NOTICE OF ANNUAL MEETING TO BE HELD JUNE 16, 1998


                                PIONEER RAILCORP
                             Peoria, Illinois 61607





To the Stockholders:

The Annual Meeting of Stockholders will be held at Pioneer Railcorp's  Corporate
Office,  1318 S. Johanson Road,  Peoria,  Illinois,  on Tuesday,  June 16, 1998,
commencing at 9:00 a.m. local time, for the purpose of considering and voting on
the following matters as described in the attached Proxy Statement:

-    To elect five directors for a one year term;

-    To  consider  and  act  upon  a  proposal  to  ratify  the  appointment  of
     independent public accountants for 1998;

-    Any other matters that may properly come before the meeting.

Only  stockholders of record at the close of business on April 30, 1998, will be
entitled  to  vote at  this  meeting.  A copy  of the  Company's  Annual  Report
containing  financial  data and a summary of operations for 1997 is being mailed
to the Company's stockholders with this Proxy Statement.

In order that your stock may be  represented  at the meeting in case you are not
personally  present,  please complete,  sign and date the enclosed  proxy/voting
instruction card and return it promptly in the accompanying addressed envelope.



By order of the Board of Directors


Daniel A. LaKemper
Secretary



May 11, 1998
<PAGE>



                                    Railcorp
                              1318 S. Johanson Road
                             Peoria, Illinois 61607
                                  309-697-1400


                                 Proxy Statement

This Proxy Statement and the accompanying  proxy will be sent to stockholders of
Pioneer  Railcorp on or about May 11, 1998, in connection with the  solicitation
by the  Board of  Directors  of  proxies  to be used at the  Annual  Meeting  of
Stockholders of the Company to be held at Pioneer  Railcorp's  corporate office,
1318 S.  Johanson  Road,  Peoria,  Illinois  61607,  on Tuesday,  June 16, 1998,
commencing  at 9:00 a.m.  local  time.  The  Company's  Annual  Report for 1997,
including financial statements, is also included herein.

The record date for stockholders entitled to vote at the Annual Meeting is April
30, 1998. As of April 30, 1998, the Company had issued and outstanding 4,609,513
shares of common stock, of which 4,609,513 are entitled to one vote per share.

The presence,  in person or by proxy,  of the holders of a majority of the total
number of shares  entitled to vote  constitutes a quorum for the  transaction of
business at the meeting. Assuming that a quorum is present, the affirmative vote
of a majority of the shares of the Company  present in person or  represented by
proxy at the  Meeting,  and  entitled to vote,  is required  for the election of
directors and for the ratification of McGladrey & Pullen, LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1998.

Votes  cast by  proxy  or in  person  at the  meeting  will be  tabulated  by an
appointed  employee of the Company  and will  determine  if a quorum is present.
Abstentions  will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but as unvoted for purposes of
determining the approval of any matter submitted to the shareholders for a vote.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain  shares to vote on a particular  matter,  those shares will not be
considered as present and entitled to vote with respect to that matter.

It is the Company's  policy that all proxies,  ballots,  and voting  tabulations
that identify  shareholders will be kept  confidential,  except where disclosure
may be required by applicable  law, where  shareholders  write comments on their
proxy cards, or where disclosure is expressly requested by a shareholder.

The Proxy

Any  person  giving a proxy has the power to revoke it at any time  before it is
voted,  upon written notice to J. Michael Carr,  Chief Financial  Officer of the
Company.

Any proxy cards returned without specification will be voted as to each proposal
in accordance with the  recommendations  of the Board of Directors.  The Company
will bear the costs of solicitation  of proxies.  Following the mailing of proxy
soliciting material, proxies may be solicited by directors, officers and regular
employees of the Company in person or by telephone or fax. The Company will also
reimburse  persons  holding stock for others in their names or in those of their
nominees  for their  reasonable  expenses  in sending  proxy  material  to their
principals and obtaining their proxies.

Beneficial Ownership of Stock

There are no  shareholders,  as of March 20,  1998,  known by the  Company to be
beneficial  owners of more than 5% of its  outstanding  common  stock other than
Company directors and officers.

Nominees for Election as Directors

Guy L.  Brenkman,  age 51,  Chairman of the Board of Directors  and President of
Pioneer  Railcorp and its  subsidiaries  was the incorporator of the Company and
has been a member of the Board of Directors  and  President of the Company since
its formation.  Mr.  Brenkman's  past business  experience  includes real estate
sales and management,  securities sales, and seven years of operational railroad
industry  experience  before  managing the  day-to-day  railroad  operations  of
Pioneer in 1988.  Mr.  Brenkman,  acting as agent of the Issuer,  conducted  the
public  offering of Pioneer  Railcorp,  which  raised its initial  capital,  and
secondary capital for expansions.
<PAGE>


Orvel L. Cox, age 55,  Director,  also serves as same for each of the  Company's
subsidiaries and Superintendent of Transportation for same. Mr. Cox has 38 years
of active  railroading  experience  with 31 of those  years  working for Class I
railroads. Mr. Cox has been a director and officer of Pioneer Railcorp since its
inception and has been involved in all phases of the  development  and growth of
the Company.

John S. Fulton,  age 65, Director,  was elected to the Board in 1993. Mr. Fulton
has 25 years  experience in real estate  development and industrial  appraising.
Mr. Fulton holds a BS degree in Public Administration from Bradley University in
Peoria, Illinois.

J. Michael  Carr,  age 34,  Treasurer,  also serves as Treasurer for each of the
Company's  subsidiaries and Chief Financial  Officer for same. Mr. Carr has been
employed by the Company since March 1993.  Before joining the Company,  Mr. Carr
worked in public  accounting  and  banking  for seven  years,  most  recently as
Controller for United Federal Bank. Mr. Carr is a CPA and holds a  BS-Accounting
from Illinois State University, Normal, Illinois.

Timothy F. Shea,  age 49, owns RE/MAX  Property  Management  and has been a real
estate  property  manager  with RE/MAX  since 1984.  Mr. Shea has a  BS-Business
Management from Bradley University, Peoria, Illinois.

General Information Relating to the Board of Directors

The Board of Directors of the Corporation consists of five members, each elected
for a term of one year.  The board met a total of 4 times in 1997, at which time
all directors were present.

Compensation of Directors

Directors  of the  Company  were each  compensated  $1,000 in 1997 and  received
reimbursement for out of pocket expenses.

Committees

The Audit  Committee is the only  standing  committee of the Board of Directors.
The purpose of the Audit Committee is to recommend to the Board of Directors the
engagement of, and the fee to be paid to, the  independent  public  accountants.
The Audit  Committee  also reviews with the  independent  accountants  as deemed
necessary, the Corporation's  accounting policies,  conflict of interest policy,
internal control systems, and financial operations and reporting.  The committee
met once in 1997. Current members of this committee are Timothy F. Shea, John S.
Fulton, and Orvel L. Cox.

Security Ownership of Directors and Executive Officers

The following table sets forth information,  as of March 20, 1998, regarding the
beneficial  ownership of all  directors  and officers of the Company as a group.
These figures  include  shares of Common Stock that the executive  officers have
the right to acquire  within 60 days of March 20, 1998  pursuant to the exercise
of stock options and warrants.

Title of Class:  Common Stock ($.001 par value)

                                                    Beneficial        Percent
        Name Of Beneficial Owner                    Ownership        Of Class
------------------------------------------          ----------       --------

Guy L. Brenkman (2) ......................          3,517,039          36.21%
Orvel L. Cox (3) .........................            235,165           2.42%
Daniel A. LaKemper (4) ...................            144,604           1.49%
John S. Fulton (5) .......................             43,600            .45%
J. Michael Carr (6) ......................             67,716            .70%
Kevin Williams (7) .......................             11,100            .11%
Tim Shea .................................              5,000            .05%
                                                    ---------          ------
Directors and Executive
  Officers as a Group: ...................          4,018,001          41.43%(1)


FOOTNOTES:

(1)  Based on 9,714,024 shares of Common Stock and Equivalents outstanding as of
     March 20,  1998.  (2) Of the total  number of shares  shown as owned by Mr.
     Brenkman, 60,606 shares represent the number of shares Mr. Brenkman has the
     right to acquire within 60 days upon the exercise of options  granted under
     the Company's  1994 Stock Option Plan, and 1,740,800  shares  represent the
     number of shares  Mr.  Brenkman  has the  right to  acquire  within 60 days
     through the exercise of  Warrants.  Mr.  Brenkman  owns all shares in joint
     tenancy with his wife. In addition, 13,233 shares are held by
<PAGE>


Mr. Brenkman under the Pioneer Railcorp Retirement Savings Plan and 2,340 shares
are held by Mr. Brenkman's wife, in which he disclaims beneficial ownership. (3)
Of the total number of shares shown as owned by Mr. Cox, 66,666 shares represent
the number of shares  Mr.  Cox has the right to acquire  within 60 days upon the
exercise of options  granted  under the  Company's  1994 Stock Option Plan,  and
101,770  shares  represent the number of shares Mr. Cox has the right to acquire
within 60 days through the exercise of Warrants.  In addition,  1,859 shares are
held by Mr. Cox under the Pioneer  Railcorp  Retirement  Savings Plan. Mr. Cox's
shares are owned in joint  tenancy  with his wife.  Mr. Cox and his wife own one
Preferred Share in the Mississippi  Central Railroad Co. (4) Of the total number
of shares shown as owned by Mr. LaKemper,  66,666 shares represent the number of
shares Mr. LaKemper has the right to acquire within 60 days upon the exercise of
options  granted under the Company's  1994 Stock Option Plan,  and 40,000 shares
represent the number of shares Mr.  LaKemper has the right to acquire  within 60
days through the exercise of Warrants.  In addition,  938 shares are held by Mr.
LaKemper under the Pioneer  Railcorp  Retirement  Savings Plan.  Mr.  LaKemper's
shares  are owned in joint  tenancy  with his wife.  (5) Of the total  number of
shares  shown as owned by Mr.  Fulton,  22,000  shares  represent  the number of
shares Mr.  Fulton has the right to acquire  within 60 days upon the exercise of
options  granted under the Company's  1994 Stock Option Plan,  and 10,200 shares
represent  the  number of shares Mr.  Fulton has the right to acquire  within 60
days upon the exercise of  Warrants.  (6) Of the total number of shares shown as
owned by Mr. Carr, 66,666 shares represent the number of shares Mr. Carr has the
right to acquire  within 60 days upon the exercise of options  granted under the
Company's  1994 Stock Option  Plan,  and 1,000  shares  represent  the number of
shares Mr. Carr has the right to acquire  within 60 days through the exercise of
Warrants.  (7) Of the total  number of  shares  shown as owned by Mr.  Williams,
11,000  shares  represent  the  number of shares Mr.  Williams  has the right to
acquire within 60 days upon the exercise of options  granted under the Company's
1994  Stock  Option  Plan,  and 100  shares  represent  the number of shares Mr.
Williams  has the  right to  acquire  within 60 days  through  the  exercise  of
Warrants.

There are no  shareholders  known by the  Registrant to be beneficial  owners of
more than 5% of its outstanding common stock other than Mr. Brenkman.

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
directors,  executive officers, and any persons holding more than ten percent of
the Company's  common stock to report their  initial  ownership of the Company's
common stock and any subsequent  changes in that ownership to the Securities and
Exchange Commission and to provide copies of such reports to the Company.  Based
upon the Company's  review of the copies of such reports received by the Company
and written representations of its directors and executive officers, the Company
believes that during the year ended  December 31, 1997, all Section 16(a) filing
requirements  were  satisfied  with  the  following  exceptions:  Timothy  Shea,
Director, filed 1997 Form 5 after the deadline date.
<PAGE>

Compensation of the Chief Executive Officer

Summary Compensation Table
------------------------------------

                               Annual
                             Compensation           Long Term Compensation
                           --------------- -------------------------------------
                                           Restricted
Name &                                       Stock                      Other
Position                   Year    Salary    Award     Options/SARs Compensation
--------------------       ----   --------  -------    ------------  -----------
Guy L. Brenkman, CEO       1997   $419,695     --            --      $ 4,750 (a)
                           1996   $350,098     --        80,000      $ 4,750 (a)
                           1995   $310,546     --        37,000      $ 4,500 (a)

(a) - Registrant's contribution to the Company's defined contribution plan.

Option/SAR Grants in Last Fiscal Year
-------------------------------------
None

Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
---------------------------------------------------
<TABLE>
                                                                         Value of
                                                                       Unexercised
                                                Number of Securities   In-the-Money
                                               Underlying Unexercised  Options/SARs
                                               Options/SARs at FY-End   At FY-End
                   Shares Acquired    Value         Exercisable/       Exercisable/
Name                 On Exercise     Realized       Unexercisable      Unexercisable
------------------------------------------------------------------------------------
<S>                <C>               <C>       <C>                     <C>
Guy Brenkman-CEO           0            0      60,606/ 165,515             $0/$0
</TABLE>

In December  1993,  the Company  entered into a five-year  executive  employment
contract with the Company's  president.  The five-year  agreement provides for a
base salary with annual  inflation  adjustments  based upon the  Consumer  Price
Index. Should the Company acquire or form additional railroads,  the base salary
will increase $25,000 for the acquisition of railroads of 125 miles or less, and
$50,000 for railroads over 125 miles. At January 1, 1998, the  president's  base
salary was  $400,803.  Should the  president's  employment  be  terminated,  the
contract  requires a lump sum payment  equal to three years of his then  current
salary. Should the president retire, he is entitled to a lump sum payment of one
year's salary.

Although Mr.  Brenkman is  authorized  by his contract to receive an increase in
compensation  immediately  upon the start of a new  railroad,  he has  generally
declined these increases,  until in his opinion, the railroad appears to be self
supporting  and can absorb the cost of such  raise.  In several  instances,  Mr.
Brenkman  has not taken a raise at all. A detailed  list of these  raises  since
1993 is listed as follows:
                                                                    Date Raise
Subsidiary                                       Date Acquired      Effective
--------------------------------------------     -------------    --------------

Vandalia Railroad Company ..................       10/07/94          10/07/94
Minnesota Central Railroad Co. .............       12/12/94          02/01/95
West Michigan Railroad Co. .................       07/11/95       No Raise Taken
Columbia & Northern Railway ................       02/21/96       No Raise Taken
Keokuk Junction Railway Co. ................       03/12/96          04/16/96
Rochelle Railroad Co. ......................       03/25/96          04/16/96
Shawnee Terminal Railway Co. ...............       11/12/96          01/01/98
Michigan Southern Railroad .................       12/18/96          01/01/97
Pioneer Industrial Railway Co. .............       02/20/98       No Raise Taken
<PAGE>


Proposal 1 - Ratification of Appointment of Independent Public Accountants

The  Board  of  Directors,  upon  recommendation  of its  Audit  Committee,  has
appointed McGladrey & Pullen, LLP, Certified Public Accountants and Consultants,
as independent  public accountants of the Company with respect to its operations
for the year 1998, subject to ratification by the holders of common stock of the
Company. In taking this action, the members of the Board and the Audit Committee
considered  carefully  McGladrey's  performance  for the Company with respect to
services  performed  in the  years  1994-1997  and its  general  reputation  for
adherence to professional auditing standards. The Board of Directors anticipates
that  representatives of McGladrey & Pullen, LLP will be present at the Meeting,
will  have the  opportunity  to make a  statement  if they  desire,  and will be
available to respond to appropriate questions.

The Board of Directors recommends a vote FOR this proposal.

Stockholder Proposals

Stockholders  are  entitled  to submit  proposals  on  matters  appropriate  for
stockholder  action  consistent with  regulations of the Securities and Exchange
Commission.  In order for a stockholder  proposal for the 1999 Annual Meeting of
Stockholders to be eligible for inclusion in the  Corporation's  Proxy Statement
and form of proxy, it must be received by the Corporate  Secretary no later than
December 31, 1998.

Other Matters

The Board of  Directors  does not know of any  matters  to be  presented  at the
Annual Meeting other than as set forth above. However, if any other matters come
before the Meeting,  the proxies received  pursuant to this solicitation will be
voted  thereon in accordance  with the judgment of the person or persons  acting
under the proxies.

Pioneer Railcorp, May 11, 1998