --------
                                                  --------        --------       --------

   Class A Units outstanding                         7,500           7,500          7,500
                                                  --------        --------       --------
                                                  --------        --------       --------

</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                                      25
<PAGE>



                           ML MACADAMIA ORCHARDS, L.P.
                         STATEMENTS OF PARTNERS' CAPITAL
                                 (in thousands)

<TABLE>
<CAPTION>

                                              1998          1997          1996
                                              ----          ----          ----
<S>                                           <C>           <C>           <C>
   Partners' capital at beginning of period:
     General partners                        $   610       $   477       $   462
     Class A limited partners                 60,355        47,179        45,676
                                             -------       -------       -------
                                              60,965        47,656        46,138
                                             -------       -------       -------

   Allocation of net income:
     General partners                             10           156            30
     Class A limited partners                    953        15,426         3,003
                                             -------       -------       -------
                                                 963        15,582         3,033
                                             -------       -------       -------

   Cash distributions:
     General partners                             23            23            15
     Class A limited partners                  2,250         2,250         1,500
                                             -------       -------       -------
                                               2,273         2,273         1,515
                                             -------       -------       -------

   Partners' capital at end of period:
     General partners                            597           610           477
     Class A limited partners                 59,058        60,355        47,179
                                             -------       -------       -------
                                             $59,655       $60,965       $47,656
                                             -------       -------       -------
                                             -------       -------       -------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      26
<PAGE>


                           ML MACADAMIA ORCHARDS, L.P.
                             STATEMENT OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                              1998             1997            1996
                                                            --------        --------        --------
<S>                                                         <C>             <C>             <C>
   Cash flows from operating activities:
     Cash received from macadamia nut sales                 $ 13,837        $ 12,218        $ 10,412
     Cash paid under farming and management contracts         (8,404)         (6,746)         (7,641)
     Cash paid to other suppliers                             (2,002)         (1,030)           (704)
     Interest received (paid), net                               244             171              (5)
                                                            --------        --------        --------
   Net cash provided by operating activities                   3,675           4,613           2,062
                                                            --------        --------        --------

   Cash flows from investing activities:
     Capital acquisition costs expenditures                        -            (292)              -
     Capital expenditures                                          -               -             (23)
                                                            --------        --------        --------
   Net cash used in investing activities                           -            (292)            (23)
                                                            --------        --------        --------

   Cash flows from financing activities:
     Principal payments of mortgage note                           -               -            (265)
     Distributions paid                                       (2,272)         (2,083)         (1,519)
                                                            --------        --------        --------
   Net cash used in financing activities                      (2,272)         (2,083)         (1,784)
                                                            --------        --------        --------

   Net increase in cash                                        1,403           2,238             255
   Cash at beginning of period                                 2,914             676             421
                                                            --------        --------        --------
   Cash at end of period                                    $  4,317        $  2,914        $    676
                                                            --------        --------        --------
                                                            --------        --------        --------

   Reconciliation of net income to net
    cash provided by operating activities:
     Net income                                             $    963        $ 15,581        $  3,033
     Adjustments to reconcile net income to
       cash provided by operating activities:
         Depreciation and amortization                         1,602           1,604           1,602
         Deferred income tax credit                              (12)        (13,750)              -
         (Increase) decrease in accounts receivable            1,374              90          (2,804)
         Increase (decrease) in accounts payable                (660)          1,058             168
         Other                                                   408              30              63
                                                            --------        --------        --------
     Total adjustments                                         2,712         (10,968)           (971)
                                                            --------        --------        --------
   Net cash provided by operating activities                $  3,675        $  4,613        $  2,062
                                                            --------        --------        --------
                                                            --------        --------        --------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      27


<PAGE>

                           ML MACADAMIA ORCHARDS, L.P.
                          NOTES TO FINANCIAL STATEMENTS

(1)   OPERATIONS AND OWNERSHIP

ML Macadamia Orchards, L.P. (the "Partnership") owns or leases 4,027 tree 
acres of macadamia orchards on the island of Hawaii. Once the nuts are 
harvested, the Partnership sells them to another entity, which processes and 
markets the finished products.

The Partnership is owned 99% by limited partners and 1% by the managing 
general partner, ML Resources, Inc. ("MLR"). MLR is a subsidiary of Mauna Loa 
Macadamia Nut Corporation ("Mauna Loa"), which in turn is a subsidiary of C. 
Brewer and Company, Limited ("CBCL"), whose parent company is Buyco, Inc. 
("Buyco"). Mauna Loa was the Partnership's special general partner, with a 
 .01% ownership interest, until December 1997, when it assigned its interest 
as a general partner to MLR and withdrew as a special general partner.

Limited partner interests are represented by Class A Units, which are 
evidenced by depositary receipts that trade publicly and are listed on the 
New York Stock Exchange. Mauna Loa Orchards, L.P., an affiliate of the 
general partner, held 30,000 Class A Units at December 31, 1997 and 1998.

Although Mauna Loa and certain of its affiliates formerly held Class B Units 
in the Partnership, all Class B Units were cancelled in November 1997 for 
nominal consideration. Ownership of Class A Units confers no direct or 
indirect interest in CBCL, Mauna Loa or any of their affiliated corporations.

On September 10, 1998 the Board of Directors of ML Resources, Inc., the 
managing general partner, approved changing the name of the Partnership from 
Mauna Loa Macadamia Partners, L.P. to ML Macadamia Orchards, L.P. Trading of 
the Partnership's units on the New York Stock Exchange under the new name 
began on October 5, 1998. The trading symbol, "NUT", remains unchanged.

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) CASH AND CASH EQUIVALENTS. Cash and cash equivalents include unrestricted 
demand deposits with banks and all highly liquid deposits with an original 
maturity of less than three months. The cash equivalents are not protected by 
federal deposit insurance.

(b) FINANCIAL INSTRUMENTS. The fair value of all financial instruments
approximates the carrying value, as the majority of the financial instruments
have fairly short durations until maturity, or the market and risk factors
associated with the instruments have not changed.

(c) FARMING COSTS. In accordance with industry practice in Hawaii, orchard
maintenance and harvesting costs for commercially producing macadamia orchards
are charged against earnings in the year that the costs are incurred.

(d) LAND, ORCHARDS AND EQUIPMENT. Land, orchards and equipment are reported 
at cost, net of accumulated depreciation and amortization. Net farming costs 
for any "developing" orchards 

                                      28
<PAGE>

are capitalized on the balance sheet until revenues from that orchard exceed 
expenses for that orchard (or nine years after planting, if earlier). 
Depreciation of orchards and other equipment is reported on a straight-line 
basis over the estimated useful lives of the assets (40 years for orchards 
and between 5 and 12 years for other equipment). A 5% residual value is 
assumed for orchards. The macadamia orchards acquired in 1986 situated on 
leased land are being amortized on a straight-line basis over the terms of 
the leases (approximately 33 years from the inception of the Partnership) 
with no residual value assumed. The macadamia orchards acquired in 1989 
situated on leased land are being amortized on a straight-line basis over a 
40 year period (the terms of these leases exceed 40 years) with no residual 
value assumed. For income tax reporting, depreciation is calculated under 
accelerated methods.

(e) INCOME TAXES. The accompanying statements of operations do not include a 
provision for corporate income taxes, as the income of the Partnership is not 
taxed directly; rather, the Partnership's tax attributes are included in the 
individual tax returns of its partners. Neither the Partnership's financial 
reporting income nor the cash distributions to unitholders can be used as a 
substitute for the detailed tax calculations which the Partnership must 
perform annually for its partners.

The Partnership is subject to a gross income tax as a result of its election 
to continue to be taxed as a partnership rather than to be taxed as a 
corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is 
calculated at 3.5% on partnership gross income (net revenues less cost of 
goods sold) beginning in 1998. With this election, the deferred tax liability 
was reduced in the third quarter 1997 from $14,982,000 to $1,232,000, 
creating a deferred tax credit of $13,750,000.

Deferred tax liabilities are recognized for the future tax consequences 
attributable to differences between the projected financial reporting and tax 
reporting basis of assets and liabilities.

(f) 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.

(g) NET INCOME PER CLASS A UNIT. The Partnership computed net income per 
Class A Unit for all periods presented under the provisions of Statement of 
Financial Accounting Standards No. 128, EARNINGS PER SHARE, which was 
required to be implemented for financial statements for periods ending after 
December 15, 1997. The adoption of this statement had no impact on the 
Partnership's reported net income per Class A Unit. Net income per Class A 
Unit is calculated by dividing 99% of Partnership net income by the average 
number of Class A Units outstanding for the period.

(3)   RELATED PARTY TRANSACTIONS

(a) NUT PURCHASE CONTRACTS. The Partnership is a party to four nut purchase
contracts with Mauna Loa. They cover all nuts produced by the orchards acquired
in June 1986, December 1986, October 1989 and September 1991, respectively. The
first two contracts run for 20 years, while the third contract runs for 30 years
and also provides for the exclusion of unusable nuts 

                                      29
<PAGE>


from those purchased by Mauna Loa. The first three contracts are identical in 
all other material respects. The fourth contract was acquired by assignment 
with the purchase of the September 1991 orchard and expires in 2003. The 
fourth contract is similar to the first three contracts, but the nut price is 
calculated on a crop year (July 1 through June 30) rather than calendar year 
basis, which results in a slightly different nut price. All four contracts 
use a pricing formula based 50% on a two-year trailing average of the 
macadamia nut price published annually by the U.S. Department of Agriculture 
and 50% on Mauna Loa's "netback component". The netback component is 
calculated by subtracting Mauna Loa's processing and marketing costs per 
pound and a "capital charge" of 20% from its nut revenues per pound. The nut 
price paid to the Partnership under the first three nut purchase contracts 
was $0.5972 for 1996, $0.5964 for 1997 and $0.6369 for 1998. The average nut 
price paid to the Partnership under the fourth nut price contract was $0.6353 
for 1996, $0.6434 for 1997 and $0.6796 for 1998.

(b) FARMING CONTRACTS. The Partnership is a party to four farming contracts 
with two subsidiaries of CBCL, Ka'u Agribusiness Company, Inc. ("KACI") and 
Mauna Kea Agribusiness Company, Inc. ("MKACI"), that together cover all 
farming, harvesting and husking activities for the orchards acquired in June 
1986, December 1986, October 1989 and September 1991, respectively. The first 
two contracts run for 20 years, the third contract runs for 30 years and the 
fourth contract, acquired with the purchase of the September 1991 orchard, 
expires in 2006.

The contracts provide KACI and MKACI with reimbursement of their direct and 
indirect costs incurred under these contracts. The reimbursements paid to the 
two farm managers were $7.2 million for 1996, $6.8 million for 1997 and $6.9 
million for 1998.

Each of the farming contracts was amended effective January 1, 1998 to 
provide farming fees equal to two and one-half percent of the Partnership's 
gross profits from farming operations (previously three percent for the first 
three farming contracts and none for the fourth contract). The two farm 
managers earned farming fees of $153,000 in 1996, $113,000 in 1997 and 
$121,000 in 1998.

The Partnership is also a party to a water agreement with KACI under which 
KACI agreed to supply water to the Partnership from a well on KACI's property 
for use on the Partnership's irrigated Ka'u orchards. The Partnership's 
allocated share of the costs of that well totaled $79,000 in 1996, $47,000 in 
1997 and $372,000 in 1998.

(c) MANAGEMENT COSTS AND FEE. The Partnership Agreement provides the managing 
general partner reimbursement of administrative costs (which consist 
primarily of compensation costs, board of directors fees, insurance costs and 
office expenses) incurred under the agreement as well as a management fee 
equal to two percent of the Partnership's operating cash flow (as defined). 
Those reimbursable costs totaled $391,000 in 1996, $428,000 in 1997 and 
$528,000 in 1998. The managing general partner earned a management fee of 
$102,000 in 1996, $75,000 in 1997 and $57,000 in 1998.

In addition to a management fee, the managing general partner is entitled, 
under the existing Partnership Agreement, to receive an annual incentive fee 
equal to 0.5% of the aggregate fair market value (as defined) of the Class A 
Units for the preceding calendar year provided that net 

                                      30
<PAGE>

cash flow (as defined) for the preceding calendar year exceeds specified 
levels. No incentive fee was earned in 1996, 1997 or 1998.

(d) STABILIZATION PAYMENTS. In December 1986, the Partnership acquired a 266 
acre orchard that was several years younger than its other orchards. Because 
of the relative immaturity of the newer orchard, its productivity (and 
therefore its cash flow) was expected to be correspondingly lower for the 
first several years than for the other older orchards.

Accordingly, the seller of this orchard (KACI) agreed to make cash 
stabilization payments to the Partnership for each year through 1993 in which 
the cash flow (as defined) from this orchard fell short of a target cash flow 
level of $507,000. Stabilization payments for a given year were limited to 
the lesser of the amount of the shortfall or a maximum payment amount.

The Partnership accounted for stabilization payments (net of general excise 
tax) as a reduction in the cost basis of this orchard. As a result, the 
payments will be reflected in the Partnership's net income ratably through 
2019 as a reduction to amortization for this orchard.

In return, the Partnership is obligated to pay KACI 100% of any year's cash 
flow from this orchard in excess of the target cash flow as additional 
percentage rent until the aggregate amount of additional percentage rent 
equals 150% of the total amount of stabilization payments previously 
received. Thereafter, the Partnership is obligated to pay KACI 50% of this 
orchard's cash flow in excess of the target cash flow as additional incentive 
rent. Such additional percentage rent totaled $54,000 in 1996 and $297,000 
for 1997. No additional rent was due in 1998.

(e) CASH FLOW WARRANTY PAYMENTS. In October 1989, the Partnership acquired 
1,040 acres of orchards that were several years younger on average than the 
Partnership's other orchards. Their productivity (and therefore their cash 
flow) was expected to be lower for the first several years than for the 
Partnership's older orchards.

Accordingly, the sellers of these orchards (affiliates of Mauna Loa) agreed 
to make cash flow warranty payments to the Partnership for each year through 
1994 in which the cash flow (as defined) from these orchards fell short of a 
cash flow target level. Warranty payments for any year were limited to the 
lesser of the amount of the shortfall or a maximum payment amount.

The Partnership accounted for cash flow warranty payments as reductions in 
the cost basis of the orchards. As a result, these payments will be reflected 
in the Partnership's net income ratably through 2030 as reductions to 
depreciation for these orchards.

(4)   INDICATED DISTRIBUTIONS

As it is impossible to anticipate every future circumstance, there can be no 
assurance that Partnership performance will be sufficient to fund 
distributions at historical levels. Distributions are paid approximately 
forty-five days after the end of each quarter to investors of record as of 
the last business day of that quarter.

Because macadamia nut farming is highly seasonal, distributions are smoothed 
to provide a more level payout rate. The managing general partner receives 
cash distributions in proportion to its ownership percentage in the 
Partnership.


                                      31
<PAGE>

(5)   CASH FLOW PERFORMANCE

Cash flow performance (based on definitions used in the Partnership 
Agreement) for the past three years is shown below (000's):

<TABLE>
<CAPTION>

                                                   1998             1997             1996
                                                  -------          -------          -------
         <S>                                      <C>              <C>              <C>
         Gross revenues                           $12,652          $12,300          $13,216
           Less:
             Farming costs                          7,714            7,790            7,514
             Administrative costs                   2,194              886              812
                                                  -------          -------          -------

         Operating cash flow                        2,744            3,624            4,890
           Less:
             Farming fee                              121              113              153
             Management fee                            57               76              102
                                                  -------          -------          -------

         Net cash flow                            $ 2,566          $ 3,435          $ 4,635
                                                  -------          -------          -------
                                                  -------          -------          -------
</TABLE>

(6)   LAND, ORCHARDS AND EQUIPMENT

Land, orchards and equipment, stated at cost, consisted of the following at 
December 31, 1997 and 1998 (000's):

<TABLE>
<CAPTION>

                                                     1998          1997 
                                                   -------       -------
        <S>                                        <C>           <C>
        Land                                       $ 8,168       $ 8,168
        Producing orchards                          64,711        64,711
        Other                                          335           335
                                                   -------       -------
        Land, orchards and equipment (gross)        73,214        73,214
        Less accumulated depreciation
          and amortization                          18,124        16,522
                                                   -------       -------
        Land, orchards and equipment (net)         $55,090       $56,692
                                                   -------       -------
                                                   -------       -------
</TABLE>

(7)   SHORT-TERM AND LONG-TERM CREDIT

The Partnership had a $4.0 million revolving line of credit at December 31, 
1996 for working capital purposes. The line was extended for one year on June 
1, 1997, again on June 1, 1998 and may be extended for additional one-year 
intervals upon the payment of extension fees. Annual extension fees of $8,000 
were paid in June 1996 and June 1997, and $5,000 in June 1998. A commitment 
fee of 3/8 of one percent of the unused portion is required and borrowings 
are charged interest at either the bank's "base rate" or at the one, two or 
three month "LIBOR" rate (plus 175 to 200 basis points) at the Partnership's 
option. The line of credit currently requires minimum net cash flow (as 
defined in the Partnership Agreement) of $1.6 million per year and minimum 
net worth levels (before non-cash adjustments due to implementation of FAS 
No. 109) 

                                      32
<PAGE>


of $40 million. In addition, the line of credit requires a "clean-up" period 
of at least thirty consecutive days during each year.

The maximum amount borrowed on the line of credit for 1996 was $470,000 with 
a weighted average interest rate of 8.23%. There were no drawings outstanding 
at December 31, 1998. No amounts were borrowed during 1997 or 1998.

In September 1991, the Partnership borrowed $0.5 million under an eight-year 
mortgage loan to acquire a 78 acre macadamia orchard in Keaau. In February 
1996, the Partnership paid off the remaining balance of this mortgage loan in 
full. The amount of that payment was $252,000 (including accrued interest).

(8)   INCOME TAXES

The components of income tax expense for the year ended December 31, 1998 
were as follows (000's):

<TABLE>

      <S>                                          <C>
      Currently payable                            $  88
      Deferred                                       (12)
                                                   -----
                                                   $  76
                                                   -----
                                                   -----
</TABLE>

The reconciliation of the total provision for income taxes by applying the 
3.5% federal tax rate to gross income for the year ended December 31, 1998 is 
as follows (000's):

<TABLE>

      <S>                                          <C>
      Income tax provision at statutory rate       $  104
      Adjustment of deferred balance                  (28)
                                                   ------
                                                   $   76 
                                                   ------
                                                   ------
</TABLE>

The components of the net deferred tax liability reported on the balance 
sheet as of December 31, 1998 and 1997 are as follows (000's):

<TABLE>
<CAPTION>

                                                                     1998         1997
                                                                    ------       ------
      <S>                                                           <C>          <C>
      Deferred tax liabilities:
        Financial statement bases of land, orchards,
          Inventory and equipment is greater than tax bases         $  670       $  691
        Excess of tax depreciation over
          Financial statement depreciation                             550          541
                                                                    ------       ------
                                                                    $1,220       $1,232
                                                                    ------       ------
                                                                    ------       ------
</TABLE>

(9)   LEASES

The Partnership leases the land underlying 1,806 acres of its orchards under 
long-term operating leases. Future minimum lease payments under 
non-cancelable leases (exclusive of renewal options) as of December 31, 1998 
were as follows (000's):

                                      33

<PAGE>

<TABLE>
<CAPTION>
            <S>                             <C> 
            1999                            $  118
            2000                               118
            2001                               118
            2002                               118
            2003                               118
            Later Years                      3,262
                                            ------
                                            $3,852
                                            ------
                                            ------
</TABLE>

Each of the above leases also provides for additional lease payments based on 
USDA-reported macadamia nut price levels. Those contingent lease payments 
totaled $52,000 in 1996, $62,000 in 1997 and $55,000 in 1998.

Total lease rent for all operating leases was $229,000 in 1996, $487,000 in 
1997 and $171,000 in 1998.

(10)  MERGER PROPOSAL

In December 1997, the Partnership entered into a merger agreement with C. 
Brewer Homes, Inc. ("Homes"). The Partnership filed with the Securities and 
Exchange Commission on February 13, 1998, a registration statement in 
connection with this merger. On June 26, 1998, a special meeting of the 
Partnership's unitholders was held for the purpose of voting on the Merger 
Proposal. The Merger Proposal was not approved, and all costs related to the 
merger were expensed in the quarter ending June 30, 1998.

(11)  QUARTERLY OPERATING RESULTS (UNAUDITED)

The following chart summarizes unaudited quarterly operating results for the 
years ended December 31, 1998 and 1997 (000's, except per unit data):

<TABLE>
<CAPTION>

                            Net       Gross Income      Net Income     Net Income (Loss)
                           Sales         (Loss)           (Loss)        per Class A Unit
                         --------     ------------      ----------   -------------------
       <S>               <C>            <C>             <C>              <C>
       1998
         1st Quarter     $  3,455       $   958         $    669         $   0.09
         2nd Quarter           93           (32)          (1,227)           (0.16)
         3rd Quarter        3,480           545              329             0.04
         4th Quarter        5,379         1,498            1,192             0.16

       1997
         1st Quarter     $  1,763       $   521         $    226         $   0.03
         2nd Quarter          476           155               43             0.01
         3rd Quarter        3,081           506           14,099             1.86
         4th Quarter        6,809         1,440            1,214             0.16

</TABLE>





                                      34
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The Partnership presently has no officers or directors. Instead, the officers 
and directors of the Managing Partner perform all management functions for 
the Partnership. Each director of the Managing Partner is elected for a term 
of one year and until his successor is duly elected and qualified. Each 
officer of the Managing Partner is elected by the Board of Directors of the 
Managing Partner and is subject to removal by that board at any time.

A.      IDENTIFICATION OF DIRECTORS

JAMES S. ANDRASICK. 54 years old; director of Managing Partner since 1986; 
chairman and chief executive officer of Mauna Loa; president of CBCL since 
September 1992.

JOHN W. A. BUYERS. 70 years old; chairman since 1989 and director of Managing 
Partner since 1986; director of Mauna Loa since August 1992; chairman and 
chief executive officer of CBCL; chairman and president of Buyco.

JAMES H. CASE. 78 years old; director and member of Conflicts Committee of 
Managing Partner since 1986; senior partner of the law firm of Carlsmith 
Ball; not an employee, officer, or director of any CBCL affiliate other than 
the Managing Partner.

RALPH C. HOOK, JR. 75 years old; director and member of Conflicts Committee 
of Managing Partner since 1986; not an employee, officer, or director of any 
CBCL affiliate other than the Managing Partner.

KENT T. LUCIEN. 45 years old; president and director of Managing Partner 
since September 1995; vice president of Mauna Loa; executive vice president 
and chief financial officer of CBCL.

B.  IDENTIFICATION OF  EXECUTIVE OFFICERS OF THE MANAGING PARTNER

JOHN W. A. BUYERS. 70 years old; chairman and chief executive officer of 
Managing Partner since 1989.

KENT T. LUCIEN. 45 years old; president of Managing Partner since September 
1995.

GREGORY A. SPRECHER. 51 years old; senior vice president and chief financial 
officer of Managing Partner since June 1997; not otherwise an employee, 
officer, or director of any CBCL affiliate.

C.      IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES

Not applicable

D.  FAMILY RELATIONSHIPS

Not applicable

                                      35
<PAGE>

E.  BUSINESS EXPERIENCE OF CURRENT DIRECTORS AND EXECUTIVE OFFICERS

CURRENT DIRECTORS OF THE MANAGING PARTNER.

JAMES S. ANDRASICK. Mr. Andrasick was promoted to president and chief 
operating officer of CBCL in September 1992, and is one of its directors. 
From 1989 until September 1992, he was executive vice president in charge of 
the sugar, distribution and Central America operations. From 1983 to 1988 he 
served as executive vice president, finance and administration and chief 
financial officer with responsibilities for finance and administration as 
well as spice and guava operations. He joined CBCL in 1978 as vice president 
of planning and controller after serving three years on the IU International 
Corporation corporate development staff. In 1980 he became senior vice 
president and chief financial officer of CBCL. Previously, he had been 
employed by the Ford Motor Company at its world headquarters and product 
development groups in various supervisory positions in finance. Mr. Andrasick 
received his bachelor's degree with honors from the U.S. Coast Guard Academy 
and his master's degree from the Massachusetts Institute of Technology. Mr. 
Andrasick is a trustee of the U.S. Coast Guard Foundation, a director and 
former chairman of the American Red Cross, Hawaii State Chapter, and outgoing 
chairman of the board of governors of the Hawaii Employers Council. He 
resides in Honolulu, Hawaii.

JOHN W. A. BUYERS. Mr. Buyers was elected chairman of the Managing Partner in 
1988 and has been chairman of Mauna Loa since July 1992. He has been chairman 
of the board and chief executive officer of CBCL since 1992. From 1982 to 
1992, he was chairman and president of CBCL. He has been chairman and a 
director of Hawaii Land and Farming, Inc. since 1992, and chairman and 
president of Buyco since 1986. From 1975 to 1982, he was president and chief 
executive officer of CBCL. From 1971 to 1975, Mr. Buyers was president and 
chief executive officer of General Waterworks Company in Philadelphia, 
Pennsylvania. After service in the U.S. Marine Corps, Mr. Buyers graduated 
CUM LAUDE from Princeton University in 1952 and later received an M.A. in 
Industrial Management from the Massachusetts Institute of Technology as a 
Sloan Fellow. He is also a director of First Hawaiian Bank, Honolulu, Hawaii, 
Bank West, Inc., Honolulu, Hawaii, John B. Sanfilippo & Sons, Inc., and 
several CBCL affiliated companies. He is a member of the U.S. Chamber of 
Commerce Committee on Food and Agriculture in Washington, D.C., and is vice 
chairman and a director of Pacific International Center for High Technology 
in Honolulu, Hawaii. He resides in Hilo, Hawaii.

JAMES H. CASE. Mr. Case is senior partner in the Hawaii law firm of Carlsmith 
Ball. Mr. Case graduated with an A.B. from Williams College and received a 
J.D. from Harvard Law School. He became associated with the Carlsmith law 
firm in 1951 and became a partner in 1959. He has served on the boards of 
directors of Hamakua Sugar Company, Inc., Paauilo, Hawaii, InterIsland 
Resorts, Ltd., Honolulu, Hawaii, Pacific Club, Honolulu, Hawaii, Central 
Union Church, Honolulu, Hawaii, Hanahauoli School, Honolulu, Hawaii, and 
Arcadia Retirement Residence, Honolulu, Hawaii. He resides in Honolulu, 
Hawaii.

RALPH C. HOOK, JR. Dr. Hook is director of the Family Business Center of 
Hawaii, which is part of the College of Business Administration at the 
University of Hawaii. He joined the faculty of the University of Hawaii in 
1968 as Dean of the College of Business Administration. In 1974, he returned 
to teaching as Professor of Marketing in the College of Business 
Administration. He became a Professor Emeritus of Marketing in June 1995. Dr. 
Hook received a bachelor's and 

                                      36
<PAGE>


master's degrees from the University of Missouri at Columbia and a Ph.D. in 
Marketing from the University of Texas at Austin. He has been a member of the 
board of Pan Pacific Institute of Ocean Science since 1974 and of Hook 
Brothers Corporation since 1983. He was appointed a Trustee of Tokai 
University, Honolulu Center in 1988. He resides in Honolulu, Hawaii.

KENT T. LUCIEN. Mr. Lucien currently serves as president of the Managing 
Partner and has been executive vice president and the chief financial officer 
of CBCL since 1991. Previously he served as a vice president and as an 
executive vice president of the Managing Partner. He joined CBCL as a senior 
analyst in 1980. Mr. Lucien is an honors graduate of Occidental College and 
received an M.B.A. from Stanford University. He resides in Honolulu, Hawaii.

EXECUTIVE OFFICERS WHO DO NOT SERVE AS DIRECTORS.

GREGORY A. SPRECHER. Mr. Sprecher has served as senior vice president and 
chief financial officer of the Managing Partner since June 1997. From 1974 to 
1990 Mr. Sprecher served as treasurer and controller for Young Laundry & Dry 
Cleaning, in Honolulu. He served as Young's chief financial officer and 
treasurer from 1990 to 1994. In 1994, the company was sold to American Linen, 
and Mr. Sprecher served there as project manager until 1995. Mr. Sprecher has 
a B.S. in Finance from California State College at Long Beach. He resides in 
Honolulu, Hawaii.

F.      SECTION 16 DISCLOSURE

Under Section 16 of the Securities Exchange Act of 1934, as amended (the 
"Exchange Act"), each director and certain officers of ML Resources, Inc., 
the managing general partner of Registrant (a "Reporting Person"), are 
required to report their ownership and changes in ownership of Class A 
Depositary Units to the Securities and Exchange commission, the New York 
Stock Exchange and Registrant. Based on reporting forms submitted to 
Registrant, no Reporting Person has failed to file on a timely basis reports 
required by Section 16(a) of the Exchange Act during 1998.


                                      37



<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

A. SUMMARY COMPENSATION TABLE

The Partnership is managed by the Managing Partner. Compensation paid by the 
Managing Partner to its chief executive officer and other executive officers 
is reimbursed by the Partnership, as provided in Section 4.5 of the 
Partnership Agreement. The following table reflects the aggregate 
compensation for services in all capacities paid by the Managing Partner to 
its executive officers for the years ended December 31, 1998, 1997 and 1996. 
There were no long-term compensation awards or payouts during those years.

<TABLE>
<CAPTION>
  
          Name and Principal Position                  Annual Compensation
          ---------------------------                  -------------------
                                             Year       Salary      Bonus       Other
                                             ----       ------      -----       -----
          <S>                                <C>       <C>         <C>         <C>
          John W. A. Buyers,                 1998      $  -        $  -        $11,700
          chief executive officer            1997         -           -          9,600
                                             1996         -           -          8,400

          Gregory A. Sprecher                1998       100,000     16,500        -
          chief financial officer            1997        58,333       -           -
                                             1996         -           -           -
</TABLE>

B. NO OPTION, SAR, LONG-TERM INCENTIVE OR PENSION PLANS. The Managing Partner 
does not presently have an option plan, SAR plan, or long-term incentive 
plan. The present executive officers of the Managing Partner are included in 
the pension plan and other benefits plans of its parent company, CBCL. As 
such, the Managing Partner is not responsible for making any payments on the 
retirement of any of its present executive officers.

C.  NO EMPLOYMENT CONTRACTS OR TERMINATION AGREEMENTS

The Managing Partner does not have any employment or severance agreements 
with any of its present executive officers.

D.  COMPENSATION OF EXECUTIVE OFFICERS

The Managing Partner does not have a compensation committee since the chief 
executive officer of the Managing Partner is not compensated for serving in 
that position. The only executive officer of the Managing Partner employed by 
it is Mr. Sprecher, who has served as its chief financial officer since June 
1997. Mr. Sprecher's salary and guideline bonus percentage are administered 
under the salary policies of CBCL. Any bonus payments are approved by the 
Managing Partner's Board of Directors annually, based on the overall 
performance of the Partnership (as evidenced by its net income for the year) 
and on general and administrative cost control performance. Performance in 
both categories is measured relative to the original Partnership operating 
budget approved by the Managing Partner's Board of Directors at the beginning 
of each year.


                                      38
<PAGE>

F.  DIRECTOR COMPENSATION

Directors of the Managing Partner presently receive a quarterly retainer of 
$3,000 and a meeting fee of $750 per meeting. Members of the Managing 
Partner's conflicts committee receive a meeting fee of $750 per meeting. 
There are no other agreements or arrangements between the Managing Partner 
and its directors.

E.  STOCK PERFORMANCE CHART

The following chart compares the Partnership's total return to (i) the 
Russell 2000 (a small business index) and (ii) a peer group index composed of 
publicly traded limited partnerships with either similar capitalization or in 
commodity based markets (other than gas and oil) or both.

<TABLE>
<CAPTION>

               12/31/93   12/31/94    12/30/95     12/29/96     12/31/97      12/31/98
               --------   --------    --------     --------     --------      --------
<S>              <C>      <C>         <C>          <C>          <C>           <C>
NUT              100       88.128      73.7588     106.6872     123.5672      118.0996
Russell 2000     100       90.178      126.100      146.899      179.747       175.169
Peer Group       100      (10.121)    126.2527     138.3339     171.6778      154.3701

</TABLE>


                                      39
<PAGE>


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1998, and subsequent to that date to the date of this 
report, (i) no person (including any "group" as that term is used in Section 
13(d)(3) of the Securities Exchange Act of 1934) is known by the Partnership 
or the Managing Partner to be the beneficial owner of more than 5% of the 
Class A Units; (ii) the Managing Partner did not own any Class A Units; and 
(iii) no director or executive officer of the Managing Partner owned more 
than 1% of the Class A Units.

The table below sets forth certain information as to the Class A Units 
beneficially owned by the directors of the Managing Partner, and all 
directors and executive officers of the Managing Partner as a group, as of 
December 31, 1998.


<TABLE>
<CAPTION>
                                                                Percent
                                            Class A                of
       Name of                               Units              Class A
       Beneficial Owner                      Owned               Units 
       ----------------                     --------            -------
      <S>                                   <C>                 <C>
      James S. Andrasick                        -                    *
      John W.A. Buyers                        4,176                  *
      James H. Case (1)                       8,000                  *
      Ralph C. Hook (2)                       4,000                  *
      Kent T. Lucien                          7,500                  *
      Gregory A. Sprecher                     2,000                  *
      All directors and executive officers   25,676                0.3%
        as a group (6 persons)
</TABLE>

* Less than 1%

(1)  Beneficially owned by James H. Case pursuant to a self-directed retirement
     plan sponsored by Carlsmith Ball Wichman Case & Ichiki, a law firm in which
     Mr. Case is a partner, and administered by Pacific Century Trust.
(2)  Beneficially owned by Ralph C. Hook pursuant to the Ralph C. Hook Revocable
     Living Trust dated March 1, 1993.

In addition, Mauna Loa Orchards L.P. ("MLO"), a limited partnership whose 
partners are CBCL and certain direct or indirect wholly-owned subsidiaries of 
CBCL, owns 30,000 Class A Units.


                                      40
<PAGE>


ITEM 13    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

1.     GENERAL

The Managing Partner makes all decisions relating to the management of the 
Partnership. The Managing Partner, as such, has the duty to act in good faith 
and to manage the Partnership in a manner that is fair and reasonable to all 
unitholders. Mauna Loa owns all of the capital stock of the Managing Partner. 
Certain officers and directors of CBCL and/or its affiliates also act as 
officers and directors of the Managing Partner and certain directors of the 
Managing Partner are substantial shareholders of Buyco, Inc., the parent 
company of CBCL. Disputes that might otherwise develop between the Managing 
Partner and CBCL or its affiliates may not develop because the parties 
representing the entities are identical. As a result of these relationships, 
certain conflicts of interest could arise with respect the administration of 
and allocation of costs under the Partnership Agreement and in situations 
described below, among others.

A committee of the Managing Partner's Board of Directors composed of two 
persons who are independent of CBCL and its affiliates (the "Conflicts 
Committee") reviews, on an annual basis, or more frequently as such committee 
may deem appropriate, the Managing Partner's management of the Partnership 
and any conflicts of interest that may have arisen or may arise as a result 
of the relationships among CBCL and its affiliates, the Managing Partner and 
the Partnership. The Partnership Agreement states that, except for one 
initial member of the Conflicts Committee, no member of the Conflicts 
Committee may be an officer, director, employee or shareholder of the 
Managing Partner, Mauna Loa or any of their affiliates. The Conflicts 
Committee presently consists of two individuals who are not affiliated with 
CBCL.

2.     FARMING LEASES.

At the time of the Partnership's acquisition of the interests in the October 
1989 Orchards, MLO assigned to the Partnership all of MLO's rights and 
obligations under three 45-year farming leases relating to 327 tree acres of 
the Ka'u II Orchards and all of the Mauna Kea Orchards. The farming leases 
permit the Partnership to conduct macadamia nut farming operations on such 
macadamia orchard properties. The farming leases provide for fixed minimum 
annual lease payments to be paid to either KACI or MKACI (collectively, the 
"Agribusiness Companies"), as the case may be. Such annual rental payments 
are subject to increase after ten years, twenty years and thirty years based 
on then current fair market lease rates. The then current fair market lease 
rate will be determined by mutual agreement between the Partnership, on the 
one hand, and either KACI or MKACI, as the case may be, on the other hand. If 
mutual agreement cannot be reached, the then current fair market lease rate 
will be determined by appraisal. Whether determined by mutual agreement or by 
appraisal, the then current fair market lease rate will be determined as a 
fair market lease rate for use of such premises as macadamia orchards.

The Partnership acquired its interests in the trees situated on such leased 
macadamia orchard properties subject to repurchase options retained by the 
Agribusiness Companies. The repurchase options grant the Agribusiness 
Companies the continuing right to repurchase all or any portion of such trees 
after June 30, 2019 at a price equal to the then current fair market value of 
the trees, according to their value as producing macadamia nut trees, as 
determined by mutual 


                                      41
<PAGE>

agreement between the Partnership, on the one hand, and either KACI or MKACI, 
as the case may be, on the other hand. If mutual agreement cannot be reached, 
the then current fair market value will be determined by appraisal. Whether 
determined by mutual agreement or by appraisal, the fair market value of such 
trees will be determined according to their value as producing macadamia nut 
trees, assuming that the owner thereof has rights to farm and harvest such 
trees and has ongoing arrangements with respect to land leases, farming and 
nut purchases of the same type as the Partnership has immediately prior to 
such time.

At the end of the 45-year lease terms of such leases, the Agribusiness 
Companies will be required to repurchase such trees at their then current 
fair market value as orchards if such entities do not offer to extend such 
farming leases at the then current fair market lease rates. The then current 
fair market lease rate and the then current market value of the trees for 
such purposes will be determined through mutual agreement between the 
Partnership, on the one hand, and either KACI or MKACI, as the case may be, 
on the other hand or, if mutual agreement cannot be obtained, by appraisal, 
in each case in the manner described above. Such repurchase obligations will 
apply with respect to the expiration of each extension of the lease terms of 
such leases until such leases have been in effect for a total of 99 years, at 
which time the leases will expire and the ownership interests in such trees 
will revert back to the Agribusiness Companies.

In the event that the Partnership decides not to accept an offer to extend 
the leases at the then current fair lease rates upon the expiration of the 
leases or any extension thereof (or does not assign the leases to a third 
party who elects to accept such offer), the leases will expire, the 
Agribusiness Companies will not be required to repurchase the trees covered 
thereby and ownership of such trees will revert back to the Agribusiness 
Companies (and in any event ownership of such trees will revert back to the 
Agribusiness Companies after 99 years). As the Managing Partner and the 
Agribusiness Companies are each direct or indirect wholly owned subsidiaries 
of CBCL, a decision to renew the farming leases will involve the Managing 
Partner in a conflict of interest.

As described above, the farming leases provide for determinations of the fair 
market lease rate to be paid by the Partnership under the farming leases and 
the fair market value of the Partnership's trees situated on property covered 
by such leases by mutual agreement between the Partnership, on the one hand, 
and with KACI or MKACI, as the case may be, on the other hand, or, if mutual 
agreement cannot be reached, by appraisal. As any determination by the 
Partnership with respect to any such mutual agreement will be made by the 
Managing Partner and as the Managing Partner and the Agribusiness Companies 
are each direct or indirect wholly owned subsidiaries of CBCL, such 
determination on behalf of the Partnership will involve the Managing Partner 
in a conflict of interest. Accordingly, the Conflicts Committee of the Board 
of Directors of the Managing Partner will review any such determinations made 
by mutual agreement.

3.    NUT PURCHASE CONTRACTS AND FARMING CONTRACTS.

Mauna Loa purchases from the Partnership all of the macadamia nut production 
from the orchards acquired in 1986 pursuant to the 1986 nut purchase 
contracts, all of the macadamia nut production from the orchards acquired in 
1989 (excluding "unusable nuts") under the 1989 nut purchase contract and all 
of the macadamia nut production from the Lot 10 orchard under the Lot 


                                      42
<PAGE>


10 nut purchase contract. In addition, KACI farms the orchards acquired in 
1986 for the Partnership pursuant to the 1986 orchards farming contracts and, 
along with MKACI, farms the orchards acquired in 1989 for the Partnership 
pursuant to the 1989 farming contract. KACI also farms the Lot 10 Orchard for 
the Partnership pursuant to the Lot 10 farming contract. Various conflicts of 
interest exist or may arise with respect to the Partnership's sale and Mauna 
Loa's purchase of nuts under the nut purchase contracts, the allocation of 
costs reimbursed by the Partnership under the farming contracts for purposes 
of determining the netback component of the purchase price for nuts under the 
nut purchase contracts and the allocation of personnel and resources with 
respect to services provided by KACI and MKACI under the farming contracts. 
For example, the purchase price under the nut purchase contracts will depend 
on Mauna Loa's processing, packaging, marketing, sales and advertising 
expenses and nonagricultural overhead costs, all of which are controlled and 
allocated by Mauna Loa. Mauna Loa also has complete control over the 
identification and weighing of nuts at its processing plants.

Under the terms of the farming contracts, KACI and MKACI are required to 
provide certain reports to the Partnership, including an annual report 
describing in reasonable detail the conduct of farming and harvesting 
operations at the orchards, and they also are required to provide a 
statement, certified by its independent accountants, which reflects its 
allocation of direct costs and overhead for the relevant year. The reports 
submitted to the Managing Partner are reviewed by the Conflicts Committee. 
The Managing Partner has the right to object to the information set forth in 
such annual reports relating to the calculation of the nut purchase price 
and/or farming costs and to engage a certified public accounting firm of its 
own selection to verify and confirm such information. The Managing Partner on 
behalf of the Partnership has the right to assert claims against Mauna Loa 
based on such independent review, and, if any such review and assertion 
results in an adjustment favorable to the Partnership in the nut purchase 
price or farming cost figures by an amount in excess of 5% of the amount 
initially calculated by Mauna Loa, Mauna Loa will be required to reimburse 
the Partnership for the expenses incurred in engaging the accounting firm and 
asserting such claims. Cost reimbursements under the farming contracts 
totaled $7.2 million in 1996, $6.8 million in 1997, and $6.9 million in 1998. 
Farming fees totaled $153,000 in 1996, $113,000 in 1997 and $121,000 in 1998.

4.    MANAGEMENT FEE.

Under the terms of the Partnership Agreement, the Partnership reimburses the 
Managing Partner for all expenses incurred by it in the conduct of 
Partnership business, including any expenses reasonably allocated to the 
Managing Partner or to the Partnership as well as a management fee equal to 
2% of the Partnership's operating cash flow (as defined in the Partnership 
Agreement). Certain conflicts may arise in connection with the allocation of 
such expenses among the Managing Partner, the Partnership, CBCL and its 
affiliates. Management cost reimbursements under the Partnership Agreement 
were $391,000 in 1996, $428,000 in 1997 and $528,000 in 1998. The management 
fee was $102,000 in 1996, $75,000 in 1997 and $57,000 in 1998.

5.    RELATIONSHIPS WITH CBCL.

Since the Partnership began operations in June 1986, the Partnership has 
purchased substantially all of its fertilizer and certain transportation 
services from subsidiaries of CBCL. Transportation 

                                      43
<PAGE>

services purchased consist of transportation of raw nuts from the orchards in 
the Mauna Kea and Ka'u areas to the processing plant. For 1998, 1997 and 
1996, fertilizer, herbicide, pesticide and transportation services purchased 
by the Partnership from CBCL subsidiaries totaled $0.6 million, $0.8 million 
and $0.8 million, respectively. It is expected that the Partnership will 
continue to purchase its fertilizer and transportation needs from CBCL 
subsidiaries as long as, and to the extent that, such purchases can be made 
on a basis at least as favorable as that available from third parties. The 
Partnership Agreement requires that the price and terms of any such 
transactions be no less favorable than those available in comparable 
transactions between unrelated parties.

                                      44


<PAGE>



                                     PART IV

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

A.   LIST OF DOCUMENTS FILED AS A PART OF THIS REPORT.
1.   FINANCIAL STATEMENTS. See Index to Financial Statements at page 22 of this
     Form 10-K.
2.   FINANCIAL STATEMENT SCHEDULES. None required.
3.   EXHIBITS. See Exhibit Index at page 47 of this Form 10-K.

B.   REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of 1998.












                                      45
<PAGE>


                                   SIGNATURES

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

                                        ML MACADAMIA ORCHARDS, L.P.
                                                 (Registrant)

                                        By: ML RESOURCES, INC.
                                                (Managing General Partner)

DATED:  March 26, 1999                  By: /s/  J. W. A. Buyers    
      ----------------                     -----------------------
                                                 J. W. A. Buyers
                                            Chairman of the Board and
                                            Principal Executive Officer

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

<TABLE>
<CAPTION>

                                   ML RESOURCES, INC.

       Signature                                Title                          Date 
       ---------                                -----                          ----
<S>                                <C>                                    <C>
/s/  J. W. A. Buyers               Chairman of the Board                  March 26, 1999
----------------------------       (Principal Executive Officer),         
         J. W. A. Buyers           Director                       
                                   

/s/  Kent T. Lucien                President, Director                    March 26, 1999
----------------------------       
         Kent T. Lucien

/s/  Gregory A. Sprecher           Senior Vice President                  March 26, 1999
----------------------------       (Principal Financial Officer      
         Gregory A. Sprecher       and Principal Accounting Officer) 
                                   

/s/  James S. Andrasick            Director                               March 26, 1999
----------------------------       
        James S. Andrasick

/s/  James H. Case                 Director                               March 26, 1999
----------------------------       
         James H. Case

/s/ Dr. Ralph C. Hook, Jr.         Director                               March 26, 1999
----------------------------       
     Dr. Ralph C. Hook, Jr.

</TABLE>


                                      46
<PAGE>


                                  EXHIBIT INDEX

       EXHIBIT      
        NUMBER                                DESCRIPTION
       -------                                -----------
         2.1      Amended and Restated Agreement and Plan of Merger, effective
                  as of December 18, 1997, between Registrant and C. Brewer
                  Homes, Inc. (a)

         3.1      Agreement of Limited Partnership of Registrant. (b)

         3.2      Form of Class A Certificate of Limited Partnership as filed
                  with the Secretary of State of Delaware. (c)

         3.3      Certificate of Limited Partnership of Registrant as filed with
                  the Secretary of State of Delaware. (c)

         4.1      Depositary Agreement between Registrant, Manufacturers Hanover
                  Trust Company as Depositary and Mauna Loa Resources Inc. as
                  attorney-in-fact of the limited partners of Registrant. (c)

         4.2      Form of Depositary Receipt. (c)

         10.1     Macadamia Nut Purchase Contract between Mauna Loa Macadamia
                  Nut Corporation ("Mauna Loa") and Registrant dated June 12,
                  1986. (b)

         10.2     Macadamia Nut Purchase Contract between Mauna Loa and
                  Registrant dated December 22, 1986. (b)

         10.3     Macadamia Nut Purchase Contract between Mauna Loa and
                  Registrant dated as of October 1, 1989. (b)

         10.4     Contribution Agreement among Mauna Loa Orchards, L.P. ("MLO"),
                  Ka'u Agribusiness Co., Inc. ("KACI"), Mauna Kea Agribusiness
                  Co., Inc. ("MKACI"), Mauna Kea Macadamia Orchards, Inc.
                  ("MKMO") and Mauna Loa dated as of July 1, 1989. (b)

         10.5     Lease between the Trustees of the Estate of Bernice Pauahi
                  Bishop ("Trustees of the Bishop Estate") and Mauna Loa. (c)

         10.6     Lease between KACI and Registrant. (d)

         10.7     MLO/MLMO Conveyance Agreement between MLO and Registrant dated
                  as of October 1, 1989. (b)

         10.8     Butcher/MLMO Contribution Agreement between Howard Butcher III
                  ("Butcher") and Registrant dated as of October 1, 1989. (b)

         10.9     Farming Lease between KACI and MLO dated as of July 1, 1989.
                  (b)

         10.10    Farming Lease between MKACI and MKMO dated as of July 1, 1989.
                  (b)


                                      47
<PAGE>

        EXHIBIT      
        NUMBER                                DESCRIPTION
        -------                               -----------
         10.11    Farming Lease between MKACI and MLO dated as of July 1, 1989.
                  (b)

         10.12    Water Agreement, as amended, between KACI and Registrant dated
                  as of October 1, 1989. (b)

         10.13    Cash Flow Warranty Agreement among KACI, MKACI and Registrant
                  dated as of July 1, 1989. (b)

         10.14    Guarantee Agreement between Mauna Loa and Registrant dated as
                  of October 1, 1989. (b)

         10.15    Agreement of Indemnification between CBCL and each director of
                  the Managing Partner. (b)

         10.16    Indemnification Agreement (Title) among Mauna Loa, KACI and
                  MKACI in favor of Registrant. (b)

         10.17    Indemnification Agreement (Subdivision) among Mauna Loa, KACI
                  and MKACI in favor of Registrant. (b)

         10.18    Deed between MLO and Registrant relating to 14% undivided
                  interest in 220 tree acres of macadamia orchard properties
                  located in the Keaau area of the island of Hawaii ("Keaau II
                  Orchards"). (b)

         10.19    Bill of Sale between MLO and Registrant relating to 14%
                  undivided interest in Keaau II Orchards. (b)

         10.20    Deed between Butcher and Registrant relating to 86% undivided
                  interest in Keaau II Orchards. (b)

         10.21    Bill of Sale between Butcher and Registrant relating to 86%
                  undivided interest in Keaau II Orchards. (b)

         10.22    Assignment of Partial Interest in Lease No. 15,020 and consent
                  from MLO to Registrant. (b)

         10.23    Assignment of Partial Interest in Lease No. 16,859 and consent
                  from MLO to Registrant. (b)

         10.24    Assignment of Partial Interest in Lease No. 20,397 and consent
                  from MLO to Registrant. (b)

         10.25    Assignment of Lease from MLO to Registrant relating to Lease
                  from the Trustees of the Bishop Estate. (b)

                                     48
<PAGE>

        EXHIBIT      
        NUMBER                                DESCRIPTION
        -------                               -----------
         10.26    Assignment from MLO to Registrant relating to certain
                  orchards. (b)

         10.27    Lease from the Trustees of the Bishop Estate to MLO. (b)

         10.28    Lease No. 15,020 from the Trustees of the Bishop Estate to
                  MLO. (b)

         10.29    Form of Amendments to Lease No. 15,020 from the Trustees of
                  the Bishop Estate. (b)

         10.30    Lease No. 16,859 from the Trustees of the Bishop Estate to the
                  Hawaiian Agricultural Company (a predecessor of KACI). (b)

         10.31    Form of Amendments to Lease No. 16,859 from the Trustees of
                  the Bishop Estate. (b)

         10.32    Lease No. 20,397 from the Trustees of the Bishop Estate to
                  CBCL. (b)

         10.33    Form of Amendments to Lease No. 20,397 from the Trustees of
                  the Bishop Estate to CBCL. (b)

         10.34    Lease from Richard L. Hughes to Mauna Loa. (b)

         10.35    Lease from the Trustees of the Bishop Estate to Mauna Loa. (b)

         10.36    Co-ownership and Partition Agreement between KACI and MLO. (b)

         10.37    Co-ownership and Partition Agreement among Mauna Loa, KACI and
                  MLO. (b)

         10.38    Co-ownership and Partition Agreement between KACI and MLO
                  relating to Lease Nos. 15,020 and 16,859. (b)

         10.39    Co-ownership and Partition Agreement between MKACI and MLO.
                  (b)

         10.40    Macadamia Nut Purchase Contract between Mauna Loa and Keaau
                  Macadamia X Corporation ("Keaau Lot 10") dated September 15,
                  1983. (e)

         10.41    Assignment of Owner's Interest in Macadamia Nut Purchase
                  Contract and Farming Contract between Keaau Lot 10 and
                  Registrant. (e)

         10.42    Warranty Deed between Keaau Lot 10 and Registrant. (e)

         10.43    Amended and Restated June 1986 Farming Contract, effective
                  January 1, 1998, between Registrant and KACI. (f)

         10.44    Amended and Restated December 1986 Farming Contract, effective
                  January 1, 1998, between Registrant and KACI. (f)

                                     49

<PAGE>

        EXHIBIT      
        NUMBER                                DESCRIPTION
        -------                               -----------
         10.45    Amended and Restated 1989 Farming Contract, effective January
                  1, 1998, among Registrant, KACI and MKACI. (f)

         10.46    Amended and Restated Farming Contract for the Keaau Lot 10
                  Orchard, effective January 1, 1998, between Registrant and
                  KACI. (f)

         10.47    Restated Kaiwiki Orchards Farming lease between Registrant and
                  MKACI dated February 26, 1997. (f)

         11.1     Statement re: Computation of Net Income per Class A Unit.


         27       Financial Data Schedule.




(a) Incorporated by reference to Appendix A of Registrant's Registration
    Statement under the Securities Act on Form S-4, Registration Statement No.
    333-46271, filed February 13, 1998.
(b) Incorporated by reference to the corresponding Exhibit previously filed as
    an Exhibit to Registrant's Registration Statement under the Securities Act
    on Form S-1, Registration Statement No. 33-30659, filed October 20, 1989.
(c) Incorporated by reference to the corresponding Exhibit previously filed as
    an Exhibit to Registrant's Registration Statement under the Securities Act
    on Form S-1, Registration Statement No. 33-4903, filed June 5, 1986.
(d) Incorporated by reference to the corresponding Exhibit previously filed as
    an Exhibit to Registrant's Annual Report on Form 10-K, Commission filed No.
    1-9145, for the year ended December 31, 1986, filed March 27, 1987.
(e) Incorporated by reference to the corresponding Exhibit previously filed as
    an Exhibit to Registrant's Annual Report on Form 10-K, Commission filed No.
    1-9145, for the year ended December 31, 1991, filed March 27, 1992.
(f) Incorporated by reference to the corresponding Exhibit previously filed as
    an Exhibit to Registrant's Registration Statement under the Securities Act
    on Form S-4, Registration Statement No. 333-46271, filed February 13, 1998.


                                      50