[cover page has design down left margin]





                                      Bryan
                                      Steam
                                   Corporation








                                 Annual Report
                            Year ended June 30, 1997

<PAGE>

To Our Shareholders:


The enclosed  annual report shows the  financial  condition of our Company as of
June 30, 1997 and the results of operations  for the past three years.  The past
fiscal year came to a successful completion.

Overall sales as well as profits were up from the preceding year and reached the
highest  level in our Company's  history.  Sales were up  approximately  17% and
profits were up approximately 40%.

Our ongoing aggressive advertising and marketing campaign, along with our superb
representative  organization,  contributed primarily to this excellent increase.
We continue to concentrate  our efforts in these areas as well as to enhance our
assistance to the representative organization.

Our backlog  remains strong,  but is expected to decline  slightly in the second
quarter.  This anticipated  decline is primarily due to the cyclic nature of our
industry.  We feel  confident  that the  third  and  fourth  quarters  will show
increases as in past years.

Our  directors  have  declared a dividend of $2.00 per share,  a $0.50 per share
increase over that paid in 1996.  This dividend is payable on September 15, 1997
to shareholders of record August 29, 1997. Your check is enclosed. Attached is a
notice of the  Annual  Meeting  of  Shareholders  to be held on  October 2, 1997
together with a proxy and a proxy statement.

If you cannot be present at the shareholders'  meeting, we would appreciate your
signing and returning the proxy immediately.



/s/ H. Jesse McVay
H. Jesse McVay
President

Enclosures:       Notice of Annual Meeting of Shareholders
                  Proxy Form
                  Proxy Statement
                  Dividend Check
<PAGE>

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


Results of Operations

         The Company's  consolidated net income for the year ended June 30, 1997
was $1,609,015, compared to $1,148,934 and $927,141 for the years ended June 30,
1996 and 1995, respectively.  The Company's earnings per share totaled $8.41 for
the year ended June 30,  1997,  compared  to $6.01 and $4.85 for the years ended
June 30, 1996 and 1995, respectively. The increase in net income of $460,081, or
40%, was primarily  attributable  to Bryan  Boilers'  operations,  which had net
income of $1,614,268  for the year ended June 30, 1997.  Wendland also generated
net income of  approximately  $117,140 for the year ended June 30,  1997.  MEMCO
generated a loss of $121,905  through June 30, 1997.  Operating  profit  totaled
$2,346,494,  or 8.94% of sales,  in 1997  compared  to  $1,668,590,  or 7.42% of
sales, and $1,228,360, or 7.03% of sales, in 1996 and 1995, respectively. Please
note that the addition of the income and losses of the three  companies does not
necessarily add up to the Company's consolidated after-tax profit because of tax
considerations from the losses at MEMCO.

         The Company's  combined sales income of $26,232,883  for the year ended
June 30, 1997  represents  an increase  of  approximately  16.71% over the sales
income of  $22,476,628  for the year ended June 30, 1996.  The increase in sales
for 1997 as compared to 1996 is primarily  attributable to two factors:  (I) the
addition  of  approximately  $1,000,000  in sales  by  MEMCO  in 1997,  and (ii)
increased  sales by Bryan Boilers in 1997 of  approximately  $2,800,000 over its
sales in 1996.  The increase in sales by Bryan  Boilers was primarily due to the
acceptance  by the  industry  of Bryan's  large  water tube  boilers  and a very
aggressive  sales  campaign  by Bryan  Boilers  and its  sales  representatives.
Competition  in Bryan  Boilers'  small water tube  boiler  market  remains  very
intense.  However,  internal concerns of some competitors seem to have mitigated
this competitive situation somewhat.  During the year ended June 30, 1997, Bryan
Boilers found that it was not  necessary to give as large  discounts as often as
it had in the past.  Bryan Boilers had no price increase  during the fiscal year
1997.  However,  a price  increase of  approximately  3% was placed in effect on
September 1, 1997.

         Wendland  Manufacturing  Corporation  maintained  its price  structure,
which  increased  its cost of goods sold by an amount  reflecting  the increased
cost of material and labor.

         MEMCO,  still on the learning curve,  had no direct increase in pricing
during fiscal 1997.

         The  Company's  cost of goods sold for the year ended June 30, 1997 was
$20,212,160,  compared to $17,887,043  and  $13,913,906 for the years ended June
30,  1996  and  1995,  respectively.  The  Company's  cost  of  goods  sold as a
percentage of sales was 77.05% in 1997,  which decreased when compared to 79.58%
in 1996.  Management  believes  that the decrease in cost of goods sold reflects
management's efforts to control materials costs and to sustain labor efficiency,
efforts  which  management  will  continue in fiscal year 1998. As reported last
year,  Bryan Boilers  negotiated a new collective  bargaining  agreement in May,
1995,  which runs  through  May,  1998.  This  collective  bargaining  agreement
provides for an increase in wages for Bryan Boilers'  bargaining unit of 3.5% in
each of the years covered by the contract.

         Total  expenses  for the year ended June 30, 1997  totaled  $3,674,229,
compared to $2,920,995 for the year ended June 30, 1996.  Total expenses for the
year ended June 30, 1997 were approximately 14% of sales, as compared to 13% for
the year ended June 30, 1996.

         Total other income  totaled  $234,474 in 1997  compared to $173,960 and
$247,271 in 1996 and 1995,  respectively.  The  increase in other income in 1997
over 1996 resulted  primarily  from an increase in Interest and dividend  income
and an increase in Freight  income,  which was offset  somewhat by a decrease in
Other  income  and  expense.   Interest   and  dividend   income   increased  by
approximately  $55,000 over this same period in 1996, and is approximately equal
to 1995.


<PAGE>




                      MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


Financial Condition

         The Company's total assets at June 30, 1997 were $17.2 million compared
to $16.2 million and $15.1 million at June 30, 1996 and 1995, respectively.  The
increase in total assets resulted  primarily from the  approximately  $1 million
increase in property,  plant and  equipment.  The majority of this $1 million is
attributable  to Bryan Boilers in the form of a building  addition  during 1997.
Total  current  liabilities  at June 30, 1997 were  approximately  $2.4 million,
which  compares  favorably to the $2.5 million and $1.6 million at June 30, 1996
and 1995,  respectively.  The  Company's  net  worth at June 30,  1997 was $14.4
million,  compared to $13.1 million and $12.2 million at June 30, 1996 and 1995,
respectively.

Liquidity and Capital Resources

         Total cash and cash  equivalents  and investments at June 30, 1997 were
$1,835,565,  compared to  $1,921,293  and  $4,121,350 at June 30, 1996 and 1995,
respectively.  This  minor  decrease  in the  Company's  liquid  assets  in 1997
resulted  primarily  from the increase in inventory  between 1997 and 1996,  the
retirement  of  short  and  long  term  debt,  and  the   construction   of  the
manufacturing  addition at Bryan Boilers.  The combined working capital ratio of
current assets to current  liabilities was 4.67:1 at June 30, 1997,  compared to
4.61:1 and 7.07:1 at June 30, 1996 and 1995, respectively.  Management estimates
that capital  expenditures  for fiscal 1998 will total  approximately  $600,000.
There is no major item included in this estimation.  Management anticipates that
internal  sources  of funds  will be  adequate  to  cover  the  planned  capital
expenditures.

General

         Management  considers  Bryan Boilers'  performance  for the last fiscal
year to be  excellent  considering  the  competitive  nature  of this  industry.
Management  considers  the  performance  of  Wendland  Manufacturing  to be very
satisfactory,  considering the regionality of its markets.  Management considers
the MEMCO  performance  to be  satisfactory.  We do believe  that MEMCO (still a
start-up  company)  will still  struggle in the year ahead,  but start to show a
profit during fiscal 1999.

         Although the Company may in the future consider possible  acquisitions,
it is not currently  pursuing any.  Management  intends to continue to emphasize
growth and  profitability  in the coming  year by  continuing  to  increase  the
progress we've made in quality, customer service and cost containment.

<PAGE>


                             OFFICERS AND DIRECTORS

                        Present Positions
                      and Offices with the            Principal Occupation
       Name                  Company                     or Employments
--------------------  ---------------------------   ----------------------------
Albert J. Bishop       Chairman of the Board,        Chairman of the Board
                       Director and member of the
                       Executive Committee

H. Jesse McVay         President, General Manager,   President of the Company
                       Director

Kurt J. Krauskopf      Corporate Secretary           Secretary of the Company

Paul D. Donaldson      Treasurer                     Treasurer of the Company

Harold V. Koch         Director                      Chairman Emeritus 
                                                       of the Board

G. N. Summers          Director                      Owner of Saine-Summers 
                                                       Insurance Agency

Jack B. Jackson        Director                      Retired community bank
                                                       Chairman, Peru office, 
                                                       First of America Bank - 
                                                       Indiana

James R. Lockhart, Jr. Director                      Vice President & General 
                                                       Manager of Residential 
                                                       Business Development for
                                                       GAF Materials Corp.

Bryan D. Herd          Director                      Design consultant,
                                                       Partridge Home 
                                                       Furnishings



<PAGE>



                             ADDITIONAL INFORMATION


         There are approximately 1,047 record holders of the Company's shares of
common stock.  There is no established  trading market for the Company's  shares
and the Company is not  normally  informed of the terms of  transactions  in its
shares.

         The  Company's  shares are traded  sporadically  over-the-counter.  Set
forth  below  are the  range  of high  and low bid  quotations  as  reported  on
Tradeline for each quarter  during the last two fiscal years.  These  quotations
may reflect inter-dealer  transactions,  without retail mark-up,  mark-down,  or
commission. They do not necessarily represent actual transactions and management
does not have  knowledge  of the volume of  trading,  if any, at any of such bid
prices.

  QUARTER ENDED                         HIGH ASK              LOW BID

September 30, 1995                       49 1/2               42 1/4
December 31, 1995                        49 1/4               42 1/4
March 31, 1996                             45                   33
June 30, 1996                              47                   35
September 30, 1996                         47                   37
December 31, 1996                          38                   38
March 31, 1997                           39 1/2               39 1/4
June 30, 1997                              50                   47

   The Company has paid dividends for the last several years on an annual basis.
The annual  dividends  per share paid during its 1997 and 1996 fiscal  years and
the dates of payment are:

                               $1.50        September 13, 1996
                               $1.40        September 15, 1995

   THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH SHAREHOLDER, ON THE WRITTEN
REQUEST OF SUCH PERSON,  A COPY OF THE  COMPANY'S  ANNUAL REPORT ON FORM 10-KSB,
INCLUDING THE FINANCIAL  STATEMENTS  AND THE SCHEDULES  THERETO,  REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE  COMMISSION  PURSUANT TO RULE 13a-1 UNDER
THE SECURITIES  EXCHANGE ACT OF 1934, AS AMENDED,  FOR THE COMPANY'S MOST RECENT
FISCAL  YEAR.  THE WRITTEN  REQUEST  SHOULD BE DIRECTED  TO: KURT J.  KRAUSKOPF,
SECRETARY, BRYAN STEAM CORPORATION, P. O. BOX 27, PERU, INDIANA 46970.

<PAGE>










                                   THIS PAGE
                                 INTENTIONALLY
                                   LEFT BLANK



<PAGE>
                         [CASSEN COMPANY LLC LETTERHEAD]


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To:      The Board of Directors and Stockholders
         of Bryan Steam Corporation

     We have audited the accompanying consolidated balance sheets of Bryan Steam
Corporation (a New Mexico Corporation) and subsidiary as of June 30, 1997, 1996,
and 1995, and the related consolidated  statements of income,  retained earnings
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
Bryan Steam  Corporation and subsidiary as of June 30, 1997, 1996, and 1995, and
the results of their consolidated operations, consolidated retained earnings and
consolidated  cash flows for the years then ended,  in conformity with generally
accepted accounting principles.

     Our  audits  were made for the  purpose  of forming an opinion on the basic
financial statements taken as a whole. The Selected Consolidated  Financial Data
is presented for the purposes of additional  analysis and is not a required part
of the basic financial  statements.  Such  information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion,  is fairly  stated in all  material  respects in relation to the
basic financial statements taken as a whole.


/s/ Cassen Company LLC
CASSEN COMPANY LLC
Indianapolis, Indiana
July 25, 1997


<PAGE>

                        CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                        1997               1996               1995
                                                                    -------------     ---------------    ---------

<S>                                                               <C>                <C>                 <C>        
SALES................................................             $ 26,232,883       $  22,476,628       $17,480,290
                                                                    ----------          ----------        ----------

COST OF GOODS SOLD
   Inventory - Beginning.............................             $  4,202,010       $   4,181,513       $ 3,881,151
   Purchases & Freight...............................               11,530,216          10,178,216         8,173,090
   Labor.............................................                5,436,966           4,581,203         3,535,022
   Other Costs.......................................                3,522,171           3,148,121         2,506,156
                                                                   -----------         -----------       -----------
        TOTAL........................................             $ 24,691,363       $  22,089,053       $18,095,419
   Less: Inventory - Ending..........................                4,479,203           4,202,010         4,181,513
                                                                   -----------         -----------       -----------
     COST OF GOODS SOLD..............................             $ 20,212,160       $  17,887,043       $13,913,906
                                                                   -----------          ----------        ----------

GROSS PROFIT ON SALES................................             $  6,020,723       $   4,589,585       $  3,566,384
                                                                   -----------         -----------        -----------

EXPENSES
   Salaries & Wages - Officers.......................             $    244,015       $     278,261       $   174,280
   Salaries & Wages - Other..........................                  910,276             772,170           554,145
   Depreciation Expense..............................                  207,935             119,184           105,375
   Pension Plan......................................                  268,658             115,523           119,204
   Taxes - Payroll & Local...........................                  166,422             117,387            72,713
   Provision for Bad Debts...........................                       77              15,207            20,564
   Repairs & Maintenance.............................                  130,564              78,141            41,461
   General & Administrative..........................                1,746,282           1,425,122         1,250,282
                                                                   -----------         -----------        ----------
     TOTAL EXPENSES..................................             $  3,674,229       $   2,920,995       $ 2,338,024
                                                                   -----------         -----------        ----------

OPERATING PROFIT.....................................             $  2,346,494       $   1,668,590       $ 1,228,360
                                                                    ----------         -----------        ----------

OTHER INCOME (LOSS)
   Interest and Dividend Income......................             $    158,675       $     103,984       $   157,871
   Interest Expense..................................                  (88,281)            (82,830)          --
   Net gain (loss) on investment securities..........                   (3,872)             (1,589)           11,928
   Frieght Income....................................                  115,599              86,613           --
   Other Income and expense..........................                   52,353              67,782            77,472
                                                                   -----------        ------------       -----------
     TOTAL OTHER INCOME..............................             $    234,474       $     173,960       $   247,271
                                                                   -----------         -----------        ----------

INCOME BEFORE INCOME TAXES ..........................             $  2,580,968       $   1,842,550       $ 1,475,631

PROVISION FOR INCOME TAXES...........................                  971,953             693,616           548,490
                                                                   -----------        ------------        ----------

NET INCOME ..........................................             $  1,609,015       $   1,148,934       $   927,141
                                                                    ==========         ===========        ==========

EARNINGS PER SHARE...................................             $       8.41       $        6.01       $      4.85
                                                                   ===========        ============        ==========
</TABLE>







The  accompanying  notes to financial  statements  are an integral part of these
Consolidated Statements of Income.


<PAGE>


                         CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                        June 30,
               ASSETS                                                   1997               1996               1995
                                                                    ------------      ---------------    ---------

CURRENT ASSETS
<S>                                                               <C>                <C>                 <C>        
   Cash & Cash Equivalents...........................             $    368,879       $     304,739       $ 2,192,946
   Investment Securities.............................                1,466,686           1,616,554         1,928,404
   Accounts Receivable, Net..........................                4,814,745           4,793,663         3,051,854
   Inventory.........................................                4,479,203           4,202,010         4,181,513
   Prepaid Federal Income Taxes......................                   27,528              84,414            - -
   Prepaid Expenses..................................                  282,644             335,183           190,839
                                                                  ------------        ------------       -----------
     TOTAL CURRENT ASSETS............................             $ 11,439,685       $  11,336,563       $11,545,556
                                                                    ----------          ----------        ----------

PROPERTY, PLANT & EQUIPMENT
   (Cost, less accumulated depreciation).............             $  5,576,122       $   4,568,220       $ 3,524,417
                                                                   -----------          ----------        ----------

OTHER ASSETS
   Intangible Assets, Net............................             $    201,791       $     268,058       $    20,698
   Deposits..........................................                    5,171               5,171               - -
                                                                  -------------      -------------       -----------
     TOTAL OTHER ASSETS..............................             $    206,962       $     273,229       $    20,698
                                                                   -----------        ------------        ----------

TOTAL ASSETS.........................................             $ 17,222,769       $  16,178,012       $15,090,671
                                                                    ==========          ==========        ==========

        LIABILITIES & NET WORTH

CURRENT LIABILITIES
   Accounts Payable - Trade..........................             $    851,512       $     553,079       $   320,072
   Capital Lease Obligations.........................                    8,632              - -               - -
   Line of Credit - Norwest Bank.....................                   45,400              20,000            - -
   Notes Payable.....................................                   - -                302,620            - -
   Accrued Liabilities...............................                1,427,492           1,168,974         1,026,825
   Current Portion of Long-term Debt.................                   24,300             341,673           200,000
   Federal Income Taxes Payable......................                   - -                - -               118,730
   State Income Taxes Payable........................                    4,837             - -                36,453
   Deferred Federal Income Tax.......................                   70,071              60,678            39,915
   Deferred State Income Tax.........................                   16,085              13,963             9,157
                                                                  ------------        ------------       -----------
     TOTAL CURRENT LIABILITIES.......................             $  2,448,329       $   2,460,987       $ 1,751,152
                                                                    ----------          ----------        ----------

LONG-TERM LIABILITIES
   Capital Lease Obligations.........................             $     45,272       $     - -           $   - -
   Long-term Debt....................................                   44,968             238,207           800,000
   Deferred Federal Income Tax.......................                  229,926             308,816           262,474
   Deferred State Income Tax.........................                   50,609              70,845            60,215
   Dividends Payable.................................                   11,834              10,016             8,863
                                                                  ------------        ------------       -----------
     TOTAL LONG-TERM LIABILITIES.....................             $    382,609       $     627,884       $ 1,131,552
                                                                   -----------         -----------        ----------

NET WORTH
   Common Capital Stock, Without Par Value,
     200,000 Shares - Authorized & Issued............             $    810,272       $     810,272       $   810,272
   Retained Earnings.................................               13,610,286          12,307,596        11,426,422
   Treasury Stock, at cost, 8,716 Shares.............                  (28,727)            (28,727)          (28,727)
                                                                   ------------        ------------      ------------
     TOTAL NET WORTH.................................             $ 14,391,831       $  13,089,141       $12,207,967
                                                                    ----------          ----------        ----------

TOTAL LIABILITIES AND NET WORTH......................             $ 17,222,769       $  16,178,012       $15,090,671
                                                                    ==========          ==========        ==========
</TABLE>







The  accompanying  notes to financial  statements  are an integral part of these
Consolidated Balance Sheets.


<PAGE>


                  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS


<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                        1997               1996               1995
                                                                    -------------     ---------------    ---------
<S>                                                                <C>                 <C>               <C>        
BALANCE AT BEGINNING OF YEAR.........................              $12,307,596         $11,426,422       $10,749,269
   Net Income........................................                1,609,015           1,148,934           927,141
   Dividends Paid....................................                 (286,885)           (267,760)         (249,988)
   Adjustment to Prior Year Income Tax Expense.......                  (19,440)            - -                - -
                                                                 --------------        -----------       -----------
BALANCE AT END OF YEAR...............................              $13,610,286         $12,307,596       $11,426,422
</TABLE>

The  accompanying  notes to financial  statements  are an integral part of these
Consolidated Statements of Retained Earnings.


<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                        June 30,
                                                                        1997               1996               1995
                                                                    -------------     ---------------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                               <C>                <C>                 <C>        
   Cash received from customers......................             $ 26,392,669       $  20,876,838       $17,310,182
   Cash paid to suppliers and employees..............              (22,990,668)        (20,083,591)      (16,254,730)
   Interest and dividends received...................                  158,675             129,783           155,422
   Interest paid.....................................                  (90,437)            (80,674)           (3,819)
   Income taxes paid.................................               (1,017,281)           (850,672)         (199,000)
                                                                  ------------       -------------       -----------
        NET CASH PROVIDED (USED) BY
          OPERATING ACTIVITIES.......................             $  2,452,958       $        (8,316)    $ 1,008,055
                                                                  ------------       -------------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of plant and equipment .................             $ (1,466,181)      $  (1,493,997)      $  (615,347)
   Proceeds from sale of plant & equipment...........                    5,346              - -               - -
   Purchases of investment securities................                 (222,916)           (520,008)         (894,308)
   Proceeds from sale of investment securities.......                  368,912             817,019         1,587,087
   Deposits with Utilities...........................                   - -                 (5,171)           - -
   Purchase of Noncompete Agreements.................                   - -               (300,000)           - -
   Purchase of Goodwill..............................                   - -                (13,627)           - -
                                                                   ------------        ------------         ------------
        NET CASH PROVIDED (USED) BY
          INVESTING ACTIVITIES.......................             $ (1,314,839)      $  (1,515,784)      $    77,432
                                                                   ------------        ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from short-term borrowings...............             $     - -          $     322,620       $   - -
   Principal payments on short-term borrowings.......                 (277,220)             - -              - -
   Principal payments on capital lease obligations...                   (1,080)             - -              - -
   Principal payments on long-term debt..............                 (566,612)           (464,484)
   Proceeds from long-term debt......................                   56,000              44,364         1,000,000
   Dividends paid....................................                 (285,067)           (266,607)         (252,754)
                                                                  ------------       -------------       -----------
        NET CASH PROVIDED (USED) BY
          FINANCING ACTIVITIES.......................             $ (1,073,979)      $    (364,107)      $    747,246
                                                                  ------------       -------------       -----------

NET INCREASE (DECREASE) IN CASH
   AND EQUIVALENTS...................................             $     64,140       $  (1,888,207)       $1,832,733

CASH AND EQUIVALENTS AT BEGINNING OF YEAR............             $    304,739       $   2,192,946        $  360,213
                                                                  ------------       -------------       -----------

CASH AND EQUIVALENTS AT END OF YEAR..................             $    368,879       $     304,739        $2,192,946
                                                                   ===========        ============        ===========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
   Non-cash investing transactions included trading used 
     equipment having a fair
     market value for new equipment,  
     in addition to boot given, and the recording
     of capital lease obligations.

   Fair value of used equipment given................             $        - -        $     14,150        $   20,579
                                                                   ===========         ===========         =========

   Capital lease obligations recorded................             $     54,984        $        - -        $      - -
                                                                   ===========         ===========         =========
</TABLE>


The  accompanying  notes to financial  statements  are an integral part of these
Consolidated Statements of Cash Flows.


<PAGE>


                      SELECTED CONSOLIDATED FINANCIAL DATA


                 (All except per share amounts are in thousands)

<TABLE>
<CAPTION>


                                                                      Year Ended June 30,
                                                                  1997       1996       1995
                                                                --------   --------   --------
<S>                                                             <C>        <C>        <C>     
TOTAL ASSETS                                                    $ 17,223   $ 16,178   $ 15,091
                                                                ========   ========   ========

LONG-TERM OBLIGATIONS
    Capital lease obligations                                   $     45   $     --   $     --
    Long-term debt                                                    45        238        800
    Deferred income taxes                                            281        380        323
    Dividends payable                                                 12         10          9
                                                                --------   --------   --------
        TOTAL LONG-TERM OBLIGATIONS                             $    383   $    628   $  1,132
                                                                ========   ========   ========

SALES - NET                                                     $ 26,233   $ 22,477   $ 17,480

COST OF GOODS SOLD                                                20,212     17,887     13,914
                                                                --------   --------   --------

GROSS PROFIT ON SALES                                           $  6,021   $  4,590   $  3,566

TOTAL EXPENSES                                                     3,674      2,921      2,338
                                                                --------   --------   --------

OPERATING PROFIT                                                $  2,347   $  1,669   $  1,228

OTHER INCOME                                                         234        174        247
                                                                --------   --------   --------

INCOME BEFORE INCOME TAXES                                      $  2,581   $  1,843   $  1,475

PROVISION FOR INCOME TAXES                                           972        694        548
                                                                --------   --------   --------

NET INCOME                                                      $  1,609   $  1,149   $    927
                                                                ========   ========   ========

EARNINGS PER SHARE - COMMON STOCK
     (191,284   shares in 1 191,284 shares in
     1996; 191,284 shares in 1995)                              $   8.41   $   6.01   $   4.85
                                                                ========   ========   ========

OPERATING  PROFIT  PER SHARE - COMMON  STOCK
     (191,284   shares in 1997;191,284
     shares in 1996; 191,284 shares in 1995)                    $  12.27   $   8.72   $   6.42
                                                                ========   ========   ========

DIVIDENDS PER SHARE - COMMON STOCK
     (191,284  shares in 1997; 191,284 shares in
     1996; 191,284 in 1995)                                     $   1.50   $   1.40   $   1.30
                                                                ========   ========   ========
</TABLE>





The  accompanying  notes to financial  statements  are an integral  part of this
Selected Consolidated Financial Data.



<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1997

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Corporation  manufactures  boilers and boiler accessories at its Bryan Steam
Corporation  (Bryan Steam) plant in Peru,  Indiana.  Bryan Steam's  wholly-owned
subsidiary,   Wendland   Manufacturing   Corp.   (Wendland),   operates  a  tank
manufacturing   facility  in  San  Angelo,   Texas.   Wendland's  wholly-  owned
subsidiary,   Monticello   Exchanger   and   Manufacturing   Co.   (Monticello),
manufactures  heat  exchangers  at  its  plant  in  Monticello,   Indiana.   The
Corporation sells its products through independent sales representatives.  North
America is the principal market for the Corporation's products.

   Bryan Steam's sales were 83.87% of total consolidated sales, while Wendland's
and Monticello's sales were 10.59% and 5.54% of the total, respectively.


   1a. CASH AND CASH EQUIVALENTS

   For purposes of the statement of cash flows, cash equivalents include cash on
   hand, deposits in banks,  certificates of deposit, money funds and all highly
   liquid debt instruments with original maturities of three months or less. The
   fair value of cash and cash  equivalents,  based on current market prices, is
   $368,879.

   1b. INVESTMENT SECURITIES

   Investment  securities  are  valued at cost,  which  approximates  the market
   value.  Based  on  current  market  prices,  the  fair  value  of  investment
   securities is $1,470,867. Current gross unrealized gains and (losses) totaled
   $24,491 and $(20,310), respectively.

   1c. PROPERTY, PLANT & EQUIPMENT

   Property,  plant and equipment are stated at cost. Depreciation of buildings,
   equipment,  fixtures and vehicles is computed using the straight-line  method
   over estimated useful lives.

   Estimated useful lives are:
                                                                      Years
                                      -------------------------- ---------------
                                      Buildings & improvements          10 - 40
                                      Machinery & equipment                  10
                                      Furniture & fixtures               5 - 10
                                      Vehicles                           4 - 10

   Expenditures  for equipment  repair and maintenance and for  replacements and
   renewals of portions of structures  which are not  considered as  lengthening
   the life of the structures are expensed as incurred. Additions,  replacements
   and renewals of equipment are capitalized.

   When  property or  equipment is retired,  sold or otherwise  disposed of, the
   cost and related  accumulated  depreciation are removed from the accounts and
   gains and losses resulting from such transactions are reflected in income.


<PAGE>

   1d. RESEARCH & DEVELOPMENT

   Research and  development  costs are charged to operations  when incurred and
   are included in operating  expenses.  The amounts charged for the years ended
   June  30,  1997,  1996,  and  1995  were  $101,290,  $92,063,  and  $119,233,
   respectively.

   1e. INVENTORY

   The  Corporation's  inventory  of raw  materials  is valued at lower of cost,
   using  the  FIFO  method,  or  market.   The  Corporation's   inventories  of
   work-in-process and finished goods are valued at cost per unit.

   1f. SUPPLEMENTAL INCOME INFORMATION

   The amounts of depreciation and maintenance are set forth in the statement of
   income.  There were no management or service  contract fees or royalties paid
   during the years ended June 30, 1997, 1996, and 1995.  Advertising  costs are
   expensed as incurred.


   1g. INCOME TAXES

   The Corporation  adopted Statement of Financial  Accounting  Standards (SFAS)
   109-"Accounting  for Income Taxes",  July 1, 1993. This Statement  supersedes
   SFAS  96-"Accounting  for Income  Taxes".  Deferred  income taxes reflect the
   future  federal and state tax  consequences  of  differences  between the tax
   basis of assets and liabilities and their financial reporting amounts at each
   year-end.

   1h. PRINCIPLES OF CONSOLIDATION

   The accompanying  consolidated  financial  statements include the accounts of
   the Corporation and of its wholly-owned subsidiary. Intercompany transactions
   and balances have been eliminated in consolidation.

   1i. INDUSTRY SEGMENT

   During the year ended June 30, 1997, the Corporation  operated exclusively in
   one industry segment, the manufacture of boilers, tanks, and heat exchangers.

   1j. FAIR VALUE OF FINANCIAL INSTRUMENTS

   Statement of Accounting  Standards No. 107  "Disclosures  about Fair Value of
   Financial  Instruments," requires disclosures of fair value information about
   financial  instruments,  whether  or  not  recognized  in  the  statement  of
   financial  condition.  In cases where quoted market prices are not available,
   fair values are based on estimates  using  present  value or other  valuation
   techniques.  Those techniques are  significantly  affected by the assumptions
   used, including the discount rate and estimates of future cash flows. In that
   regard,   the  derived  fair  value  estimates  cannot  be  substantiated  by
   comparison to independent  markets and, in many cases,  could not be realized
   in  immediate  settlement  of the  instruments.  Statement  No. 107  excludes
   certain  financial  instruments  and all  nonfinancial  instruments  from its
   disclosure requirements.  For most of its covered financial instruments,  the
   Corporation's  carrying  value  closely  approximates  the fair  value of the
   financial instruments to the Corporation.

   1k. USE OF ESTIMATES

   The preparation of financial statements in conformity with generally accepted
   accounting  principles  requires management to make estimates and assumptions
   that affect certain  reported amounts and  disclosures.  Accordingly,  actual
   results could differ from the estimates.

2. INVENTORY

   Inventories  are  stated at the lower of cost or  market.  Cost  approximates
   market.  Such cost includes raw materials,  direct labor,  other direct costs
   and  production  overhead.  The  inventories  are  valued  on  the  first-in,
   first-out (FIFO) method.

   Inventories at June 30 are as follows:

   Finished goods and...       1997        1996         1995
                           ----------   ----------   -------
     work-in-process....   $1,165,334  $1,136,608 $   843,503
   Raw materials........    3,313,869   3,065,402   3,338,010
                            ---------   ---------   ---------
     TOTAL..............   $4,479,203  $4,202,010  $4,181,513
                            =========   =========   =========




<PAGE>
--------------------------------------------------------------------------------
3. INCOME TAXES
--------------------------------------------------------------------------------

   As discussed in Note 1g, on July 1, 1993, the Corporation  adopted  Statement
   of Financial Accounting Standards No. 109-"Accounting for Income Taxes" (SFAS
   109).  SFAS  109  is an  asset  and  liability  approach  that  requires  the
   recognition of deferred tax assets and  liabilities  for the expected  future
   tax  consequences  of events that have been  recognized in the  Corporation's
   financial  statements or tax returns.  In estimating future tax consequences,
   SFAS 109 generally considers all expected future events other than enactments
   of changes in the tax law or rates.

   The Corporation and its subsidiary file separate income tax returns.

   The provision for income taxes consists of the following:

                                             For the years ended June 30,
                                           1997          1996          1995
                                      -----------   -----------   -----------
Current taxes
  Federal .........................   $   847,472    $   483,412   $   388,744
  State ...........................       212,093        127,663       106,398
                                      -----------   -----------   -----------
    Total .........................   $ 1,059,565    $   611,075   $   495,142
                                      -----------   -----------   -----------

Deferred taxes
  Federal .........................   $   (69,359)   $    67,105   $    43,388
  State ...........................       (18,253)        15,436         9,960
     Total ........................   $   (87,612)   $    82,541   $    53,348

Provision (benefit) for
  income taxes ....................   $   971,953    $   693,616   $   548,490
                                      ===========   ===========   ===========

   Reconciliation of total provision for income tax with the expected  provision
obtained by applying statutory rates to pretax income:

                                 For the years ended June 30,
                              1997         1996        1995
                           ---------    ---------   ---------
Expected tax provision .   $ 990,165    $ 606,802   $ 616,814
Nondeductible expenses/
  (nontaxable income) ..     (15,760)      86,814     (68,324)
Tax benefit of graduated
  rates used in the
  calculation of the
  deferred tax liability          --           --          --
Other ..................      (2,452)          --          --
                           ---------    ---------   ---------
Total Provision for
  Income Tax ...........   $ 971,953    $ 693,616   $ 548,490
                           =========    =========   =========


<PAGE>

   The sources of the temporary differences for deferred income taxes as of June
30, are summarized as follows:

                         1997          1996           1995    
Depreciation .....   $ 1,021,060    $   908,281    $   771,984
                     -----------    -----------    -----------
Pension ..........       206,118        272,434        126,909
Net Operating Loss      (327,321)            --             --
Other ............       (17,372)       (12,460)        (9,511)
                                                   -----------
                     $   882,485    $ 1,168,255    $   889,382
                     ===========    ===========    ===========
Deferred Income
  Tax Liabilities..  $   366,691    $   454,302    $   371,761
                     ===========    ===========    ===========


   Deferred tax liabilities (assets) are comprised of the following:

                                  For the years ended June 30,
                                 1997        1996             1995
                              ----------  ----------       -------
Depreciation ..............   $ 423,728    $ 379,661    $ 322,689
Pension ...................      86,156      113,877       53,048
                              ---------    ---------    ---------
  Gross deferred tax
    liability .............   $ 509,884    $  493,538   $  375,737
                               ---------    ---------    ---------

Allowance for bad debts ...   $  (6,547)   $  (5,208)   $  (3,976)
Net operating loss
  carryforward, expires
  June 30, 2011 ...........    (136,646)     (34,028)          --
Capital loss carryforward .          --           --           --
                              ---------    ---------    ---------
  Gross deferred tax assets   $(143,193)   $ (39,236)   $  (3,976)

Deferred tax assets
  valuation allowance .....   $      --    $      --    $      --
                              ---------    ---------    ---------

Deferred tax liabilities
  (assets) ................   $ 366,691    $ 454,302    $ 371,761
                              =========    =========    =========


<PAGE>

4. PENSION PLANS

   The  Corporation has  non-contributory  pension plans for  substantially  all
   employees  at its  Peru,  Indiana  facility.  The  initial  pension  plan was
   established  on or about July 1, 1966.  Plan assets consist of government and
   corporate bonds,  mutual funds,  guaranteed  investment  contracts,  and cash
   equivalent  investments.  Pension  benefits are based on taxable earnings and
   years of service.  The  Corporation's  policy is to fund at least the minimum
   amounts required by Federal law and regulation.

   Pension expense includes the following components:

                                  1997         1996         1995
                                ---------    ---------    ---------
   Service cost - benefits
     earned during year .....   $ 226,998    $ 175,553    $ 214,930
   Interest cost on projected
     benefit obligation .....     266,026      278,403      268,558
Actual return on assets .....    (151,097)    (346,036)    (179,441)
   Net of other components ..     (62,339)     (42,720)    (164,893)
                                ---------    ---------    ---------
   Net periodic
     pension cost ...........   $ 279,588    $  65,200    $ 139,154

   The reconciliation of the funded status of the plans is as follows:

     Year Ended                   6/30/97         6/30/96        6/30/95

     Measurement Date             3/31/97         3/31/96        3/31/95

   Actuarial present value of benefit obligations:

     Vested benefit
  obligation .............   $(2,798,339)   $(3,490,452)   $(2,605,779)
Accumulated benefit
  obligation .............   $(3,102,787)   $(3,826,817)   $(2,858,294)
Projected benefit
  obligation .............   $(3,878,041)   $(4,627,297)   $(3,427,845)
Plan assets at
  fair value .............     4,100,016      4,637,004      4,178,854
                             -----------    -----------    -----------
Plan assets greater
  (less) than projected
  benefit obligation .....   $   221,975    $     9,707    $   751,009
Unrecognized net
  (gain) loss ............       177,968        536,257       (320,239)
Prior service cost not yet
  recognized in net
  periodic pension cost ..        29,369         31,533         33,697
Unrecognized transition
  obligation (assets) ....      (223,197)      (305,063)      (337,558)
                             -----------    -----------    -----------
     Prepaid (accrued)
pension expense...........   $   206,115    $   272,434    $   126,909
                              ==========     ==========     ==========

   The  assumptions  used in  determining  pension  expense  and  funded  status
information shown above were as follows:

                             6/30/97      6/30/96      6/30/95
Discount rate......             7.50%       7.00%       8.25%
Rate of salary
  progression......             4.00%       4.00%       4.00%
Long-term rate of return
  on assets........        7.00-8.50%       7.00%       7.00%

   The discount  rates for June 30, 1997, and 1996 are based upon the Moody's AA
Corporate Bond Index.





<PAGE>

--------------------------------------------------------------------------------
4. PENSION PLANS (CONTINUED)
--------------------------------------------------------------------------------
   Contributions  to a union  sponsored  defined  contribution  pension plan for
   years  ended June 30,  1997,  1996,  and 1995 were  $224,750,  $171,238,  and
   $131,323,  respectively. This plan covers all bargaining unit employees. This
   plan is not administered by the Corporation and  contributions are determined
   in accordance with provisions of a negotiated labor contract.

   The  Corporation  maintains a defined  contribution  money-purchase  plan for
   qualified  employees at its San Angelo,  Texas  facility.  The  Corporation's
   contribution   to  this  retirement  plan  is  determined  by  the  voluntary
   contributions  made  by  the  employees.  The  Corporation  matches  employee
   contributions  up to 3% of the  individual  employee's  earnings.  During the
   years ended June 30, 1997, and 1996,  the  Corporation  incurred  expenses of
   $20,230 and $16,652, respectively, for this retirement plan, all of which was
   charged to operations.

5. PLANT, PROPERTY & EQUIPMENT

                                        June 30,
                          -----------------------------------
                             1997         1996        1995
                          ----------   ----------   ----------
Land ..................   $  197,326   $  183,526   $   54,676
Buildings .............    3,809,322    2,883,870    2,486,135
Machinery & Equipment .    3,488,412    3,131,250    2,432,653
Equipment under capital
lease .................       54,984           --           --
Patterns - Hoppes .....       30,000       30,000       30,000
Furniture & fixtures ..    1,020,343      958,293      774,841
Vehicles ..............      376,247      311,718      288,843
                          ----------   ----------   ----------
                          $8,976,634   $7,498,657   $6,067,148
Less: Accumulated
Depreciation ..........   (3,400,512)  (2,930,437)  (2,542,731)
TOTALS ................   $5,576,122   $4,568,220   $3,524,417

6. CONTINGENT LIABILITIES

   The  Corporation is involved in litigation  arising from the normal course of
   business.  In the opinion of  management,  based on advice of legal  counsel,
   this  litigation  will not have any material  adverse effect on the financial
   position of the Corporation.


<PAGE>

7. RELATED PARTY TRANSACTIONS

   The  Corporation  paid  approximately  $613,253 in the fiscal year 1997,  and
   $553,956  in the  fiscal  year  ended  1996 to  cover  premiums  for  various
   property,  casualty,  and workers compensation insurance policies on which an
   insurance  agency  owned by G. N.  Summers,  a director  of the  Corporation,
   received  commissions.  Refunds  totalling  $4,210 in the year ended June 30,
   1997,  and  $26,067  in the year  ended June 30,  1996 were  received  by the
   Corporation as a result of periodic  insurer audits of the various  policies.
   There  are  no  other  reportable  related  party  transactions  between  the
   Corporation and its directors, executive officers, 5% beneficial shareholders
   or immediate family members of the foregoing persons.

   The  Corporation  paid freight  charges  totaling  $12,800 to Western Express
   through  January  31,  1997,  at  which  time  Wendland  Manufacturing  Corp.
   (Wendland) purchased all of the business assets of Western Express.  Prior to
   February 1, 1997, an officer of Wendland had an ownership interest in Western
   Express.

8. INTANGIBLES

   Amortization  is recorded  under the  "straight  line  method."  Goodwill and
   non-compete  agreements are being amortized over five years.  Expenditures to
   acquire a patent are capitalized and amortized over 17 years.

9. OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK

   In 1990, the Corporation  adopted Statement of Financial  Accounting Standard
   No. 105 which requires disclosure of information about financial  instruments
   with off-balance  sheet risk and about  concentrations of credit risk for all
   financial instruments.

   OFF-BALANCE SHEET RISK

   As of June 30, 1997, the  Corporation  had no significant  off-balance  sheet
   risk.

   CONCENTRATIONS OF CREDIT RISK

   Financial   instruments   which   potentially   subject  the  Corporation  to
   significant  concentrations  of credit risk consist  principally of temporary
   cash investments and trade receivables.

   The Corporation  places its cash and temporary  investments with various high
   quality financial  institutions.  Cash accounts,  on deposit at a local bank,
   sometimes  exceeded the $100,000  limit  established  by the Federal  Deposit
   Insurance Corporation.  The Corporation maintains accounts with several stock
   brokerage  firms.  The  accounts  contain cash and various  securities.  Cash
   balances, which are generally not significant,  are insured up to $100,000 by
   the Securities Investor Protection Corporation (SIPC).  Investment securities
   balances, as reported in the balance sheet, are insured by SIPC up to various
   limits, depending on the brokerage firm.

   Concentrations  of credit risk with respect to trade  receivables are limited
   due to the large number of customers  comprising the  Corporation's  customer
   base, and their dispersion across many different  industries and geographical
   areas. No individual customer balance exceeded 10% of the Corporation's trade
   receivables at the balance sheet date.

   In management's  opinion,  as of June 30, 1997, and 1996, the Corporation had
   no other significant concentrations of credit risk.


<PAGE>

10.   COMPARATIVE STATEMENT OF CASH FLOWS

     RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
     BY OPERATING ACTIVITIES

                                                   June 30,
                                      1997           1996           1995
                                   -----------    -----------    -----------
     CASH FLOWS FROM
        OPERATING ACTIVITIES
     Net Income ................   $ 1,609,015    $ 1,148,934    $   927,141
      Non-Cash Items
        Included in Net Income:
        Adjustment to prior year
           tax expense .........       (19,440)            --             --
        Amortization ...........        66,267         79,517         10,042
Depreciation ...................       495,001        447,072        366,388
        (Gain) loss on disposal
           of equipment ........        12,916          3,121         17,985
        (Gain) loss on sale
           of securities .......         3,872          1,589         11,928
        Deferred Income Taxes ..       (87,612)        82,541         53,348
     Changes in:
        Accounts Receivable ....       (21,082)    (1,741,809)      (271,836)
        Inventory ..............      (277,193)       (20,497)      (300,362)
        Prepaid Income Taxes ...        56,886        (84,414)       170,014
Prepaid Expense ................        52,539       (144,344)       (87,156)
        Other Assets ...........            --             --         (5,000)
        Accounts Payable -
           Trade ...............       298,434        233,007        (86,795)
        Accrued Expenses .......       258,518        142,150        202,358
        Accrued Income Taxes ...         4,837       (155,183)            --
                                   -----------    -----------    -----------
           NET CASH PROVIDED
           (USED) BY OPERATING
           ACTIVITIES ..........   $ 2,452,958    $    (8,316)   $ 1,008,055
                                   ===========    ===========    ===========



<PAGE>

11.  OPERATING LEASES

     The Corporation  has entered into  noncancelable  operating  leases for two
     vehicles,  a computer, a software license, and office equipment expiring in
     various years through 2002. Remaining minimum lease payments,  by year, are
     as follows:

     Year Ended June 30,
     -------------------
     1998..................   $ 28,730
     1999..................     25,979
     2000..................     25,541
     2001..................     25,367
     2002..................     11,500
                               -------
                    TOTAL..   $117,117

     Rental expense totalled $20,986 during the fiscal year ended June 30, 1997.

12.   CAPITAL LEASES

     The  Corporation  is a lessee of a phone system and  hydraulic  shear under
     capital  leases,  both expiring in 2002. The assets and  liabilities  under
     capital  leases  are  recorded  at the  lower of the  present  value of the
     minimum  lease  payments  or the fair  value of the  asset.  The assets are
     amortized over the estimated productive life of the asset.  Amortization of
     the assets under capital leases is included in depreciation expense for the
     current year.

     Following is a summary of the property held under capital lease:

          New Lucent Partner Phone System             $4,839
          New Atlantic Hydraulic Shear                50,145
                                                     $54,984
          Less: Accumulated Amortization                (741)
                                                     $54,243

   Amortization  of assets under capital  leases  charged to expense in 1997 was
   $741.

   The annual interest rates on the phone system and hydraulic shear are 18% and
   9%,  respectively.  Total interest cost incurred during the year was $412 and
   $251, respectively, all of which was charged to operations.

   Minimum  future lease  payments under the capital leases as of June 30, 1997,
   for each of the next five years and in the aggregate are:

                     1998                       $ 14,924
                     1999                         14,924
                     2000                         14,923
                     2001                         14,923
                     2002                         12,493
                                                 -------
          Total minimum lease payments          $ 72,187
          Less: Amount representing interest     (18,283)
          Present value of minimum
               lease payments                   $ 53,904
                                                 =======


<PAGE>
13.  INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                           June 30,
                                1997        1996        1995
                              --------    --------    --------
     Organization
        Expense             $    5,000 $     5,000  $    5,000
     Noncompetition
        Agreements             300,000     300,000     100,000
     Patents                     9,214       9,214       9,214
     Goodwill - Wendland        13,627      13,627     - -
     Goodwill - Hoppes          10,000      10,000      10,000
                              --------    --------    --------
                              $337,841   $ 337,841    $124,214
     Less:
        Accumulated
           Amortization       (136,050)    (69,783)   (103,516)
                              --------    --------    --------
                              $201,791    $268,058   $  20,698
                               =======     =======    ========

14.  ACCOUNTS RECEIVABLE

        Accounts receivable consist of the following:

                                      June 30,
                           1997         1996         1995
                         ----------   ----------   ----------
     Trade Receivables   $4,822,885   $4,774,684   $3,012,285
     Other Receivables        9,232       31,439       49,080
     Allowance for
         Doubtful Accts.    (17,372)     (12,460)      (9,511)
                         ----------   ----------   ----------
                         $4,814,745   $4,793,663   $3,051,854
                          =========    =========    =========

15.  ACCRUED LIABILITIES

     Accrued liabilities consist of the following:

                                       June 30,
                             1997         1996          1995
                          ----------    ---------    ---------
     Commissions           $ 807,617   $  621,882   $  694,809
     County Property Taxes   254,251      224,006      226,651
     Insurance                21,440       - -          - -
     Interest                 - -           2,156       - -
     Payroll                 165,239      125,784       39,402
     Pension & 401(k)         - -          23,051       - -
     Payroll Taxes &
        Withholdings         148,977      129,351       65,963
     Other                     2,836          861       - -
     Vacation & Sick Pay      10,488       41,883       - -
     Sales Taxes               3,463          - -       - -
     Ad Valorem Taxes         13,181          - -       - -
                          ----------    ---------    ---------
                          $1,427,492   $1,168,974   $1,026,825
                           =========    =========    =========

16.  LONG-TERM DEBT

     Long-term debt consists of the following:

     Note payable to Norwest Bank for equipment,
     matures June 30, 2002.  Note is secured by same
     equipment.  Principal and interest are currently
     being made in monthly installments.  The interest
     rate is 10.22%.                                       $ 44,047

     Installment note payable to Norwest Bank for, and
     secured by, an automobile.  Monthly principal
     and interest payments of $274 are payable
     through the loan's April 18, 2001 maturity date,
     at 9% interest.                                         10,618

     Note payable to Robert Laframboise Mechanical
     Limited in annual installments of $20,167 (Canadian),
     without interest.  This note is unsecured, and matures
     September 15, 1997.                                     14,603

         Total                                             $ 69,268
                                                            =======

     Maturities of long-term debt are as follows:
             Year Ending
             June 30,                    Amount
                1998                      $24,300
                1999                       10,705
                2000                       11,816
                2001                       12,478
                2002                        9,969

                             TOTAL        $69,268

<PAGE>

--------------------------------------------------------------------------------
17.  OTHER COMMITMENTS
--------------------------------------------------------------------------------

     The Corporation has $500,000  available on its $500,000 line of credit from
     First of America Bank. The line of credit expires October 31, 1997.

     At June 30, 1997, the Monticello subsidiary was indebted to Norwest Bank in
     the  amount of  $45,400  on a  $100,000  revolving  commercial  plan.  This
     obligation  was  collateralized  by a security  interest in the  Monticello
     subsidiary's  inventory,  equipment,  accounts  receivable and intangibles.
     Norwest Bank also holds an unsecured guaranty by Bryan Steam Corporation on
     this  obligation.  The  outstanding  balance is due  December 31, 1997 with
     interest at a current rate of 9.25% in monthly installments  beginning July
     30, 1997.

     Production  employees  at the  Corporation's  Peru,  Indiana  facility  are
     covered by a  collective  bargaining  agreement  which will  expire in May,
     1998.

18.  BUSINESS COMBINATIONS

     On July 3, 1995, Wendland Manufacturing Corp. (Wendland), the Corporation's
     wholly-owned subsidiary,  acquired substantially all the tank manufacturing
     business  assets  of  a  Texas  corporation  for  $1,115,000.   Results  of
     operations  from July 3, 1995  through  June 30, 1996 are  included in this
     report.

     Wendland also acquired  substantially all the heat exchanger  manufacturing
     business assets of an Indiana corporation on December 6, 1995 for $215,000.
     Wendland operated this business as a division from acquisition through June
     30, 1996.

     On March 15,  1996,  Wendland  exchanged  $447,952 of the net assets of the
     heat exchanger  manufacturing  business for 100% of the outstanding  common
     stock   of  its   wholly-owned   subsidiary,   Monticello   Exchanger   and
     Manufacturing  Co.  (Monticello).  Monticello's  results of operations from
     March 15 through June 30, 1996 are included in this report.

     On January 31, 1997,  Wendland purchased all the business assets of Western
     Express Company,  a Texas  corporation,  which operates as a common carrier
     for  transporting  goods in the  United  States.  The  purchase  price  was
     $38,000.  Results of operations  from January 31, through June 30, 1997 are
     included in this report.




<PAGE>

19.  INVESTMENT SECURITIES

     On July 1, 1994, the Corporation adopted Statement of Financial  Accounting
     Standards No. 115 - "Accounting for Certain  Investments in Debt and Equity
     Securities" (SFAS 115). The Corporation's policy has been, historically, to
     classify  its  investment   securities  as  current  assets,   even  though
     management  has set a  precedent,  evidencing  its  intent,  by holding its
     investment  securities to maturity.  The Corporation  considers none of its
     investment securities to be, or to have been, available-for-sale or trading
     securities.  Investment  securities  held to  maturity,  which  do not have
     either a single  or  defined  maturity  date,  have been  allocated  to the
     "maturing within one year" maturity grouping.

     The following is a summary of investment  securities  classified as held to
maturity:

<TABLE>
<CAPTION>
                                          June 30, 1997             June 30, 1996
                                        Fair      Amortized       Fair       Amortized
                                        Value       Cost          Value        Cost
                                     ----------   ----------   ----------   ----------
<S>                                  <C>          <C>          <C>          <C>       
Equity Securities ................   $  194,161   $  184,461   $   71,629   $   68,176
U.S. Government obligations ......           --           --           --           --
Obligations of individual states
    and political subdivisions ...    1,095,081    1,100,725    1,274,581    1,299,298
Obligations of foreign governments           --           --           --           --
Corporate obligations ............      156,375      155,500       73,500       75,000
Mortgage-backed securities .......       25,250       26,000       25,000       26,000
Other ............................           --           --      154,912      148,080
                                     ----------   ----------   ----------   ----------
                                     $1,470,867   $1,466,686   $1,599,622   $1,616,554
                                     ==========   ==========   ==========   ==========

</TABLE>






<PAGE>

--------------------------------------------------------------------------------
19.  INVESTMENT SECURITIES (CONTINUED)
--------------------------------------------------------------------------------

     At June 30, 1997,  investment  in debt  securities,  classified  as held to
maturity, mature as follows:

Maturity
                                    Within               After
                                    1 year   1-5 years  5-10 years 10 years
                                 ---------- ----------- ---------- ---------
Obligations of individual states
and political subdivisions .....   $822,020   $215,350   $ 10,955 $    52,400
Corporate obligations ..........         --         --         --     155,500
Other ..........................         --         --         --          --
                                   --------   ---------   --------   --------
                                   $822,020   $ 215,350   $ 10,955   $207,900
                                   ========   =========   ========   ========

     The following is a summary of gross unrealized holding gains and losses for
investment securities classified as held to maturity:

<TABLE>
<CAPTION>
                                        June 30, 1997             June 30,  1996
                                      Gross        Gross       Gross        Gross
                                    Unrealized   Unrealized   Unrealized  Unrealized
                                      Holding     Holding      Holding     Holding
                                      Gains       Losses        Gains       Losses
                                     -------      -------      -------      -------
<S>                                  <C>          <C>          <C>          <C>    
Equity Securities ................   $ 9,876      $   176      $ 4,867      $ 1,414
U.S. Government obligations ......        --           --           --           --
Obligations of individual states                                         
    and political subdivisions ...    13,115       18,759        9,532       34,249
Obligations of foreign governments        --           --           --           --
Corporate obligations ............     1,500          625           --        1,500
Mortgage-backed securities .......        --          750           --        1,000
Other ............................        --           --        6,832           --
                                     -------      -------      -------      -------
                                     $24,491      $20,310      $21,231      $38,163
                                     =======      =======      =======      =======
</TABLE>

     Realized  gains  and  losses  were  determined  on the  basis  of  specific
     identification  during  the  years  ended  June 30,  1997 and  1996.  Gross
     proceeds and gross  realized  gains and losses on securities  classified as
     held to maturity were:
                                                 June 30,
                                              1997      1996
                                            --------  --------

Sale proceeds .......................       $308,912   $518,572
                                            ========   ========

Redemption proceeds .................       $ 60,000   $298,447
                                            ========   ========

Amortized cost of sales & redemptions       $372,784   $686,734
                                            ========   ========

Gross realized gains ................       $    --    $  7,245
                                            ========   ========

Gross realized losses ...............       $  3,872   $  8,834
                                            ========   ========

   The Corporation sold investment  securities during the fiscal year ended June
   30,  1997,  and used the  proceeds to partially  fund  construction  of a new
   building in Peru, Indiana.

   The Corporation sold investment  securities during the fiscal year ended June
   30, 1996, and used the proceeds to purchase the business assets of Monticello
   Tank Company.

   The Corporation sold investment  securities during the fiscal year ended June
   30, 1995 and  purchased a U.S.  Treasury  Money Fund having a higher  current
   yield.  Redemption  proceeds from municipal bond maturities were subsequently
   invested in similar municipal bonds.


<PAGE>

20.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  carrying  values  and  fair  values  for the  Corporation's  financial
instruments are as follows:

                                                    June 30, 1997
                                                Carrying       Fair
                                                 Value        Value
                                               ----------   ----------
Cash and Cash Equivalents ..................   $  368,879   $  368,879
Investment Securities (held to maturity) ...    1,466,686    1,470,867
Accounts Receivable ........................    4,814,745    4,814,745
Non-compete Agreements .....................      180,000      180,000
Deposits with Utilities ....................        5,171        5,171
Accounts Payable ...........................      851,512      851,512
Accrued Expenses ...........................    1,427,492    1,427,492
Note Payable - Norwest Bank ................       44,047       44,047
Note Payable - Line of Credit - Norwest Bank       45,400       45,400
Note Payable - Laframboise .................       14,603       14,603
Note Payable - Auto Loan - Norwest Bank ....       10,618       10,618
Dividends Payable ..........................       11,834       11,834

     The fair value of  investment  securities  is an  estimate  based on quoted
     market  prices.  The fair value of long-term debt is based on current rates
     at  which  the  Corporation  could  borrow  funds  with  similar  remaining
     maturities.