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                                     [LOGO]



                       2003 Annual Report to Shareholders





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                                GENERAL OVERVIEW

         Hanover Foods Corporation (as used herein the term "Corporation" refers
to Hanover Foods Corporation and its consolidated subsidiaries) was incorporated
on December 12, 1924 in Harrisburg, Pennsylvania.

         The Corporation has six (6) wholly-owned subsidiaries, Tri-Co. Foods
Corp., Consumers Packing Corporation, d/b/a Hanover Foods - Lancaster Division,
Spring Glen Fresh Foods, Inc., Hanover Insurance Corporation, Ltd., Nittany
Corporation and Bickel's Snack Foods, Inc. Tri-Co. Foods Corp. has three (3)
wholly-owned subsidiaries: Alimentos Congelados Monte Bello, S.A., Sunwise
Corporation and Mayapac, S.A.

         The Corporation enjoys its strongest retail sales in the mid-Atlantic
states and Florida. Introduction of frozen ethnic blends, specialty vegetables,
canned pasta, frozen soft pretzels, refrigerated food, canned and frozen
mushrooms and snack food products has enabled the Corporation to increase and
expand its distribution throughout the eastern seaboard. Distribution in the
remainder of the United States is limited to food service, military and
industrial customers.

         The Corporation markets its products under the brand names HANOVER,
HANOVER FARMS, MYERS, PHILLIPS, GIBBS, SUPERFINE, MARYLAND CHIEF, MITCHELL'S,
DUTCH FARMS, SUNWISE, O&C (jarred onions only), SPRING GLEN FRESH FOODS,
SUNNYSIDE FOODS, NOTTINGHAM, BICKEL'S, BON TON, YORK SNACKS, CABANA and DRAPER
KING COLE. The products sold by the Corporation under these brand names include
canned vegetables, beans and pasta as well as frozen vegetables, frozen meat
products, food entrees, refrigerated and fresh foods, canned and frozen
mushrooms and potato chips.

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

Forward Looking Statements

         When used in this Annual Report, the words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"projected," or similar expressions are intended to identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties
including but not limited to quarterly fluctuations in operating results,
competition, state and federal regulation, environmental considerations, foreign
operations, and a change of control as a result of the pending Warehime family
litigation. Such factors, which are discussed in the Annual Report, could affect
the Corporation's financial performance and could cause the Corporation's actual
results for future periods to differ materially from any opinion or statements
expressed herein with respect to future periods. As a result, the Corporation
wishes to caution readers not to place undue reliance on any such forward
looking statements, which speak only as of the date made.

Description of Business

         The Corporation is a vertically integrated processor of food products
in one industry segment. The Corporation is involved in the growing, processing,
canning, freezing, freeze-drying, packaging, marketing and distribution of its
products under its own trademarks as well as other branded, customer and private
labels. The Corporation has operations in ten plants in Pennsylvania, one plant
in Maryland, one plant in Delaware, and two plants in Guatemala. The Corporation
and its subsidiaries, in the normal course of business, purchase and sell goods
and services to related parties. See Note 6 of the notes to the Consolidated
Financial Statements.

         The Corporation's fiscal year ends at the close of operations on the
Sunday nearest to May 31. Accordingly, the following discussion compares the
results of operations for the fiscal year ended June 1, 2003 to the year ended
June 2, 2002, and the fiscal year ended June 2, 2002 to the year ended June 3,
2001. The fiscal year ended June 3, 2001 was comprised of 53 weeks. The fiscal
years ended June 1, 2003 and June 2, 2002, were comprised of 52 weeks.

                                       1
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RESULTS OF OPERATIONS

Year Ended June 1, 2003 Compared to Year Ended June 2, 2002

Net Sales

         Consolidated net sales were $290.3 million for fiscal 2003 compared to
$290.2 million for fiscal 2002. The consolidated net sales comprised of the
following volume and sales price components:

                                         Volume       Sales Price      Combined
                                         ------       -----------      --------
Frozen Foods.....................          1.0%           (.7)%           .3%
Canned Foods.....................         (1.3)%           .6%           (.7)%
Prepared/Snack Foods.............           .1%            .3%            .4%
                                          ------          -----          -----
                                           (.2)%           .2%             0%
                                          ======          =====          =====

         The increased volume in frozen food sales was principally due to an
increase in retail brand sales and private label sales. These increases were
partially offset by decreases in food service and industrial sales. Frozen food
prices have remained relatively consistent with last fiscal year, however the
increase in price sensitive promotions did decrease price, and the increase in
private label sales were made at a lower price per unit that offset the
increased price in branded retail sales.

         The decreased volume in canned food sales was principally due to a
decrease in industrial and private label sales. Canned food prices have remained
relatively consistent with last fiscal in all major sales areas.

         Prepared and snack foods volume was consistent with last fiscal with
increases in prepared foods and offset by decreases in snack food sales. The
prices for both prepared and snack foods remained relatively consistent with
last fiscal year.

Cost of Goods Sold

         Consolidated cost of goods sold represent 84.2% of consolidated net
sales for fiscal year 2003 compared to 84.6% for fiscal 2002. The consolidated
cost of sales decreased $1.4 million to $244.3 million in fiscal 2003 compared
to $245.7 million for fiscal 2002. The cost of sales decreased $0.9 million
primarily due to a reduction in ingredient costs and to a lesser extent due to
the volume reduction which decreased cost of goods by $0.5 million for fiscal
2003.

Selling Expenses

         Consolidated selling expenses represented 4.2% of consolidated net
sales for fiscal 2003 and 4.9% for fiscal 2002. The decrease in the amount of
selling expenses reflect lower media advertising, customer advertising, free
goods marketing program, accounts receivable write-off and the elimination of
the amoritization of trademarks.

Administration Expenses

         Consolidated administration expenses were $15.8 million for fiscal year
2003, or 5.4% of consolidated net sales, as compared to $14.6 million, or 5.0%
of consolidated net sales in 2002. The increase in administration expenses
reflects increases in outside professional fees and services, the provision for
the supplemental pension benefits, the provision for post-retirement benefits as
well as increase in the 401(k) contribution and the ESOP contribution.

                                       2
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Interest Expense

         Consolidated interest expense for fiscal 2003 decreased $0.8 million to
$2.8 million compared to $3.6 million in fiscal 2002. The decrease reflected
lower average borrowings as well as lower average borrowing rates for the fiscal
year compared to last fiscal year.

Other Income (Expense)

         Consolidated other income decreased $101,000 to $270,000 for fiscal
2003 as compared to other income of $371,000 for fiscal 2002. The decrease was
due to lower return of sale of investments and a lower gain on the sales of
fixed assets.

Income Taxes

         The provision for corporate federal and state income tax for the fiscal
year 2003 was $5.7 million or 36.4% of pretax earnings, as compared to $5.1
million or 41.3% of pretax earning for 2002. The decrease in the effective rate
was primarily due to the elimination of the income taxes in our Guatemala
subsidiary. Alcosa lost its income tax exoneration on March 31, 2001, and the
government granted an income tax exoneration to Mayapac, S.A. beginning January
2002 and ending January 2012.

Net Earnings

         Consolidated net earnings for fiscal year 2003 were $9.9 million, or
3.4% of consolidated net sales, as compared to $7.3 million, or 2.5% of
consolidated net sales, for fiscal 2002 as a result of the factors discussed
above.

RESULTS OF OPERATIONS

Year Ended June 2, 2002 Compared To Year Ended June 3, 2001

Net Sales

         Net sales and gross profit for fiscal years 2002 and 2001 have been
adjusted by certain amount previously recorded as selling and marketing expense
in accordance with EITF 01-9, and cost of sales have been adjusted by certain
freight costs previously recorded as net sales in accordance with EITF 00-10.

         Consolidated net sales were $290.2 million for fiscal 2002 compared to
$293.0 million for fiscal 2001, a decrease of $2.8 million, or 1.0%. The
decrease in consolidated net sales was comprised of the following volume and
sales price components:

                                          Volume    Sales Price      Combined
                                          ------    -----------      --------
Frozen Foods.....................          (.8)%         0%             (.8)%
Canned Foods.....................         (1.1)%       2.0%              .9%
Prepared/Snack Foods.............          (.5)%       (.6)%           (1.1)%
                                          ------       -----           ------
                                          (2.4)%       1.4%            (1.0)%
                                          ======       =====           ======

         The decreased volume in frozen sales was principally due to a decrease
in retail brand sales due to a planned decrease in price sensitive promotions.
This decrease was partially offset by increases in food service and private
label sales. Frozen food prices remained relatively consistent with last fiscal
year, however the reduced price sensitive promotions did increase prices, but
the increase in foods services and private label sales were made at a lower
price per unit that offset the increased price in branded retail sales.

                                       3
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         The decreased volume in canned sales was principally due to a decrease
in retail branded sales due to a planned decrease in price sensitive promotions.
This decrease was partially offset by increases in food service sales. Canned
prices increased due to a reduction in price sensitive promotion and an overall
increase in dry bean and potato prices during the current fiscal year.

         Prepared and snack foods showed a decrease in sales volume due to the
elimination of non-profitable snack accounts which was planned. The decreased
sales prices in prepared and snack foods were principally due to a change in the
mix of product sold towards private label versus branded products.

Cost of Goods Sold

         Consolidated costs of goods sold represents 84.6% of consolidated net
sales for fiscal 2002 compared to 86.4% for fiscal 2001. The consolidated cost
of sales decreased $7.5 million to $245.7 million in fiscal 2002 compared to
$253.2 million for fiscal 2001. The cost of sales decreased $.6 million
primarily due to reduced energy costs and increased plant productivity, and to a
larger extent, due to a volume reduction of 2.4% or $6.9 million for fiscal
2002.

Selling Expenses

         Consolidated selling expenses represented 4.9% of consolidated net
sales for fiscal 2002 and 4.8% for fiscal 2001. Free goods marketing program
expense increased to $.7 million for fiscal year 2002 as compared to $0 dollars
for fiscal 2001 as the Corporation spent more dollars to increase brand
awareness.

         The Corporation spent $.7 million on advertising for fiscal 2002,
compared to $.7 million in advertising for fiscal 2001.

Administrative Expenses

         Consolidated administrative expenses were $14.6 million for fiscal year
2002, or 5.0% of consolidated net sales, as compared to $13.3 million, or 4.5%
of consolidated net sales in 2001. Increased corporate bonus provision and a
charge to earnings for the contribution to the Corporation's Employee Stock
Ownership Plan accounted for the increase in administration expense for the
fiscal year ended June 2, 2002.

Interest Expense

         Consolidated interest expenses for fiscal 2002 decreased $1.0 million
to $3.6 million compared to $4.6 million in fiscal 2001. The decrease reflects
lower average borrowings as well as lower average borrowing rates for the fiscal
year compared to last fiscal year.

Other Income (Expense)

         Consolidated other income decreased $763,000 to $371,000 for fiscal
2002 as compared to other income of $1,134,000 for fiscal 2001. Increased
foreign exchange losses accounted for $118,000 of the decrease and decreased
gains on the sales of investments accounted for $511,000 of the decrease.

Income Taxes

         The provision for corporate federal, foreign and state income tax for
fiscal year 2002 was $5.1 million or 41.3% of pretax earnings, as compared to
$2.5 million or 27.3% of pretax earnings for 2001. The increase in the effective
rate was primarily due to income earned in Guatemala that was subject to income
taxes in the current year resulting from the expiration of an export tax
exemption and related adjustment of tax accruals for these taxes. Prior to March
31, 2001, the Corporation's Guatemalan subsidiary Alimentos Congelados Monte
Bello S.A. was generally not subject to income taxes.

                                       4
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Net Earnings

         Consolidated net earnings for fiscal year 2002 were $7.3 million, or
2.5% of consolidated net sales as compared to $6.7 million or 2.3% of
consolidated net sales for fiscal 2001 as a result of the factors discussed
above.



RELATED PARTY TRANSACTIONS

         During fiscal 2003, the Corporation and its subsidiaries, in the normal
course of business, purchase and sell goods and services to related companies.
These transactions are summarized below.

         During fiscal 2003, the Corporation rented equipment from Park 100
Foods, Inc. The rental payments pursuant to such lease agreements totaled
$12,000 during fiscal 2003. As of June 1, 2003, the Corporation had an accounts
receivable of $163,000 from Park 100 Foods, Inc. for food products sold and
shipped to Park 100 Foods, Inc. During fiscal 2003, the Corporation sold
approximately $1.9 million of frozen food products to Park 100 Foods, Inc.,
Tipton, Indiana. James A. Washburn, a director of the Corporation, owns
approximately 80% of the outstanding stock of Park 100 Foods, Inc.

         During fiscal 2003, the Corporation leased a two story farm house,
adjoining one story guest house and adjoining ground located on Trolley Road,
R.D. #3, Hanover, Heidelberg Township, Pennsylvania, for customer housing and
temporary new employee housing from John A. and Patricia M. Warehime for a total
of $36,000.

         During fiscal 2003, the Corporation leased a barn for seed storage,
located in Heidelberg Township, Pennsylvania for $4,000 from Warehime
Enterprises, Inc. J. William Warehime, a shareholder of the Corporation, and
John A. Warehime, Chairman of the Corporation, own 44.4% and 14.8% of the
outstanding stock of Warehime Enterprises, Inc., respectively.

         During fiscal 2003, the Corporation purchased $1.1 million of
contracted vegetables from Lippy Brothers, Inc. T. Edward Lippy, a director of
the Corporation, owns approximately 37% of the outstanding stock of Lippy
Brothers, Inc.

         During fiscal 2003, the Corporation's subsidiary, Alimentos Congelados
Monte Bello S.A. sold its condominium real estate located in Naples, Florida to
John A. & Patricia M. Warehime for $127,500, which approximates fair value.

         During fiscal 2003, the adult children of the Corporation's Chairman,
John Warehime, were employed by the Corporation, including Jennifer Carter,
Director, who is employed as Assistant to the Chairman, Jeffrey Warehime, who is
employed as Director - Fresh Produce, and Andrew Warehime, who is employed as
Special Sales Manager. Jennifer Carter, Jeffrey Warehime and Andrew Warehime are
employed by the Corporation at annual salaries of $92,314, $97,919, $62,129,
respectively. Ms. Carter also receives director compensation customary for the
Corporation's directors. On June 20, 2002, each of Jennifer Carter, Jeffrey
Warehime, and Andrew Warehime were granted an option to purchase 500 shares of
Class B common stock. Andrea Kint, the daughter of Pietro Giraffa, Vice
President and Controller of the Corporation, is employed as Assistant Production
Manager - Hanover, PA Frozen Operations at an annual salary of $46,350.

LIQUIDITY AND CAPITAL RESOURCES

         The discussion and analysis of the Corporation's liquidity and capital
resources should be read in conjunction with the Consolidated Statements of Cash
Flows, contained elsewhere herein.

         Net working capital was $47.0 million at June 1, 2003 and $36.5 million
at June 2, 2002. The current ratio was 2.07 on June 1, 2003 and 1.64 on June 2,
2002.

                                       5
<PAGE>
         Net cash provided by operations for the fiscal year ended June 1, 2003
was $22.7 million, compared to $19.0 million, for the fiscal year ended June 2,
2002. Sources of net cash provided by operations consisted principally of net
earnings of $9.9 million and non-cash depreciation and amortization expense of
$9.6 million and decreases in inventory and accounts receivable of $5.1 million.
The use of net cash for operations consisted primarily of decreased accounts
payable and accrued expenses of $2.4 million and deferred income taxes of $1.3
million.

         Net cash provided by operations for the fiscal year ended June 2, 2002
was $19.0 million, compared to $10.8 million for the fiscal year ended June 2,
2001. Sources of net cash provided by operations consisted principally of net
earnings of $7.3 million and non-cash depreciation and amortization expense of
$9.4 million and increases in accounts payable and accrued expenses of $1.2
million. The use of net cash for operations consisted primarily of increased
inventory of $.3 million and increased prepaid expenses of $.6 million.

         Net cash used by investing activities for the fiscal year ended June 1,
2003 was $5.0 million as compared to $6.9 million for fiscal year ended June 2,
2002. The principal use of funds was the upgrade of property, plants and
equipment. During the year ended June 1, 2003, $5.6 million was spent on
development and modernization of equipment as compared to $6.8 million in fiscal
year ended June 2, 2002. These projects were funded by internally generated
funds

         Net cash used by investing activities for the fiscal year ended June 2,
2002 was $6.9 million as compared to $13.2 million for fiscal year ended June 3,
2001. The principal use of funds was the upgrade of property, plant and
equipment. During the year ended June 2, 2002, $6.8 million was spent on
development and modernization of equipment as compared to $13.6 million in the
fiscal year ended June 3, 2001. These projects were funded by internally
generated funds.

         Net cash used by financing activities was $16.4 million for the fiscal
year ended June 1, 2003, compared to cash used by financing activities of $11.1
million for the fiscal year ended June 2, 2002. Seasonal borrowings amounting to
$145.3 million were used throughout the fiscal year to fund operating needs.
Seasonal borrowing decreased $11.4 million as of June 1, 2003 compared to June
2, 2002. Payments on long-term debt were $4.3 million. The weighted average cost
of seasonal borrowing was 2.28% for the fiscal year ended June 1, 2003 compared
to 4.02% for the fiscal year ended June 2, 2002.

         Net cash used by financing activities was $11.1 million for the fiscal
year ended June 2, 2002, compared to cash used by financing activities of $2.8
million for the fiscal year ended June 3, 2001. Seasonal borrowing decreased
$33.3 million as of June 2, 2002 compared to June 3, 2001. As of September 1,
2001, the Corporation entered in the Note Purchase Agreement with a group of
lenders led by John Hancock Insurance Company (the "Lenders") and issued 7.01%
Senior Notes (the "Notes") due September 15, 2011 in the aggregate principal
amount of $25.0 million to the Lenders. The Corporation is required to make a
prepayment of $2.5 million of the principal amount of the Notes on September 15,
2002 and on each September 15 thereafter to and including September 15, 2011. In
the event of any change of control of the Corporation, the Corporation has an
obligation to prepay the Notes in the amount equal to 100% of the outstanding
principal amount of the Notes and accrued interest thereon, together with a
premium equal to the applicable Make-Whole Amount, as defined in the Note
Purchase Agreement. The Note Purchase Agreement contains certain limitations on
the Corporation's ability to enter into merger agreements, incur debt, sell its
assets, other than in the ordinary course of business. The Corporation received
$25.0 million on September 1, 2001 from proceeds for the Notes. Payments on
long-term debt were $1.8 million. The weighted average cost of seasonal
borrowing was 4.02% for the fiscal year ended June 2, 2002 compared to 6.53% for
the fiscal year ended June 3, 2001.

         A change in control of the Corporation would trigger a repayment
obligation with respect to $22.5 million in aggregate principal amount of 7.01%
Senior Notes due September 15, 2011 of the Corporation (the "Notes"). In the
event of any change of control of the Corporation, the Corporation has an
obligation to prepay the Notes in the amount equal to 100% of the outstanding
principal amount of the Notes and accrued interest thereon, together with a
premium equal to the applicable Make-Whole Amount, as defined in the Note
Purchase Agreement. A "change in control" as defined in the Note Purchase
Agreement means the date on which (i) John Warehime ceases to hold the positions
of Chairman, President and Chief Executive Officer of the Corporation or (ii)
Gary T. Knisely ceases to hold the positions of Executive Vice President and
Secretary of the Corporation. To the extent a change of control were to occur
and the Lenders demand repayment of the Notes, the Corporation would be required
to obtain an alternative funding source to repay this obligation. While the
Corporation currently believes it would be successful in obtaining additional
financing, no assurance can be given as to whether the Corporation will be
successful in obtaining additional funding sources or if such financing will be
on terms and conditions that are acceptable to the Corporation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" in this report.

                                       6
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         At June 1, 2003, the Corporation has commitments from financial
institutions to provide seasonal lines of credit in the amount of $50.0 million.
Borrowing is permitted within prescribed parameters in existing debt agreements,
which contain certain performance covenants. The term loan agreements with the
Lenders and seasonal borrowing with financial institutions, contain various
restrictive provisions including those relating to mergers and acquisitions,
additional borrowing, guarantee of obligations, lease commitments, limitations
to declare or pay dividends, repurchase stock, and the maintenance of working
capital and certain financial ratios. Based on the requirements of the
agreements at June 1, 2003, $38,576,000 of retained earnings are restricted from
distribution. The Corporation is in compliance with the restrictive provisions
in the agreements as of June 1, 2003.

         The Corporation paid dividends of $688,000 during fiscal 2003 compared
to $984,000 in fiscal 2002.

         The Corporation believes that it has sufficient working capital and
availability from seasonal lines of credit to meet its cash flow needs.

         The following table summarizes the Corporation's contractual
obligations and other commitments as of June 1, 2003:
<TABLE>
<CAPTION>
                                                                Payment Due by Period
                                          ------------------------------------------------------------------
                                                                                                    After
        Contractual Obligation              Total        1 Year       2-3 Years     4-5 Years      5 Years
-------------------------------------      -------      --------     -----------   -----------    ----------
<S>                                      <C>           <C>            <C>     <C>   <C>     <C>  <C>      <C>
Short-Term Notes Payables............    $ 7,634,000   $ 7,634,000    $      -0-    $      -0-   $       -0-
Long-Term Debt.......................     29,643,000     4,286,000     8,572,000     6,785,000    10,000,000
Operating Leases.....................      1,121,000       433,000       470,000       218,000           -0-
                                         -----------   -----------    ----------    ----------   -----------
Total contractual obligations........    $38,398,000   $12,353,000    $9,041,000    $7,000,000   $10,000,000
                                         ===========   ===========    ==========    ==========   ===========
</TABLE>
         Currently, the Corporation is obligated to purchase 6,000,000 pounds of
tomato paste from California Tomato Products, Colusa, California in each of the
fiscal years from 2003 through 2006, at a price based on annual cost of
production.

         The Corporation's sources of liquidity are primarily funds from
operation and available amounts under seasonal lines of credit expiring (two on
October 31, 2004 and one on January 28, 2004), which are expected to be renewed
in the ordinary course of business.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

         Preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the U.S. requires the Corporation to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Many of the estimates and assumptions
require significant judgment. Future actual results could differ from those
estimates and assumptions and could have a significant impact on our
consolidated results of operations, financial position and cash flows.

         The following accounting policies, estimates and assumptions are
particularly sensitive because of their significance on the preparation of the
Corporation's consolidated financial statements:

         o    The allowance for potentially uncollectible receivables and
              pending deductions requires management to make significant
              judgments in estimating future amounts to be received. Our
              judgments are based upon historical experience and current market
              conditions. Changes in estimates could be impacted as a result of
              events, such as a deterioration of the credit status of customers
              or material reductions in product and sales volumes.

                                       7
<PAGE>

         o    Determination of liabilities for pension and post-retirement
              benefits includes significant assumptions and estimates relating
              to compensation and health care cost trends, discount rates and
              rate of return on plan assets. The assumptions are based upon
              current market and health care trends.

         o    Long-lived assets are reviewed for impairment whenever events or
              changes in circumstances indicate that the carrying amount of the
              asset may not be recoverable. Recoverability of assets to be held
              and used is measured by a comparison of the carrying amount of the
              assets to future net cash flows estimated to be generated by such
              assets. If such assets are considered to be impaired, the
              impairment to be recognized is the amount by which the carrying
              amount of the assets exceeds the fair value of the assets.
              However, determining fair value is subject to estimates of both
              cash flows and interest rates and different estimates could yield
              different results. There are no events or changes in circumstances
              of which management is aware indicating that the carrying value of
              the Corporation's long-lived assets may not be recoverable.

         o    Effective June 1, 2002, the Corporation adopted Statement of
              Financial Accounting Standards No. 142, "Goodwill and Other
              Intangible Assets" (SFAS 142). In accordance with SFAS 142,
              goodwill and indefinite-lived intangible assets are no longer
              amortized but are reviewed at least annually for impairment. As
              required by SFAS 142, management performed transitional impairment
              testing during the third quarter and annual impairment testing of
              goodwill and indefinite-lived intangible assets during the fourth
              quarter of fiscal year 2003. These tests confirmed that the fair
              value of the Corporation's reporting units exceeds their carrying
              values, and that no impairment loss needed to be recognized for
              goodwill upon the adoption of SFAS 142.

              The annual evaluation of goodwill and other indefinite-lived
              intangible assets requires the use of estimates about future
              operating results for each reporting unit to determine their
              estimated fair value. Changes in forecasted operations can
              materially affect these estimates. Additionally, other changes in
              the estimates and assumptions, including the discount rate and
              expected long-term growth rate, which drive the valuation
              techniques employed to estimate the fair value of goodwill and
              other indefinite-lived intangible assets could change and,
              therefore, impact the assessments of impairment in the future.

The footnotes to the consolidated financial statements provide additional
information on accounting policies and assumptions used by the Corporation.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Corporation is subject to market risk associated with changes in interest
rates. To manage the risk of fluctuations in interest rates, the Corporation's
borrowings are a mix of fixed and floating rate obligations. This includes the
$29.6 million of unsecured senior notes payable, $7.1 million bears interest at
an 8.74% fixed rate and is due in 2007, $22.5 million bears interest at a 7.01%
fixed rate and is due in 2013. The Corporation also maintains short-term
unsecured lines of credit that bear interest at floating rates.

                                       8
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         The following table presents the expected maturity and effective
interest rates of the Corporation's debt obligations (dollars in thousands):
<TABLE>
<CAPTION>
                                                                                                                Fair
                                        2004      2005       2006      2007       2008    Thereafter   Total    Value
                                        ----      ----       ----      ----       ----    ----------   -----    -----
<S>                                    <C>       <C>        <C>       <C>        <C>      <C>          <C>     <C>
Fixed Rate
   Unsecured senior notes.......       $4,286    $4,286     $4,286    $4,285     $2,500     $10,000   $29,643  $27,859
   Effective interest rate......        7.42%     7.37%      7.30%     7.20%      7.01%       7.01%     7.22%       --
Variable Rate
   Lines of credit..............       $7,634        --         --        --         --          --    $7,634   $7,634
   Effective interest rate......        2.12%        --         --        --         --          --     2.12%       --
</TABLE>

IMPACT OF EVENTS AND COMMITMENTS OF FUTURE OPERATIONS

Competition in the Marketplace

The Corporation faced stiff competition from national and regional branded
companies during the entire fiscal year 2002 in all of its market areas and
management anticipates this competitive environment to continue throughout
fiscal year 2003.

Impact of Inflation and Changing Prices

The changes in cost and prices within the Corporation's business due to
inflation were not significantly different from inflation in the United States
economy as a whole. Levels of capital investment, pricing and inventory
investment were not materially affected by the moderate inflation.

New Accounting Standards

In May 2003, the FASB issued SFAS No. 150 Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. This statement
establishes standards for how an issuer classifies and measure certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer to classify a financial instrument within its scope as a
liability (or an asset in some circumstances). The statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. The statement is not expected to have a material impact on our
consolidated financial statements.

                                       9
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                         FINANCIAL HIGHLIGHTS FIVE YEARS
                 (in thousands except share and per-share data)

The consolidated financial information set forth below should be read in
conjunction with the more detailed consolidated financial statements, including
related notes, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" including elsewhere in this Annual Report.
<TABLE>
<CAPTION>

                                                    June 1,       June 2,       June 3,       May 28,       May 30,
                                                     2003          2002          2001          2000          1999
                                                    -------       -------       -------       -------       -------
<S>                                                <C>           <C>           <C>           <C>           <C>
Net Sales..................................        $290,311      $290,227      $293,049      $277,334      $266,717
Earnings before income taxes...............         $15,528       $12,392        $9,158       $13,648       $15,443
Net Earnings...............................          $9,874        $7,271        $6,661        $8,619        $9,539
Net Earnings per common share-basic........          $13.64        $10.10         $9.26        $11.99        $13.24
Net Earnings per common share-diluted......          $13.40         $9.97         $9.15        $11.82        $13.03
Basic weighted-average shares..............         720,684       716,191       714,565       715,249       716,974
Diluted weighted-average shares............         733,750       729,577       728,235       729,389       731,895
Common shares outstanding-year end.........         723,335       718,791       714,496       714,670       715,888
Preferred shares outstanding-year end......          24,564        24,564        24,724        24,764        25,044
Working Capital............................         $47,027       $36,547        $6,826        $7,566       $10,841
Property, plant and equipment-net..........         $72,634       $76,639       $78,837       $73,484       $65,992
Long-term debt.............................         $25,357       $29,643        $8,940       $10,741       $12,500
Stockholders' equity.......................         $93,217       $83,991       $77,465       $72,312       $64,454
Total assets...............................        $171,433      $179,016      $180,728      $179,512      $157,241
Dividend per common share..................           $1.10         $1.10         $1.10         $1.21        $1.265
</TABLE>

                                       10
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S>                                                                                                           <C>
Independent Auditors' Report....................................................................................F-2

Consolidated Balance Sheets as of June 1, 2003 and June 2, 2002.................................................F-3

Consolidated Statements of Earnings for the Years Ended  June 1, 2003, June 2, 2002,
    and June 3, 2001............................................................................................F-5

Consolidated Statements of Comprehensive Income for the Years Ended June 1, 2003,
    June 2, 2002, and  June 3, 2001.............................................................................F-6

Consolidated Statements of Cash Flows for the Years Ended June 1, 2003, June 2, 2002,
    and June 3, 2001............................................................................................F-7

Consolidated Statements of Stockholders' Equity for the Years Ended June 1, 2003,
     June 2, 2002, and June 3, 2001.............................................................................F-8

Notes to Consolidated Financial Statements for the Years Ended June 1, 2003,
     June 2, 2002, and June 3, 2001.............................................................................F-9
</TABLE>

                                      F-1

<PAGE>
                          Independent Auditors' Report



Board of Directors and Stockholders
Hanover Foods Corporation:

We have audited the accompanying consolidated balance sheets of Hanover Foods
Corporation and subsidiaries as of June 2, 2002 and June 3, 2001, and the
related consolidated statements of earnings, comprehensive income, cash flows,
and stockholders' equity for each of the years in the three-year period ended
June 2, 2002. These consolidated financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hanover Foods
Corporation and subsidiaries as of June 2, 2002 and June 3, 2001 and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 2, 2002, in conformity with accounting principles generally
accepted in the United States of America.



/s/KPMG LLP
Harrisburg, Pennsylvania
July 23, 2003


                                      F-2
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          JUNE 1, 2003 AND JUNE 2, 2002
<TABLE>
<CAPTION>
                                                                                  June 1,            June 2,
                  Assets                                                           2003               2002
                                                                              --------------     ---------------
<S>                                                                          <C>                <C>
Current assets:
      Cash and cash equivalents                                               $    4,128,000     $     2,816,000
      Accounts and notes receivable - net of allowance for doubtful
      accounts of $768,000 and $772,000                                           25,099,000          26,917,000
      Accounts receivable from related parties                                       163,000             167,000
      Inventories:
           Finished goods                                                         40,746,000          44,933,000
           Raw materials and supplies                                             17,562,000          16,622,000
      Prepaid expenses                                                             2,216,000           2,361,000
      Deferred income taxes                                                          917,000             276,000
                                                                              --------------     ---------------

Total current assets                                                              90,831,000          94,092,000
                                                                              --------------     ---------------

Property, plant, and equipment - at cost:
      Land and buildings                                                          53,972,000          52,966,000
      Machinery and equipment                                                    128,422,000         124,048,000
      Leasehold improvements                                                         544,000             544,000
                                                                              --------------     ---------------

                                                                                 182,938,000         177,558,000

Less accumulated depreciation and amortization                                   111,255,000         101,749,000
                                                                              --------------     ---------------

                                                                                  71,683,000          75,809,000

Construction in progress                                                             951,000             830,000
                                                                              --------------     ---------------

                                                                                  72,634,000          76,639,000
                                                                              --------------     ---------------

Other assets:
      Goodwill and intangible assets - less accumulated amortization of
           $3,175,000 and $3,165,000                                               3,539,000           3,549,000
      Other assets                                                                 4,429,000           4,736,000
                                                                              --------------     ---------------

Total assets                                                                  $  171,433,000     $   179,016,000
                                                                              ==============     ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          JUNE 1, 2003 AND JUNE 2, 2002
<TABLE>
<CAPTION>

                                                                                    June 1,                    June 2,
               Liabilities and Stockholders' Equity                                  2003                       2002
                                                                                --------------             ---------------
<S>                                                                            <C>                       <C>
Current liabilities:
     Accounts payable                                                           $   19,745,000            $     19,890,000
     Accounts payable to related parties                                                 7,000                           0
     Notes payable - banks                                                           7,634,000                  18,987,000
     Accrued expenses                                                               10,921,000                  13,189,000
     Current maturities of long-term debt                                            4,286,000                   4,297,000
     Income taxes payable                                                            1,211,000                   1,182,000
                                                                                --------------             ---------------

Total current liabilities                                                           43,804,000                  57,545,000

Long-term debt, less current maturities                                             25,357,000                  29,643,000
Deferred income taxes                                                                3,139,000                   3,777,000
Other liabilities                                                                    5,916,000                   4,060,000
                                                                                --------------             ---------------

Total liabilities                                                                   78,216,000                  95,025,000
                                                                                --------------             ---------------

Commitments and contingencies (note 9)

Stockholders' equity:
     Series A and B 8-1/4% cumulative convertible preferred stock                      776,000                     776,000
     Series C cumulative convertible preferred stock                                   250,000                     250,000
     Common stock, Class A - non-voting                                              8,733,000                   8,733,000
     Common stock, Class B - voting                                                 16,227,000                  15,889,000
     Capital paid in excess of par value                                            16,372,000                  15,238,000
     Retained earnings                                                              76,746,000                  67,560,000
     Treasury stock, at cost                                                        (8,172,000)                 (8,148,000)
     Employee Stock trust                                                          (17,096,000)                (16,168,000)
     Accumulated other comprehensive loss                                             (619,000)                   (139,000)
                                                                                --------------             ---------------

     Total stockholders' equity                                                     93,217,000                  83,991,000
                                                                                --------------             ---------------

Total liabilities and stockholders' equity                                      $  171,433,000             $   179,016,000
                                                                                ==============             ===============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
            YEARS ENDED JUNE 1, 2003, JUNE 2, 2002, AND JUNE 3, 2001
<TABLE>
<CAPTION>

                                                  Year                  Year                   Year
                                                  ended                 ended                  ended
                                                 June 1,               June 2,                June 3,
                                                  2003                  2002                   2001
                                              -------------         -------------         --------------
<S>                                           <C>                   <C>                   <C>
Net sales                                     $ 290,311,000         $ 290,227,000         $  293,049,000
Cost of goods sold                              244,302,000           245,673,000            253,205,000
                                              -------------         -------------         --------------
       Gross profit                              46,009,000            44,554,000             39,844,000
Selling expenses                                 12,192,000            14,306,000             13,933,000
Administrative expenses                          15,767,000            14,624,000             13,259,000
                                              -------------         -------------         --------------
       Operating profit                          18,050,000            15,624,000             12,652,000
Interest expense                                  2,792,000             3,603,000              4,628,000
Other (income) - net                               (270,000)             (371,000)            (1,134,000)
                                              -------------         -------------         --------------
       Earnings before income taxes              15,528,000            12,392,000              9,158,000
Income taxes                                      5,654,000             5,121,000              2,497,000
                                              -------------         -------------         --------------
       Net earnings                               9,874,000             7,271,000              6,661,000
Dividends on preferred stock                         41,000                41,000                 41,000
                                              -------------         -------------         --------------
       Net earnings applicable to
       Common stock                           $   9,833,000         $   7,230,000         $    6,620,000
                                              =============         =============         ==============
Basic earnings per common share               $       13.64         $       10.10         $         9.26
                                              =============         =============         ==============
Diluted earnings per common share             $       13.46         $        9.97         $         9.15
                                              =============         =============         ==============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
            YEARS ENDED JUNE 1, 2003, JUNE 2, 2002, AND JUNE 3, 2001
<TABLE>
<CAPTION>
                                                                        Year               Year              Year
                                                                       Ended               Ended             Ended
                                                                      June 1,             June 2,           June 3,
                                                                        2003               2002              2001
                                                                    ------------       ------------      ------------
<S>                                                                 <C>                <C>               <C>
Net earnings                                                        $  9,874,000       $  7,271,000      $  6,661,000
                                                                    ------------       ------------      ------------
Other comprehensive income
     Unrealized loss on securities, net of
           reclassification adjustments (net of taxes
           of $29,000 in 2003, $44,000 in 2002 and
           $88,000 in 2001)                                              (22,000)          (238,000)         (577,000)
     Minimum pension liability adjustment (net of
           taxes of $328,000 in 2003, $1,000 in 2002
           and $35,000 in 2001)                                         (458,000)            (3,000)          (51,000)
                                                                    ------------       ------------      ------------

Other comprehensive loss                                                (480,000)          (241,000)         (628,000)
                                                                    ------------       ------------      ------------

Comprehensive income                                                $  9,394,000       $  7,030,000      $  6,033,000
                                                                    ============       ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            YEARS ENDED JUNE 1, 2003, JUNE 2, 2002, AND JUNE 3, 2001
<TABLE>
<CAPTION>
                                                               Year                  Year                  Year
                                                               ended                 ended                 ended
                                                               June 1,               June 2,               June 3,
                                                                2003                  2002                  2001
                                                            --------------       ---------------       ---------------
<S>                                                         <C>                  <C>                   <C>
Cash flows from operating activities:
    Net earnings                                            $    9,874,000       $     7,271,000       $     6,661,000
    Adjustments to reconcile net earnings to net
      cash provided by operating activities:
          Depreciation and amortization                          9,604,000             9,375,000             8,552,000
          Gain on sale of property, plant, and
          equipment                                               (126,000)             (120,000)              (12,000)
          Gain on sale of investments                              (18,000)             (105,000)             (616,000)
          Deferred income taxes                                 (1,279,000)              396,000              (253,000)
          Non cash charge for ESOP contribution                    544,000               480,000                     0
          Change in assets and liabilities:
            Accounts and notes receivable                        1,822,000               442,000               985,000
            Inventories                                          3,247,000              (261,000)           (2,102,000)
            Prepaid expenses and other assets                       12,000              (649,000)             (520,000)
            Accounts payable and accrued expenses               (2,406,000)            1,182,000            (2,332,000)
            Income taxes payable                                    29,000               543,000              (421,000)
            Other liabilities                                    1,417,000               424,000               837,000
                                                            --------------       ---------------       ---------------
Net cash provided by operating activities                       22,720,000            18,978,000            10,779,000
                                                            --------------       ---------------       ---------------
Cash flows from investing activities:
       Purchase of investments                                    (484,000)             (580,000)           (1,553,000)
       Sale of investments                                         901,000               499,000             1,988,000
       Acquisitions of property, plant, and
         equipment                                              (5,614,000)           (6,779,000)          (13,645,000)
       Proceeds from dispositions of property,
         plant,  and equipment                                     151,000                     0                30,000
                                                            --------------       ---------------       ---------------
Net cash used in investing activities                           (5,046,000)           (6,860,000)          (13,180,000)
                                                            --------------       ---------------       ---------------
Cash flows from financing activities:
        Proceeds from notes payable                            145,250,000           212,419,000           357,545,000
        Payment on notes payable                              (156,603,000)         (245,760,000)         (357,597,000)
        Proceeds from issuance of long-term debt                         0            25,000,000                     0
        Payment on long-term debt                               (4,297,000)           (1,801,000)           (1,821,000)
        Payment of dividends                                      (688,000)             (984,000)             (866,000)
        Common stock redemptions                                   (24,000)                    0               (14,000)
                                                            --------------       ---------------       ---------------
Net cash provided by (used in) financing activities            (16,362,000)          (11,126,000)           (2,753,000)
                                                            --------------       ---------------       ---------------
Net increase (decrease) in cash and cash equivalents             1,312,000               992,000            (5,154,000)
Cash and cash equivalents, beginning of year                     2,816,000             1,824,000             6,978,000
                                                            --------------       ---------------       ---------------
Cash and cash equivalents, end of period                    $    4,128,000       $     2,816,000       $     1,824,000
                                                            ==============       ===============       ===============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Stockholders' Equity
            Years ended June 1, 2003, June 2, 2002, and June 3, 2001
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                              Cumulative
                                              convertible                 Cumulative
                                              preferred                   convertible
                                Total        stock Series                  preferred                     Common
                             Stockholders'      A and B                   stock Series               stock Series A
                                equity          Shares         Amount       C Shares        Amount       Shares          Amount
                             -------------   ------------      ------     ------------      ------   --------------      ------
<S>                         <C>              <C>             <C>          <C>             <C>        <C>              <C>
Balance, May 28, 2000........$72,312,000        31,256        $781,000       10,000        $250,000      349,306       $8,731,000
Net earnings  ...............  6,661,000            --              --           --              --           --               --
Cash dividends per share:
   Preferred - $2.0625           (41,000)           --              --           --              --           --               --
     annually................
   Common - $1.10 annually...   (825,000)           --              --           --              --           --               --
Issuance of common stock to
   Employee Stock Trust......
   Class B 142,449 shares....         --            --              --           --              --           --               --
Redemption of common stock
   Class A 183 shares........
   Class B 1 share...........    (14,000)           --              --           --              --           --               --
Stock Conversion.............         --           (40)         (1,000)          --              --           10            1,000
Other comprehensive loss.....   (628,000)           --              --           --              --           --               --
                             -----------        ------        --------       ------        --------      -------       ----------
Balance, June 3, 2001........$77,465,000        31,216        $780,000       10,000        $250,000      349,316       $8,732,000
                             -----------        ------        --------       ------        --------      -------       ----------

Net earnings.................  7,271,000
Cash dividends per share:
   Preferred - $2.0625
     annually................    (41,000)           --              --           --              --           --               --
   Common - $1.10 annually...   (943,000)           --              --           --              --           --               --
Issuance of common stock to
   Employee Stock Ownership
     Plan ...................
   Class B 4,258 shares......    480,000            --              --           --              --           --               --
Stock Conversion.............         --          (160)         (4,000)          --              --           37            1,000
Other comprehensive loss.....   (241,000)           --              --           --              --           --               --
                             -----------        ------        --------       ------        --------      -------       ----------
Balance, June 2, 2002........$83,991,000        31,056        $776,000       10,000        $250,000      349,353       $8,733,000
                             ===========        ======        ========       ======        ========      =======       ==========

Net earnings.................  9,874,000            --              --           --              --           --               --
Cash dividends per share:
   Preferred - $2.0625
     annually................    (41,000)           --              --           --              --           --               --
   Common - $1.10 annually...   (647,000)           --              --           --              --           --               --
Issuance of common stock to
   Employee Stock Ownership
     Plan....................
   Class B 138,191 shares....    544,000            --              --           --              --           --               --
   Employee Stock Trust......                       --              --           --              --           --               --
Redemption of Common Stock...
      Class B................    (24,000)           --              --           --              --           --               --
Other comprehensive loss.....   (480,000)           --              --           --              --           --               --
                             -----------        ------        --------       ------        --------      -------       ----------
Balance, June 3,2003......... 93,217,000        31,056        $776,000       10,000        $250,000      349,353       $8,733,000
                             ===========        ======        ========       ======        ========      =======       ==========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                Common                        Capital paid
                             Stock Class B                    in excess of        Retained          Treasury
                                Shares          Amount          par value         earnings        stock Shares        Amount
                             -------------      ------        ------------        --------        ------------        ------
<S>                         <C>              <C>               <C>              <C>                <C>            <C>
Balance, May 28, 2000........   493,123       $12,328,000       $2,148,000       $55,478,000         144,251       $(8,134,000)
Net earnings  ...............        --                --               --         6,661,000              --                --
Cash dividends per share:
   Preferred - $2.0625               --                --               --           (41,000)             --                --
     annually................
   Common - $1.10 annually...        --                --               --          (825,000)             --                --
Issuance of common stock to
   Employee Stock Trust......
   Class B 142,449 shares....   142,449         3,561,000       13,106,000                --              --                --
Redemption of common stock
   Class A 183 shares........
   Class B 1 share...........        --                --               --                --             184           (14,000)
Stock Conversion.............        --                --               --                --              --                --
Other comprehensive loss.....        --                --               --                --              --                --
                               --------       -----------      -----------       -----------        --------       -----------
Balance, June 3, 2001........   635,572       $15,889,000      $15,254,000       $61,273,000         144,435       $(8,148,000)
                               --------       -----------      -----------       -----------        --------       -----------

Net earnings.................                                                      7,271,000
Cash dividends per share:
   Preferred - $2.0625
     annually................        --                --               --           (41,000)             --                --
   Common - $1.10 annually...        --                --               --          (943,000)             --                --
Issuance of common stock to
   Employee Stock Ownership
     Plan ...................
   Class B 4,258 shares......        --                --          (19,000)               --              --                --
Stock Conversion.............        --                --            3,000                --              --                --
Other comprehensive loss.....        --                --               --                --              --                --
                               --------       -----------      -----------       -----------        --------       -----------
Balance, June 2, 2002........   635,572       $15,889,000      $15,238,000       $67,560,000         144,435       $(8,148,000)
                               ========       ===========      ===========       ===========        ========       ===========

Net earnings.................        --                --               --         9,874,000              --                --
Cash dividends per share:
   Preferred - $2.0625
     annually................        --                --               --           (41,000)             --                --
   Common - $1.10 annually...        --                --               --          (647,000)             --                --
Issuance of common stock to
   Employee Stock Ownership
     Plan....................
   Class B 138,191 shares....        --                --               --                --              --                --
   Employee Stock Trust......    13,500           338,000        1,134,000                --              --                --
Redemption of Common Stock...
      Class B................        --                --               --                --             222           (24,000)
Other comprehensive loss.....        --                --               --                --              --                --
                               --------       -----------      -----------       -----------        --------       -----------
Balance, June 3,2003.........   649,072       $16,227,000      $16,372,000       $76,746,000         144,657        (8,172,000)
                               ========       ===========      ===========       ===========        ========       ===========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                    Employee Stock Trust
                                ---------------------------     Accumulated
                                                                   Other
                                                               Comprehensive
                                   Shares         Amount        Incme (Loss)
                                  --------       --------      -------------
<S>                              <C>             <C>          <C>
Balance, May 28, 2000........          -0-             -0-         $730,000
Net earnings  ...............           --              --               --
Cash dividends per share:
   Preferred - $2.0625                  --              --               --
     annually................
   Common - $1.10 annually...           --              --               --
Issuance of common stock to
   Employee Stock Trust......
   Class B 142,449 shares....      142,449     (16,667,000)              --
Redemption of common stock
   Class A 183 shares........
   Class B 1 share...........           --              --               --
Stock Conversion.............           --              --               --
Other comprehensive loss.....           --              --         (628,000)
                                  --------    ------------        ---------
Balance, June 3, 2001........      142,449    $(16,667,000)        $102,000
                                  --------    ------------        ---------

Net earnings.................
Cash dividends per share:
   Preferred - $2.0625
     annually................           --              --               --
   Common - $1.10 annually...           --              --               --
Issuance of common stock to
   Employee Stock Ownership
     Plan ...................
   Class B 4,258 shares......       (4,258)        499,000               --
Stock Conversion.............           --              --               --
Other comprehensive loss.....           --              --         (241,000)
                                  --------    ------------        ---------
Balance, June 2, 2002........      138,191    $(16,168,000)        (139,000)
                                  ========    ============        =========

Net earnings.................           --              --               --
Cash dividends per share:
   Preferred - $2.0625
     annually................           --              --               --
   Common - $1.10 annually...           --              --               --
Issuance of common stock to
   Employee Stock Ownership
     Plan....................
   Class B 138,191 shares....       (4,761)        544,000               --
   Employee Stock Trust......       13,500      (1,472,000)              --
Redemption of Common Stock...
      Class B................           --              --               --
Other comprehensive loss.....           --              --         (480,000)
                                  --------    ------------        ---------
Balance, June 3,2003.........      146,930    ($17,096,000)       ($619,000)
                                  ========    ============        =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies

       (a)    Description of Business

              Hanover Foods Corporation (the "Company") is a vertically
              integrated processor of food products in one industry segment. The
              Company is involved in the growing, processing, canning,
              freeze-drying, packaging, marketing, and distribution of its
              products under its own trademarks as well as other branded,
              customer, and private labels. The Company has operations in ten
              plants in Pennsylvania, one plant in Delaware, one plant in
              Maryland, and two plants in Guatemala. The Company's raw materials
              are readily available and the Company is not dependent on a single
              supplier or a few suppliers. Revenue is recognized when title
              transfers pursuant to shipping terms. Separately billed shipping
              and handling is included in net sales. Shipping and handling costs
              are included in cost of goods sold.

       (b)    Principles of Consolidation

              The accompanying consolidated financial statements include the
              accounts of Hanover Foods Corporation and its subsidiaries, which
              are Consumers Packing Company (T/A Hanover Foods - Lancaster
              Division), Spring Glen Fresh Foods, Inc., Bickel's Snack Foods,
              Inc., Hanover Insurance Company, LTD., The Nittany Corporation,
              Tri-Co Foods Corp. and its subsidiaries - Alimentos Congelados
              Monte Bellos, S.A. (Alcosa), Sunwise Corporation and Mayapac S.A.,
              all of which are wholly-owned. All significant intercompany
              balances and transactions have been eliminated.

        (c)   Concentration of Credit Risk

              Financial instruments that potentially subject the Company to
              credit risk consist of trade receivables. Wholesale and retail
              food distributors comprise a significant portion of the trade
              receivables; collateral is not required. The risk associated with
              the concentration is generally limited due to the large number of
              wholesalers and retailers and their geographic dispersion,
              however, the Company's ten largest customers accounted for
              approximately 38%, 36%, and 33%, of the Company's net sales for
              the years ended June 1, 2003, June 2, 2002, and June 3, 2001,
              respectively. The Company's ten largest customers account for
              approximately 30% and 32% of the Company's accounts receivable as
              of June 1, 2003 and June 2, 2002, respectively. No single customer
              accounted for more than 10% of net sales for the years ended June
              1, 2003, June 2, 2002, and June 3, 2001.

                                      F-9
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont'd)

       (d)    Cash and Cash Equivalents

              Cash equivalents of $1,219,000 and $618,000 at June 1, 2003 and
              June 2, 2002, respectively, consist of short-term interest-bearing
              investments with maturities of less than three months. For
              purposes of the statements of cash flows, the Company considers
              all highly liquid debt instruments with original maturities of
              three months or less to be cash equivalents.

       (e)    Trade Accounts Receivable

              Trade accounts receivable are recorded at the invoiced amount and
              do not bear interest. The allowance for doubtful accounts is the
              Company's best estimate of the amount of probable credit losses in
              the Company's existing accounts receivable. The company determines
              the allowance based on historical write-off experience.


       (f)    Investments

              Investments of $2,243,000 and $3,681,000 at June 1, 2003 and June
              2, 2002, respectively, classified as available-for-sale
              securities, are included in other noncurrent assets and measured
              at fair value. Net unrealized gains and losses are reported as a
              separate component of accumulated other comprehensive income
              (loss) until realized. Net unrealized losses were $106,000 at June
              1, 2003 and $85,000 at June 2, 2002 and net unrealized gain was
              $153,000 at June 3, 2001.

              The reconciliation of the reclassification adjustments related to
              unrealized gains and losses on securities included in
              comprehensive income for the respective fiscal year are as
              follows:
<TABLE>
<CAPTION>
                                                          2003       2002       2001
                                                         ------     ------     ------
<S>                                                   <C>         <C>         <C>
             Unrealized holding gains (losses)
                 arising during period.............    $ (4,000)   (133,000)   (36,000)
             Reclassification adjustments for gains
                 included in net income............     (18,000)   (105,000)  (541,000)
                                                       --------    --------   --------
             Net unrealized gain (loss) on
                 securities........................    $(22,000)   (238,000)  (577,000)
                                                       ========    ========   ========
</TABLE>

       (g)    Fair Value of Financial Instruments

              The carrying value of cash and cash equivalents, accounts and
              notes receivable, accounts payable and notes payable approximates
              fair values due to the short-term maturities of these instruments.

              The fair values of each of the Company's long-term debt
              instruments are based on the amount of future cash flows
              associated with each instrument discounted using the Company's
              current borrowing rate for similar debt instruments of comparable
              maturity. The amount reported in the consolidated balance sheet
              for long-term debt approximates fair value.

                                      F-10
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont'd)

       (h)    Inventories

              Inventories are stated at the lower of cost (determined by average
              cost which approximates the first-in, first-out method) or market.

       (i)    Property, Plant, and Equipment

              Property, plant, and equipment are stated at cost. Expenditures
              for maintenance and repairs are expensed as incurred; additions
              and betterments that materially increase the lives of the related
              assets are capitalized. Upon retirement, sale, or other
              disposition of buildings and equipment, cost and accumulated
              depreciation are eliminated from the accounts and gain or loss is
              included in operations.

              Depreciation on property, plant, and equipment is calculated on
              the straight-line method over the estimated useful lives of the
              assets. Estimated useful lives range from approximately 3 years to
              12 years for equipment and up to 40 years for buildings.
              Accelerated methods are used for tax reporting purposes. Plant and
              equipment held under capital leases are amortized using the
              straight-line method over the shorter of the lease term or
              estimated useful life of the asset.

       (j)    Goodwill and Intangible Assets

              On June 3, 2002, the Company adopted the provisions of SFAS 142
              "Goodwill and Other Intangible Assets". In connection with this
              adoption, the Company performed an initial impairment test of the
              goodwill and discontinued amortization of goodwill. The initial
              valuation did not indicate any impairment of the goodwill.
              Additionally, the SFAS requires the Company to perform an annual
              impairment test of the goodwill. The Company has chosen March 1 as
              the date to perform the annual impairment test of goodwill. The
              March 1 impairment test did not indicate any impairment.

              Intangible assets consist of the Company's trademarks. The
              trademarks were determined to have an indefinite life and are not
              amortized. In accordance with SFAS 142, "Goodwill and Other
              Intangible Assets", the Company will perform an annual review of
              its trademarks to determine whether impairments exists. As of June
              1, 2003, the Company did not recognize any impairment charges
              related to these trademarks.

       (k)    Impairment of Long-Lived Assets

              Long-lived assets, such as property, plant and equipment, and
              purchased intangibles subject to amortization, are reviewed for
              impairment whenever events or changes in circumstances indicate
              that the carrying amount of an asset may not be recoverable.
              Recoverability of assets to be held and used is measured by a
              comparison of the carrying amount of an asset to estimated
              undiscounted future cash flows expected to be generated by the
              asset. If the carrying amount of an asset exceeds its estimated
              future cash flows, an impairment charge is recognized by the
              amount by which the carrying amount of the asset exceeds the fair
              value of the asset. Assets to be disposed of are reported at the
              lower of the carrying amount or fair value less costs to sell, the
              depreciation ceases.

                                      F-11
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont'd)

              Goodwill and intangible assets not subject to amortization are
              tested annually for impairment. An impairment loss is recognized
              to the extent that the carrying amount exceeds the asset's fair
              value.

       (l)    Insurance

              The Company, through its wholly-owned insurance subsidiary, is
              self-insured with respect to certain general liability and
              workers' compensation claims. Excess insurance coverage is
              maintained for general liability and workers' compensation claims.

              Outstanding claims include a provision for claims reported as
              advised to the Company by the primary insurer and a provision for
              incurred but not reported claims based upon the advice of the
              primary insurer on the ultimate liability of the Company under the
              reinsurance assumed or, in the absence of such an evaluation, the
              provision is based upon the best estimate of the ultimate
              liability of the Company.

       (m)    Income Taxes

              Income taxes are accounted for under the asset and liability
              method. Deferred tax assets and liabilities are recognized for the
              future tax consequences attributable to differences between the
              financial statement carrying amounts of existing assets and
              liabilities and their respective tax bases and operating loss and
              tax credit carryforwards. Deferred tax assets and liabilities are
              measured using enacted tax rates expected to apply to taxable
              income in the years in which those temporary differences are
              expected to be recovered or settled. The effect on deferred tax
              assets and liabilities of a change in tax rates is recognized in
              income in the period that includes the enactment date. Earnings of
              foreign operations are reinvested in the business and no provision
              for domestic income tax or foreign withholding tax is made on such
              earnings until distributed.

       (n)    Research and Development

              Research and development costs are expensed as incurred. Research
              and development costs amounted to $608,000, $600,000, and
              $633,000, for the years ended June 1, 2003, June 2, 2002, and June
              3, 2001, respectively.

       (o)    Promotional Costs

              Promotional costs are expensed as incurred. Accounts and notes
              receivable are presented net of allowances for bad debts and
              promotional programs.

       (p)    Advertising Costs

              Advertising costs are expensed as incurred. Advertising expenses
              amounted to $730,000, $724,000, and $783,000, for the years ended
              June 1, 2003, June 2, 2002, and June 3, 2001, respectively.

                                      F-12
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 Summary of Significant Accounting Policies (Cont'd)

       (q)    Earnings per Share

              Earnings per share are computed in accordance with Statement of
              Financial Accounting (SFAS) No. 128, Earnings per Share. Basic
              earnings per share excludes dilution and is computed by dividing
              income available to common stockholders by the weighted-average
              number of common shares outstanding for the period. Diluted
              earnings per share reflects the potential dilution that could
              occur if securities or other contracts to issue common stock were
              exercised or converted into common stock or resulted in the
              issuance of common stock that then shared in the earnings of the
              entity.

       (r)    Fiscal Year End

              The Company's fiscal year ends at the close of operations on the
              Sunday nearest to May 31. The fiscal years ended June 1, 2003 and
              June 2, 2002, were comprised of 52 weeks. The fiscal year ended
              June 3, 2001 was comprised of 53 weeks.

       (s)    Use of Estimates

              Management of the Company has made a number of estimates and
              assumptions relating to the reporting of assets, liabilities,
              revenues and expenses, and the disclosure of contingent assets and
              liabilities to prepare these financial statements in conformity
              with generally accepted accounting principles. Actual results
              could differ from those estimates.

       (t)    Accounting for Stock-Based Compensation

              The Company applies the intrinsic value method in accordance with
              Accounting Principles Board (APB) Opinion No. 25, "Accounting for
              Stock Issued to Employees" and related interpreciations in
              accounting for a stock-based compensation plan. Accordingly, no
              compensation expense has been recognized for the stock-based
              compensation plan.

       (u)    Reclassifications

              Certain amounts in prior periods have been reclassified to conform
              to classification made in the current year.



                                      F-13
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 2 Goodwill and Other Intangible Assets

              Amortization expense related to goodwill and other intangible
              assets was $115,000 and $115,000 for the years June 2, 2002 and
              June 3, 2001, respectively. The following table reconciles
              previously reported net income as if the provisions of SFAS No.
              142 were in effect in fiscal years ending June 2, 2002 and June 3,
              2001.
<TABLE>
<CAPTION>
                                                                 2002            2001
                                                                ------          ------
<S>                                                           <C>           <C>
               Reported net income                            $ 7,271,000   $  6,661,000
                  Add back:  Goodwill Amortization                 75,000         75,000
                  Add back: Trademark Amortization                 40,000         40,000
                                                              -----------   ------------
                  Adjusted net income                           7,386,000      6,776,000
                                                              ===========   ============
               Basic Earnings per share:
               Reported net income                            $     10.10   $       9.26
                  Add back:  Goodwill Amortization                    .10            .10
                  Add back:  Trademark Amortization                   .06            .06
                                                              -----------   ------------
               Adjusted net income                                  10.26           9.42
                                                              ===========   ============

               Diluted earnings per share:
               Reported net income                            $      9.97   $       9.15
                  Add back:  Goodwill Amortization                    .10            .10
                  Add back:  Trademark Amortization                   .05            .05
                                                              -----------   ------------
               Adjusted net income                                  10.12           9.30
                                                              ===========   ============
</TABLE>

Note 3 Notes Payable - Banks

       The Company maintains short-term unsecured lines of credit with various
       banks providing credit availability amounting to $50,000,000, of which
       $7,634,000 was borrowed (including an overdraft of $892,000) at June 1,
       2003 and $18,987,000 was borrowed (including an overdraft of $1,054,000)
       at June 2, 2002. The Company borrows funds under these lines of credit
       under two methods of cost of funds. The first method used to price the
       cost of short-term borrowings is based upon LIBOR plus thirty-five to one
       hundred twenty-five basis points. The second method is based upon the
       financial institution's "calculated cost of funds" plus an earnings
       modification. The weighted-average interest rate on short-term borrowings
       at June 1, 2003 and June 2, 2002, was 2.29% and 4.02%, respectively. The
       maximum amount of borrowings outstanding under short-term lines of credit
       at any one time during the years ended June 1, 2003, June 2, 2002, and
       June 3, 2001, was approximately $26,848,000, $55,513,000, and
       $53,393,000.

       The Corporation's sources of liquidity are primarily funds from operation
       and available amounts under seasonal lines of credit expiring (two on
       October 31, 2004 and one on January 28, 2004), which are expected to be
       renewed in the ordinary course of business.


                                      F-14
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 4 Long-term Debt

       The long-term debt of the Company and its subsidiaries consists of:
<TABLE>
<CAPTION>
                                                        June 1, 2003       June 2, 2002
                                                       --------------     --------------
<S>                                                    <C>                <C>
        8.74% unsecured senior notes payable to
          an insurance company, due through 2007        $   7,143,000      $   8,929,000

        7.01% unsecured senior notes payable to
            an insurance company, due through 2011         22,500,000         25,000,000

        Other                                                       -             11,000
                                                        -------------      -------------

        Total long-term debt                               29,643,000         33,940,000
        Less current maturities                             4,286,000          4,297,000
                                                        -------------      -------------

        Long-term debt, excluding current maturities    $  25,357,000      $  29,643,000
                                                        =============      =============
</TABLE>

The term loan agreements with the insurance company and seasonal borrowing with
financial institutions (note 2), contain various restrictive provisions
including those relating to mergers and acquisitions, additional borrowing,
guarantee of obligations, lease commitments, limitations to declare or pay
dividends, repurchase stock, and the maintenance of working capital and certain
financial ratios. Based on the requirements of the agreements at June 1, 2003,
$38,576,000 of retained earnings are restricted from distribution. The Company
is in compliance with the restrictive provisions in the agreements as of June 1,
2003.

       The aggregate long-term debt maturities follow:

              For the fiscal year ending:

                    2004                            $ 4,286,000
                    2005                              4,286,000
                    2006                              4,286,000
                    2007                              4,285,000
                    2008                              2,500,000
                    Thereafter                       10,000,000
                                                    -----------

                    Total                           $29,643,000
                                                    ===========
Note 5 Leases

       The Company has several noncancelable operating leases, primarily for
       equipment, that expire over the next five years. These leases generally
       contain renewal options for periods ranging from three to five years and
       require the Company to pay all executory costs such as maintenance and
       insurance. Rental expense for operating leases (except those with lease
       terms of a month or less that were not renewed) during the periods ended
       June 1, 2003, June 2, 2002, and June 3, 2001, amounted to $1,918,000,
       $3,042,000, and $3,303,000 respectively.

       Future minimum lease payments under noncancelable operating leases (with
       initial or remaining lease terms in excess of one year) as of June 1,
       2003 are:


                                      F-15
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


Note 5 Leases (Cont'd)

                                                    Operating
             For the fiscal year ending:              leases
                                                    -----------

               2004                                 $   433,000
               2005                                     270,000
               2006                                     200,000
               2007                                     135,000
               2008                                      83,000
                                                     ----------

             Total minimum lease payments           $ 1,121,000
                                                     ==========

Note 6 Capital Stock

       The Company's capital stock consists of Class A Nonvoting Common Stock,
       Class B Voting Common Stock, 8 1/4% Series A and B Cumulative Convertible
       Preferred Stock, and Series C Cumulative Convertible Preferred Stock.
       Holders of Class B Common Stock have one vote per share. No other classes
       of stock have voting rights except as discussed below.

       The Company's Amended and Restated Articles of Incorporation authorize
       the Board of Directors to issue up to 10,000 shares of Series C
       Convertible Preferred Stock to the trustees of the Company's 401(k)
       Savings Plan (or a similar employee benefit plan). At least a majority of
       the trustees of the Company's 401(k) Savings Plan (or similar employee
       benefit plan), who are appointed by the Board of Directors, must be
       "disinterested directors" of the Company. If certain Warehime family
       Class B shareholders cannot unanimously agree in writing on the
       composition of the Board of Directors or on other important matters
       specified below, the Amended and Restated Articles permit each of the
       10,000 shares of Series C Convertible Preferred Stock the right to cast
       35 votes in the election of directors, and each share of Class A Common
       Stock would have one-tenth (1/10) of a vote per share, thereby enabling
       them to influence the ultimate result of the election by the Class B
       shareholders. The Amended and Restated Articles also permit the trustees
       and the Class A shareholders to similarly vote on proposals to remove
       directors, and in connection with any proposal (not previously approved
       by the Board of Directors) to further amend the Articles of Incorporation
       or Bylaws or to effectuate a merger, consolidation, division, or sale of
       substantially all of the assets of the Company. The voting power of the
       Series C Convertible Preferred Stock ceased in January 2003. Under the
       Amended and Restated Articles, each of the shares of Series C Convertible
       Preferred Stock is convertible into one share of Class A Common Stock and
       is not entitled to vote except in the event that certain Warehime family
       Class B shareholders cannot agree in writing on the composition of the
       Board of Directors or on other important matters specified above.

       During fiscal year 2001, the Corporation established an Employee Stock
       Trust (the "Trust") to fund future stock related and other obligations of
       the Corporation's compensation and benefit plans, including a
       concurrently established Employee Stock Ownership Plan ("ESOP"). For
       financial reporting purposes, the Trust is consolidated with the
       Corporation. On March 1, 2001, the Corporation contributed 142,449 shares
       of Class B Common Stock to the Trust. Upon contribution, these shares
       were recorded at a fair value of $117/per share based upon the most
       recent appraised value of Class B Common Stock as determined by an
       independent valuation. No shares were transferred from the Trust to the
       ESOP during the fiscal year ended June 3, 2001. During the year ended
       June 1, 2003 and June 2, 2002, the Company transferred 4,761 and 4,258
       shares of Class B

                                      F-16
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 6 Capital Stock (Cont'd)

       Common Stock to the ESOP. The shares had a fair market value of
       approximately $114 and $112 on the respective transfer dates and
       accordingly, the Company recorded a charge to earnings of approximately
       $544,000.

       The following summarizes the Company's capital stock at June 1, 2003 and
       June 2, 2002:
<TABLE>
<CAPTION>
                                                            June 1, 2003                  June 2, 2002
                                                    ----------------------------- -----------------------------
                                                      Issued      Outstanding        Issued      Outstanding
                                                    ----------------------------- -----------------------------
<S>                                                  <C>         <C>                <C>          <C>
    Series A  8 1/4% cumulative
       convertible preferred stock - $25
       Par value, 60,000 shares authorized              14,948       6,228           14,948           6,228
    Series B  8 1/4% cumulative
       convertible preferred stock - $25
       Par value, 60,000 shares authorized              16,108       8,336           16,108           8,336
    Series C 4.4% cumulative convertible
       preferred stock - $25 par value,
       10,000 shares authorized                         10,000      10,000           10,000          10,000

    Class A nonvoting common stock -
       $25 par value, 800,000 shares
       authorized                                      349,353     288,062          349,353         288,284

    Class B voting common stock -
       $25 par value, 880,000 shares
       authorized                                      649,072     435,268          635,572         430,507
</TABLE>

       At any time, the holders of the Series A and B Cumulative Convertible
       Preferred Stock have the option to convert their shares to shares of
       Class A Nonvoting Common Stock based on the book value of the Class A
       Nonvoting Common Stock at the time of conversion. At June 1, 2003, the
       outstanding Series A and B Preferred Stock could be converted into 2,844
       shares of Class A Common Stock.


                                      F-17
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 7 Related Party Transactions

       The Company and its subsidiaries, in the normal course of business,
       purchase and sell goods and services to related parties. Transactions
       with related parties are summarized below:

                                          Year ended    Year ended    Year ended
                                            June 1,       June 2,      June 3,
                                             2003          2002          2001
                                          -----------   -----------  -----------
        Revenues:
          Park 100 Foods, Inc.            $ 1,877,000   $ 1,555,000  $ 1,800,000
        Expenditures:
          Lippy Brothers, Inc.              1,146,000     1,158,000    1,284,000
          James G. Sturgill                         0             0       20,000
          ARWCO Corporation                         0             0       73,000
          Warehime Enterprises, Inc.            4,000        81,000        4,000
          John A. and Patricia M. Warehime     58,000        49,000       67,000
          Park 100 Foods, Inc.                 12,000        25,000        9,000
          Schaier Travel                        3,000        10,000        8,000
        Accounts receivable:
          Park 100 Foods, Inc.                163,000       164,000      121,000
          Lippy Brothers, Inc.                      0         3,000          0
        Accounts payable:
          Patricia M. Warehime                      0             0        5,000
          Schaier Travel                            0             0        1,000
          Park 100 Foods                        7,000             0            0


       Included in other assets is a related party receivable of $1,030,000 in
       2003 and $877,000 in 2002 related to two split interest life insurance
       contracts on the life of Patricia M. Warehime.

       During fiscal 2003, the Corporation, via its subsidiary, Alimentos
       Congelados Monte Bello S.A., sold its condominium real estate, located in
       Naples, Florida to John A. & Patricia M. Warehime for $127,500, which
       approximates fair value.

       In connection with the amended complaint filed by Michael A. Warehime
       versus John A. Warehime (note 9), pursuant to applicable state law, the
       Company has agreed to pay directly all expenses (including attorney's
       fees) and costs in advance of the final disposition of the litigation or
       any substantially similar or related action, suit, or proceeding. The
       Company has received an undertaking from John A. Warehime to repay all
       costs and expenses if it is ultimately determined that he is not entitled
       to be indemnified by the Company. The amount paid and expensed by the
       Company under this arrangement for the years ended June 1, 2003, June 2,
       2002, and June 3, 2001 was approximately $365, $65,000, and $6,000,
       respectively.

       A portion of rental expense included in note 4 was paid to ARWCO
       Corporation; Park 100 Foods, Inc. and Warehime Enterprises, Inc. all of
       which are related companies through common control. The amounts were
       $14,000, $15,000, and $100,000, for the years ended June 1, 2003, June 2,
       2002, and June 3, 2001, respectively.

                                      F-18
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans

       (a)    Defined Contribution Plan

              The Company offers a 401(k) plan covering certain of its
              employees. The Company contributes an amount equal to 100% of each
              employee's deferral up to 5%. Effective July 25, 1997, the plan
              was amended to permit matching contributions to be made in cash
              and/or securities of the Company (see note 5). The Company's
              contribution to the 401(k) plan for the years ended June 1, 2003,
              June 2, 2002, and June 3, 2001 was $694,000, $759,000, and
              $538,000, respectively.

       (b)    Postretirement Benefits other than Pensions

              Certain employees receive postretirement benefits other than
              pensions. This plan is currently not funded. The Company accounts
              for these costs by accruing for them over the employee service
              period. The status of the plan, based on the most recent
              measurement dates, is as follows:
<TABLE>
<CAPTION>
                                                                                       June 1,            June 2,
                                                                                        2003               2002
                                                                                     ------------       ------------
<S>                                                                                 <C>                <C>
               Change in benefit obligation:
                 Benefit obligation at beginning of year                             $ (4,599,000)      $ (3,759,000)
                 Service cost                                                            (126,000)          (115,000)
                 Interest cost                                                           (405,000)          (347,000)
                 Amortization of transition obligation                                    (73,000)           (73,000)
                 Plan assumptions                                                      (1,790,000)        (1,078,000)
                 Change in plan                                                        (1,062,000)           546,000
                 Benefits paid                                                            238,000            227,000
                 Other                                                                          0                  0
                                                                                     ------------       ------------
                         Benefit obligation at end of year                             (7,817,000)        (4,599,000)
                                                                                     ------------       ------------
               Change in plan assets
                 Fair value of plan assets at beginning of year                                --                 --
                 Contributions                                                            238,000            227,000
                 Benefits paid                                                           (238,000)          (227,000)
                                                                                     ------------       ------------
                         Fair value of plan assets at end of year                              --                 --
                                                                                     ------------       ------------
               Funded status:
                 Unrecognized net loss                                                  4,333,000          1,541,000
                 Unrecognized prior service cost                                          173,000            187,000
                 Unrecognized transition liability, amortized over 20 years               789,000            861,000
                                                                                     ------------       ------------
                 Accrued postretirement benefit cost                                 $ (2,522,000)      $ (2,010,000)
                                                                                     ============       ============
</TABLE>


              A discount rate of 6.25% for June 1, 2003 and 7.25% for June 2,
              2002, was used in determining the actuarial present value of the
              accumulated postretirement benefit obligation.

                                      F-19
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont'd)

              The cost of postretirement benefits other than pensions consisted
              of the following components:
<TABLE>
<CAPTION>
                                                       Year ended    Year ended    Year ended
                                                         June 1,      June 2,        June 3,
                                                          2003         2002           2001
                                                       ----------    ---------     ----------
<S>                                                    <C>           <C>           <C>
              Service cost                             $  126,000    $ 115,000     $   87,000
              Interest cost                               405,000      347,000        253,000
              Amortization of transition obligation        73,000       73,000         73,000
              Other amortization and deferral             147,000      131,000         61,000
                                                       ----------    ---------     ----------
                                                       $  751,000    $ 666,000     $  474,000
                                                       ==========    =========     ==========
</TABLE>

              The assumed postretirement health care cost trend rates in
              measuring the accumulated post retirement obligation was as
              follows:

                  o   Medical: 10.0% in 2002, decreasing by 1% per year to an
                      ultimate rate of 5.0% in 2007 and later
                  o   Prescription Drugs: 12.0% in 2002, decreasing by 1% per
                      year to an ultimate rate of 5.0% in 2009 and later
                  o   Dental: 4.0% in 2002 and later

              The health care cost trend rate assumption has a significant
              effect on the amounts reported. For example, increasing the
              assumed health care cost trend rates by one percentage point in
              each year would increase the accumulated postretirement benefit
              obligation as of February 28, 2003 by $1,243,000 and the aggregate
              of the service and interest cost components of net periodic
              postretirement benefit cost for the year ended February 28, 2003
              by $85,000.

       (c)    Employment and Deferred Compensation Agreements

              On June 12, 1995, the Company entered into a five-year employment
              agreement with its Chief Executive Officer, John A Warehime, at an
              annual base salary of $650,000 with such compensation payable
              retroactively from April 1, 1994 (the "1995 Employment
              Agreement"). The 1995 Employment Agreement was amended on February
              13, 1997 (Amended Employment Agreement). The principal terms of
              Mr. Warehime's employment arrangements with the Company as amended
              by the Amended Employment Agreement are set forth below.

              The Amended Employment Agreement provides for annual increases
              (but not decreases) in the employee's annual salary equal to the
              greater of 5% of the prior year's salary or the annual percentage
              increase in the Consumer Price Index (CPI). Mr. Warehime's annual
              base salary for fiscal 2003, 2002 and 2001 was $737,000, $702,000,
              and $669,000 respectively. Unless terminated by either party, the
              Amended Employment Agreement automatically renews annually on each
              anniversary date so that five years always remain on the term of
              the agreement. In the event the employee is terminated without
              cause, or in the event the employee terminates his employment
              after a reduction (without his written consent) of his duties or
              authority, compensation, or similar events, the Amended Employment
              Agreement

                                      F-20
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont'd)

              provides for the payment of the salary and bonus (including all
              other benefits) over the remaining term of the agreement. In the
              event of termination due to death or disability, the Amended
              Employment Agreement provides for the same payment to the employee
              (or in the event of the death of the employee, his spouse, or
              descendants) for one year and thereafter the payment of
              supplemental pension benefits as described below. In addition, the
              Amended Employment Agreement provides for the reimbursement by the
              Company of the employee's legal and accounting fees up to $75,000
              per year and reasonable business expenses incurred by the employee
              in connection with the business of the Company. The Amended
              Employment Agreement also provides the employee with various other
              benefits including the use of an automobile, disability and life
              insurance, and a club membership.

              The annual bonus payable to the employee under the Amended
              Employment Agreement is equal to $100,000 plus 10% of the
              Company's pretax earnings over $5.0 million provided that no
              annual bonus is payable if pretax earnings of the Company are less
              than $5.0 million. The Amended Employment Agreement limits salary
              and the annual bonus payment described above to an aggregate of
              not more than $1.0 million annually. Annual bonuses can be paid in
              cash or Class A Common (non-voting) Stock at the option of the
              employee. For the years ended June 1, 2003, June 2, 2002, and June
              3, 2001, the bonus accrued under this agreement was $263,000,
              $298,000, and $331,000, respectively.

              The Amended Employment Agreement also provides for the annual
              payment of a long-term performance bonus based upon the Company's
              performance over the prior five-year period as measured by its
              average sales growth and average increase in operating profits as
              compared to an industry peer group over the same period. The bonus
              payable is calculated based upon a formula matrix set forth in the
              Amended Employment Agreement, with such formula being recommended
              by an independent management consulting firm retained by the
              Company and approved by the Compensation Committee of the Board of
              Directors. For the years ended June 1, 2003, June 2, 2002, and
              June 3, 2001, the long-term performance bonus accrued under this
              agreement was $169,000, $157,000, and $144,000, respectively.

              The Amended Employment Agreement provides for annual supplemental
              pension benefits, commencing upon the earlier of (a) five years
              after termination of the employee (or one year following his death
              or disability) or (b) the date of retirement, payable during the
              life of the employee and upon his death for the life of his
              spouse. Such annual supplemental pension benefits are equal to 60%
              of average total compensation (including bonuses) over the latest
              three-year period prior to retirement, assuming retirement at age
              65 or later. Supplemental pension benefits are reduced based upon
              an established formula to the extent the employee retires prior to
              age 65. The net present value of the cost of providing this future
              benefit is recognized by the Company over the remaining expected
              years of service. The expense recognized under this agreement was
              approximately $863,000, $773,000, and $628,000, for the years
              ended June 1, 2003, June 2, 2002, and June 3, 2001, respectively.
              The projected benefit obligation was approximately $4,447,000 and
              $3,584,000, June 1, 2003 and June 2, 2002, respectively.

              The Amended Employment Agreement was revised effective as of
              August 1, 1997 to make certain clarifying changes and to require
              that bonus payments to Mr. Warehime in any taxable year in excess
              of $1.0 million would be subject to shareholder approval, which
              shareholder approval was given on August 14, 1997.

                                      F-21
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont'd)

              On January 23, 1997, the Company entered into a five-year
              employment agreement with Gary T. Knisely, Executive Vice
              President, Secretary, and Counsel of the Company, at an annual
              salary of $175,000 with such compensation payable retroactively
              from June 1, 1996 (the "Knisely Agreement"). Unless terminated by
              either party, the Knisely Agreement automatically renews annually
              on each anniversary date so that five years always remain on the
              term of the agreement. The Knisely Agreement provides for annual
              salary increases (but not decreases) equal to the greater of 5% of
              the prior year's salary or the annual percentage increase in the
              CPI, as well as incentive bonuses and various other benefits. As
              of June 2, 2002, the aggregate liability of the Company under this
              agreement for the next five years is estimated to be $1,410,000,
              excluding annual performance bonuses. In the event the employee is
              terminated without cause, or in the event the employee terminates
              his employment after a reduction (without his written consent) of
              his duties or authority, compensation, or similar events, the
              Knisely Agreement provides for the payment of the salary and bonus
              (including all other benefits) over the remaining term of the
              agreement. In the event of termination due to death or disability,
              the Knisely Agreement provides for the payment of salary and bonus
              (including all other benefits) to the employee (or his spouse or
              other descendants in the event of the employee's death) for the
              later of one year from the date of such termination or the death
              of the employee.

              The Knisely Agreement also provides for annual supplemental
              pension benefits equal to 60% of the employee's average annual
              compensation (including bonuses but excluding other benefits) over
              the three most recent fiscal years prior to the employee's
              termination if the employee is no longer employed by the Company
              and the employee has attained the age of 55. Such annual
              supplemental pension benefits are payable for the remainder of the
              lifetime of the employee. The net present value of the cost of
              providing this future pension benefit is recognized by the Company
              over Mr. Knisely's expected remaining years of service. The
              expense recognized for supplemental pension benefits under this
              agreement was approximately $171,000, $81,000, and $108,000, for
              the years ended June 1, 2003, June 2, 2002, and June 3, 2001,
              respectively. The pension liability was approximately $593,000 and
              $422,000 at June 1, 2003 and June 2, 2002, respectively.

              The Company also entered into a change in control severance
              agreements with several officers and executives which provides for
              termination compensation if respective individual's employment is
              terminated: (i) involuntarily within 24 months of a change in
              control or (ii) voluntarily, following a reduction in base salary,
              duties, and responsibilities within 24 months of a change in
              control. A "change in control" shall be deemed to occur if John A.
              Warehime ceases to be Chief Executive Officer of the Company or
              ceases to have the power and authority of the Chief Executive
              Officer. Pursuant to the terms of this agreement, any payment due
              thereunder shall be made over a two year period no less frequently
              than monthly and all payments during any twelve month period shall
              not in the aggregate exceed the individual's total cash
              compensation (salary and bonus) received from the Company during
              fiscal 2000.

              All payments made pursuant to this agreement are subject to the
              further conditions that: (i) the individual maintain the
              confidentiality of the Company's trade secrets, customer lists,
              and other proprietary information of the Company; (ii) for a
              period of two years following the termination of the officer,
              neither the individual or his employer or business associate shall

                                      F-22
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont'd)

              enter into or attempt to enter into any business relationship,
              solicit for employment or employ any person, employed by the
              Company or its affiliates at any time within the six months prior
              to the officer's termination; and (iii) for a period of two years
              following the termination, the individual shall not directly or
              indirectly own, manage, operate, join, or participate in any
              capacity, any entity which is primarily engaged in a business
              which competes with any significant business of the Company or its
              affiliates. If all officers and executives subject to agreements
              were terminated on June 1, 2003 under circumstances entitling them
              to severance payments pursuant to the agreements, the aggregate
              amount due to them under these agreements would be approximately
              $1,932,000.

              The Company is also committed to another employee, Patricia H.
              Townsend, under a previous employment contract, which provides for
              minimum salary levels, annual adjustments, as well as incentive
              bonuses and for a term, which ends in March 2004.

              Provisions contained in the agreement provide for continuation of
              the remuneration for the remainder of the term of the agreement in
              the event of termination, incapacity, death, or disability. The
              estimated commitment for future salaries through the duration of
              the agreement as of June 1, 2003 was approximately $78,000.

       (d)    Stock Option Plan

              On June 20, 2002, the Corporation's Board of Directors adopted the
              Stock Option Plan. 34,600 shares of the Corporation's Class B
              Common Stock, par value $25.00 per share, are authorized for
              issuance under the Stock Option Plan, and options to purchase
              13,500 shares were granted during fiscal year 2003 with
              weighted-average exercise price of $110 per share. Options vest at
              the rate of 12.50% per year beginning June 20, 2004 and June 20 of
              each following year up to and including June 20, 2011. All
              officers and key employees of the Corporation and of any present
              or future parent or subsidiary of the Corporation are eligible to
              receive options under the Stock Option Plan, excluding John A.
              Warehime. No individual may receive options under the Stock Option
              Plan for more than 15% of the total number of shares of the
              Corporation's Class B Common Stock authorized for issuance under
              the Stock Option Plan.

              The Stock Option Plan will be administered by the Corporation's
              Board of Directors or by an option committee appointed by the
              Corporation's Board of Directors. The option committee will
              consist of a minimum of two and a maximum of five members of the
              Board of Directors, each of whom will be a "non-employee director"
              within the meaning of Rule 16b-3(b)(3) under the Exchange Act.

              Options issued pursuant to the Stock Option plan may be either
              incentive stock options or non-qualified stock options. An
              "incentive stock option" is an option that satisfies all of the
              requirements of Section 422(b) of the Internal Revenue Code of
              1986, as amended, and the regulations thereunder, and a
              "non-qualified stock option" is an option that either does not
              satisfy all of those requirements of the terms of the option
              provide that it will not be treated as an incentive stock option.
              The option price for options issued under the Stock Option Plan
              will be equal at least to the fair market value of the
              Corporation's Class B Common Stock on the date of the grant of the
              option. Options will not be granted pursuant to the Stock Option
              Plan until after the expiration of the ten years from June 20,
              2002. The number of shares available for award under the Stock
              Option Plan is subject to adjustment in the event of any

                                      F-23
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefit Plans (Cont'd)

              change in the outstanding shares of Class B Common Stock as a
              result of, among other circumstances, a stock dividend, stock
              split, recapitalization, merger, transfer of assets or
              reorganization.

              The Company applies the intrinsic value method in accordance with
              Accounting Principles Board (APB) Opinion No. 25, "Accounting for
              Stock Issued to Employees", and related interpretations in
              accounting for our stock-based compensation plans. Accordingly, no
              compensation expense has been recognized for stock-based
              compensation plans. Had compensation expense for all stock and
              employee stock purchase plans been determined based upon the fair
              value at the grant date for awards under these plans consistent
              with the methodology prescribed under SFAS No. 123, "Accounting
              for Stock-Based Compensation", as amended, our net (loss) income
              and (loss) earnings per share would have been adjusted to the pro
              forma amounts as follows:
<TABLE>
<CAPTION>
              In thousands, except (per share data)                                        2003
                                                                                        ----------
<S>                                                                                     <C>
              Net Income - as reported                                                  $9,874,000

              Deduct: Total stock-based employee compensation expense
              determined under fair value based method for all awards,
              net of related tax effects                                                    81,000
                                                                                        ----------

              Pro forma net income                                                      $9,793,000

              Earnings per share:
                  Basic-as reported                                                          13.64
                  Basic - pro forma                                                          13.53

              Diluted - as reported                                                          13.46
              Diluted - pro forma                                                            13.29
</TABLE>

Since the determination of fair value of all stock options granted includes
variable factors, including volatility, and additional stock option grants are
expected to be made each year, the above pro forma disclosures are not
representative of pro forma effect on reported net income and earnings per share
for future years.

The per share weighted average fair value of stock options granted during 2003
is calculated as $26.23 on the date of grant using the Black-Scholes
option-pricing model. The weighted average assumptions based on the date of
grant are as follows:

                                                                  2003
         Divided yield                                              1%
         Votatility                                               8.6%
         Risk-free interest rate                                  3.5%
         Expected life                                         9 years

                                      F-24
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 8 Benefits Plans (Cont'd)

       (e)   Employee Stock Ownership Plan

             The Company has a noncontributory employee stock ownership plan in
             which substantially all non-union employees are eligible to
             participate. The Company makes annual contributions to the plan in
             an amount determined by a resolution of the Board of Directors.
             Compensation expense is recorded for the amount of the annual
             contribution to the plan as determined by resolution of the Board
             of Directors of the Company.

Note 9 Income Taxes

       Total income taxes for the years ended June 1, 2003, June 2, 2002, and
       June 3, 2001, were attributable to the following:
<TABLE>
<CAPTION>
                                                               June 1,          June 2,              June 3,
                                                                2003             2002                 2001
                                                             -----------      -----------          -----------
<S>                                                          <C>              <C>                  <C>
        Earnings from operations                             $ 5,654,000      $ 5,121,000          $ 2,497,000
        Stockholders' equity for unrealized losses on
        securities and minimum pension liability                (357,000)         (45,000)            (123,000)
                                                             -----------      -----------          -----------
                                                             $ 5,297,000      $ 5,076,000          $ 2,374,000
                                                             ===========      ===========          ===========
</TABLE>

       Income tax expense (benefit) attributable to earnings from operations
       consists of:
<TABLE>
<CAPTION>
                                           Current         Deferred             Total
                                         ----------        --------           ----------
<S>                                     <C>               <C>                 <C>
      Year ended June 1, 2003
      U.S. Federal                       $5,758,000         (809,000)          4,949,000
      State                               1,049,000         (122,000)            927,000
      Foreign                              (223,000)               0            (223,000)
                                         ----------        ---------          ----------
                                         $6,584,000         (931,000)          5,654,000
                                         ==========        =========          ==========

      Year Ended June 2, 2002
      U.S. Federal                       $3,230,000          385,000           3,615,000
      State                                 342,000           20,000             362,000
      Foreign                             1,144,000                0           1,144,000
                                         ----------        ---------          ----------
                                         $4,716,000          405,000           5,121,000
                                         ==========        =========          ==========

      Year ended June 3, 2001
      U.S. Federal                       $2,468,000         (235,000)          2,233,000
      State                                 335,000          (71,000)            264,000
                                         ----------        ---------          ----------
                                         $2,803,000         (306,000)          2,497,000
                                         ==========        =========          ==========
</TABLE>


       There is no income tax attributable to the earnings from foreign
       subsidiaries in 2001 since the foreign entities were generally not
       subject to taxes on earnings during that year. Prior to April 1, 2001,
       the Company's subsidiary, Alcosa received an income tax exemption on
       substantially all

                                      F-25
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 9 Income Taxes (Cont'd)

       earnings. The Guatemala government has granted an income tax exemption to
       the Company's subsidiary Mayapac beginning January 2004 through January
       2012.

       A reconciliation of the Company's effective tax rate to the amount
       computed by applying the federal income tax rate of 35% to earnings
       before taxes attributable to earnings from operations expressed in
       percentages, follows:
<TABLE>
<CAPTION>
                                                                            Year         Year         Year
                                                                            Ended        Ended        Ended
                                                                            June 1,      June 2,      June 3,
                                                                             2003         2002         2001
                                                                            ------       ------       ------
<S>                                                                          <C>          <C>         <C>
        Federal income tax rate                                              35.0%        35.0%       35.0%
        Increase (decrease) in taxes:
            State taxes - net of federal tax benefit                          3.9          1.9         1.9
            Taxes related to foreign subsidiaries                            (1.5)         3.3           -
            Other items - net                                                (0.9)         1.1        (2.3)
                                                                            -----        -----       -----

        Effective income tax rate                                            36.4%        41.3%       27.3%
                                                                            =====        =====       =====
</TABLE>

       The tax effects of temporary differences that give rise to significant
       portions of deferred tax assets and deferred tax liabilities at June 1,
       2003 and June 2, 2002 follow:
<TABLE>
<CAPTION>
                                                             June 1,            June 2,
                                                              2003               2002
                                                             -------            -------
<S>                                                       <C>                <C>
        Deferred tax assets:
           Inventory costs                                     243,000            168,000
           Accrued expenses and other liabilities            2,828,000          2,077,000
           Pension and postretirement benefits               1,014,000            825,000
           Net operating loss carryforwards                     70,000            182,000
           Minimum pension liability                           364,000             36,000
           Other                                               546,000            355,000
                                                          ------------        -----------
                   Total gross deferred tax assets           5,065,000          3,643,000
                                                          ------------        -----------


        Deferred tax liabilities:
          Property, plant and equipment                   $ (6,534,000)        (6,058,000)
          Net unrealized gain on marketable securities         (59,000)           (45,000)
          Other                                               (694,000)        (1,041,000)
                                                          ------------        -----------
                  Total gross deferred tax liabilities      (7,287,000)        (7,144,000)
                                                          ------------        -----------

        Net deferred tax liabilities                      $ (2,222,000)        (3,501,000)
                                                          ============        ===========
</TABLE>

       In assessing the realizability of deferred tax assets, management
       considers whether it is more likely than not that some portion or all of
       the deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent upon the generation of future taxable
       income during

                                      F-26
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 9 Income Taxes (Cont'd)

       the periods in which those temporary differences become deductible.
       Management considers the scheduled reversal of deferred tax liabilities,
       projected future taxable income, and tax planning strategies in making
       this assessment. Based upon the level of historical taxable income and
       projections for future taxable income over the periods in which the
       deferred tax assets are deductible, management believes it is more likely
       than not the Company will realize the benefits of these deductible
       differences. The amount of the deferred tax asset considered realizable,
       however, could be reduced in the near term if estimates of future taxable
       income are reduced.

       The Company has not recognized a deferred tax liability for the
       undistributed earnings and tax basis differences of its investment in
       foreign subsidiaries since the earnings and investment are considered to
       be permanently invested in the businesses and, under the tax laws, are
       not subject to such taxes until distributed. The accumulated amount of
       such undistributed earnings was approximately $8,602,000 at June 1, 2003.

       At June 1, 2003, the Company has net operating loss carryforwards for
       state income tax purposes of approximately $949,000, which are available
       to offset future state taxable income, if any, through 2018.

Note 10 Commitments and Contingencies

       (a)    Letter of Credit

              As of June 1, 2003, the Company's wholly-owned reinsurance company
              had outstanding four letters of credit in the amount of
              $1,580,000, $131,000, $476,000 and $624,000 as security for the
              reimbursement of losses arising from the reinsurance assumed by
              the Company.

       (b)    Legal Matters

              Derivative Action

              On September 13, 1996, certain Class A common stockholders filed a
              complaint in equity against six of the Corporation's directors and
              the estate of a former director in the Court of Common Pleas of
              York County, Pennsylvania (the complaint). The suit also names the
              Corporation as a nominal defendant. The suit sought various forms
              of relief including, but not limited to, rescission of the board's
              April 28, 1995 approval of John A. Warehime's 1995 Employment
              Agreement and the board's February 10, 1995 adjustment of
              director's fees. (Since the filing of this lawsuit, John A.
              Warehime's 1995 Employment Agreement was amended.) In addition,
              the plaintiffs sought costs and fees incident to bringing suit. On
              November 4, 1996, the complaint was amended to add additional
              plaintiffs. On June 24, 1997, the Court dismissed the amended
              complaint for failure to make a prior demand. An appeal was filed
              on the Court's June 24, 1997 Order. On December 2, 1998, the
              Superior Court of Pennsylvania held that the derivative plaintiffs
              had made adequate demand.

              On May 12, 1997, a written demand was received by the Corporation
              from the attorney for those Class A common stockholders containing
              similar allegations and the allegations raised by the Class A
              common stockholders were investigated by a special independent
              committee of the Board of Directors and found to be without merit.

                                      F-27
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont'd)

              The director defendants filed an Answer and New Matter to the
              amended complaint on March 17, 1999. On September 5, 2001,
              director defendants filed a Motion to Dismiss the Derivative
              Action. On September 20, 2001, plaintiffs' filed an answer to
              director defendants' Motion to Dismiss. On May 17, 2002, the Court
              entered an order denying defendants' Motion to Dismiss.

              On May 14, 2002, Albert Blakey, Esquire, counsel for certain of
              the derivative plaintiffs filed a petition for fees seeking an
              award of $1,585,716 in attorney's fees. Defendants filed a
              response in opposition to the request for fees.

              On January 29, 2003, Albert Blakey, Esquire, counsel for certain
              derivative plaintiffs filed a Motion for Reconsideration of the
              Court's December 31, 2002 denial of the Petition for Fees. A
              Response in Opposition to the Motion for Reconsideration of
              Plantiff's Petition for Fees was filed with the Court on February
              12, 2003.

              Warehime Family Litigation

              On February 13, 1997, the Board of Directors proposed an amendment
              and restatement of the Corporation's Articles of Incorporation
              (the "Amended and Restated Articles") which provides that if all
              of the following Class B Shareholders (or their estates upon the
              death of such stockholders), (Michael A. Warehime, John A.
              Warehime, Sally W. Yelland, J. William Warehime, and Elizabeth W.
              Stick (all members of the Warehime family)), do not agree in
              writing to the composition of the Board of Directors or other
              important matters specified below on or after the 1998 annual
              shareholders meeting, the trustees of the Corporation's 401(k)
              Savings Plan (or a similar employee benefit plan), acting as
              fiduciaries for the employees who participate in the Plan, and the
              Class A shareholders may become entitled to vote in the manner
              described in the document. Pursuant to the Company's Bylaws,
              nominations for directors must be submitted to the Company in the
              manner prescribed by the Bylaws no later than June 1 of the year
              in which the meeting is to occur.

              The Amended and Restated Articles created a Series C Convertible
              Preferred Stock , which, in case of a dispute among the above
              mentioned members of the Warehime family on Board of Directors
              composition or other important matters, would be entitled to 35
              votes per shares (a total of 350,000 votes based on 10, 000 shares
              of Series C Convertible Preferred Stock issued to and held by the
              trustees of the Corporation's 401(k) Savings Plan); if Series C
              Convertible Preferred Stock were entitled to vote because of such
              dispute, each share of Class A Common Stock would be entitled to
              1/10th of a vote per share.

              The Amended and Restated Articles also classified the terms of the
              Board of Directors commencing with the election at the 1997 annual
              shareholders' meeting and permitted directors to be elected for
              four-year term as permitted by Pennsylvania law. Pursuant to the
              Corporation's Bylaws, as then in effect, nominations for directors
              must be submitted to the Corporation in the manner prescribed by
              the Bylaws no later than June 1 of the year in which the meeting
              is to occur.

              On February 21, 1997, Michael A. Warehime, a Class B shareholder,
              and certain Class A shareholders filed motions for a preliminary
              injunction against the Corporation, John A. Warehime, in his
              capacity as voting trustee, and certain directors of the
              Corporation in the Court of Common Pleas of York County,
              Pennsylvania against a Proposal of the Board of

                                      F-28
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont'd)

              Directors to amend and restate the Corporation's Articles of
              Incorporation in the manner hereafter described.

              The motions for a preliminary injunction were dismissed by the
              Court on June 24, 1997. The Class B shareholders on June 25, 1997
              approved the Amended and Restated Articles (John A. Warehime,
              being the sole Class B shareholder voting affirmatively in his
              capacity as voting trustee) and the Amended and Restated Articles
              became effective June 25, 1997.

              In August 1997, the Board of Directors proposed a further
              amendment (the "Amendment") to the Amended and Restated Articles
              to expand the definition of "disinterested directors" in the
              manner described below, and to approve certain performance based
              compensation for John A. Warehime solely for the purpose of making
              the Corporation eligible for a federal income tax deduction
              pursuant to Section 162(m) of the Internal Revenue Code of 1986,
              as amended. A special meeting was scheduled for August 14, 1997
              (the "Special Meeting") to vote on these proposals. On August 8,
              1997, Michael A. Warehime filed a motion in the Court of Common
              Pleas of York County, Pennsylvania to prevent John A. Warehime, in
              his capacity as voting trustee from voting on these proposals and
              to enjoin the Amendment. This motion was denied by the Court on
              August 11, 1997. The Amendment and the proposal under Section
              162(m) were approved by Class B Shareholders (John A. Warehime was
              the sole Class B shareholder to vote affirmatively, in his
              capacity as voting trustee) on August 14, 1997 and the Amendment
              became effective on August 14, 1997.

              Under the Amendment, the definition of "disinterested directors"
              means a person who, in the opinion of counsel for the Corporation,
              meets any of the following criteria: (i) disinterested directors
              as defined in Section 1715(e) of the Pennsylvania Business
              Corporations Law of 1988, as amended; (ii) persons who are not
              "interested" directors as defined in Section 1.23 of The American
              Law Institute "Principles of Corporate Governance: Analysis and
              Recommendations" (1994); or (iii) persons who qualify as members
              of the Audit Committee pursuant to Section 303.00 of the New York
              Stock Exchange's Listed Company Manual.

              Michael A. Warehime filed an appeal from the denial of his motion
              to enjoin the previously described Amendment to the Company's
              Amended and Restated Articles. On December 2, 1998, a majority
              panel of the Superior Court of Pennsylvania issued a decision
              holding that although John A. Warehime had acted in good faith in
              voting for the Amendment to the Amended and Restated Articles as
              trustee of the Warehime voting trust, he had breached his
              fiduciary duty to the beneficiaries of the Warehime voting trust
              in voting for the Amendment. On November 29, 1999, the Supreme
              Court of Pennsylvania granted a petition for allowance of appeal,
              filed by John A. Warehime, and granted a cross-petition for appeal
              filed by Michael A. Warehime.

              On August 13, 1999, Michael A. Warehime filed a complaint in
              equity in the Court of Common Pleas of York County, Pennsylvania,
              naming as defendants Arthur S. Schaier, Cyril T. Noel, Clayton J.
              Rohrbach, Jr., John A. Warehime, and the Company. The complaint
              sought a court order declaring that the September 1999 election
              for the Board of Directors of the Company be conducted in
              accordance with the Articles of Incorporation of the Company as
              they existed prior to June 25, 1997, an order declaring that the
              Series C Convertible Preferred Stock cannot be voted, and an order
              that the following candidates for the Board of Directors of the
              Company proposed by Michael A. Warehime, Sally Yelland, Elizabeth
              Stick and J. William Warehime be accepted by the Company and
              listed on the ballot to be

                                      F-29
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont'd)

              distributed at the annual meeting of shareholders of the Company
              to be held on September 16, 1999: Michael A. Warehime, Daniel
              Meckley, Elizabeth Stick, Sonny Bowman, and John Denton. The basis
              for the complaint was the December 2, 1998 decision of the
              Superior Court of Pennsylvania which held that John A. Warehime
              breached his fiduciary duties in voting for the Amended and
              Restated Articles as trustee of the Warehime voting trust. The
              requested relief was denied by the Court of Common Pleas of York
              County and Michael Warehime appealed to the Superior Court of
              Pennsylvania.

              On September 12, 2000, the Superior Court of Pennsylvania stated,
              in a Memorandum decision, that the June 25, 1997 shareholder vote,
              which adopted the Amended and Restated Articles of Incorporation
              of the Corporation should be set aside, and remanded the case to
              the Court of Common Pleas of York County to determine what further
              relief would be appropriate. On remand, the Court of Common Pleas
              of York County entered an Order on October 10, 2000 declaring that
              the Amended and Restated Articles of Incorporation were set aside
              and that an election should be held without the Amended or
              Restated Articles of Incorporation. On October 11, 2000, the
              Supreme Court of Pennsylvania entered an Order staying the Order
              of the Court of Common Pleas of York County. On November 27, 2000,
              the Supreme Court of Pennsylvania reversed and remanded the Order
              of the Superior Court issued on December 2, 1998 and, in effect,
              the Order of the Superior Court issued September 12, 2000. In
              reversing the Superior Court's Order, the Supreme Court of
              Pennsylvania held that John A. Warehime, the trustee of the voting
              trust, did not breach his fiduciary duties in voting the trust
              shares in favor of the Amended and Restated Articles of
              Incorporation. The Supreme Court remanded the case to the Superior
              Court of Pennsylvania to consider other issues raised by Michael
              A. Warehime. On May 4, 2001, the Superior Court of Pennsylvania,
              on remand from the Supreme Court of Pennsylvania to decide several
              remaining issues, held that the 1997 amendments to the
              Corporation's Amended and Restated Articles of Incorporation
              "violated principles of corporate democracy" and should be
              invalidated even though the Superior Court found the directors
              acted in good faith and their actions in approving the amendments
              did not result in a breach of their fiduciary duties. A petition
              for allocatur was filed with the Supreme Court of Pennsylvania
              requesting that the Supreme Court of Pennsylvania review the
              Superior Court's May 4, 2001 ruling. On September 17, 2002, the
              Supreme Court of Pennsylvania granted the petition for allocutur
              and oral argument was heard in the matter on May 13, 2003.

              On December 12, 2002, Michael Warehime filed a Motion for Relief
              under the Warehime v. Schaier caption in the York County Court of
              Common Pleas. Michael Warehime's motion requested, inter alia,
              that Hanover Foods Corporation's December 23, 2002 election be
              conducted according to the Articles of Incorporation as they
              existed prior to June 25, 1997. Following a hearing on December
              20, 2002, the York County Court of Common Pleas denied Michael
              Warehime's Motion for Relief. On January 17, 2003 Michael Warehime
              appealed the Court's denial of his Motion for Relief to the
              Superior Court of Pennsylvania.

              On December 12, 2002, Michael Warehime filed an Emergency
              Application for Expedited Relief with the Pennsylvania Supreme
              Court in the Warehime v. Warehime appeal concerning the election
              of director noticed for December 23, 2002. The Pennsylvania
              Supreme Court denied Michael Warehime's emergency application on
              December 20, 2002.

              In addition, the Corporation is involved in various other claims
              and legal actions arising in the ordinary course of business.

                                      F-30
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 10 Commitments and Contingencies (Cont'd)

              In the opinion of management, the ultimate disposition of these
              matters will not have a material adverse effect on the
              Corporation's consolidated financial position, results of
              operations or liquidity.

       (c)    Stock Repurchase Plan

              The Company has agreed to purchase the Company's Class A Common
              Stock purchased or owned by employees prior to April 20, 1988 at
              appraised value. This guarantee of repurchase by the Company is
              for an indefinite period of time. No shares were repurchased under
              this plan for the years ended June 1, 2003, June 2, 2002 and June
              3, 2001. As of June 1, 2003, there are 9,049 shares outstanding
              that would be eligible for this plan. The maximum commitment, if
              requested, for all eligible shares would be approximately $995,000
              based on the most recent appraised value per share as of March 31,
              2003.

       (d)    Sales and Lease Agreement

              In February 2001, the Company entered into a renewable Sales and
              Lease agreement to lease the Colusa plant for six (6) years
              beginning July 1, 2001 and to purchase 6 million pounds of tomato
              paste on a cost basis formula from the lessee during the second
              through sixth year of the agreement. In addition, the Company has
              the option to purchase an additional 6 million pounds if the cost
              basis formula is more favorable than market prices. The Company
              expects to use this annual purchase commitment through normal
              operations.

Note 11 Foreign Operations

       The Company's foreign subsidiary, Alimentos Congelados Monte Bello, S.A.
       (ALCOSA) produces food products in Guatemala, which are sold to Sunwise
       Corporation in the United States. The revenues generated by the
       operations in Guatemala and the assets employed in generating those
       revenues are as follows:

                                 June 1,           June 2,          June 3,
                                  2003              2002             2001
                              ------------      -------------    ------------
       Revenues               $ 19,072,000      $  18,699,000    $ 13,152,000
       Cost of goods sold       16,911,000         15,075,000      12,294,000
       Assets                    9,964,000          9,092,000       7,907,000

       ALCOSA maintains its accounting records in quetzals. For financial
       reporting purposes the U.S. dollar is considered the functional currency.
       The financial statements of ALCOSA have been translated to their U.S.
       dollar equivalents prior to being consolidated. Assets and liabilities
       have been translated to their U.S. dollar equivalents based on rates of
       exchange prevailing at the end of the period except for inventories,
       fixed assets, deferred and prepaid expenses, and other assets, which have
       been translated at historical rates. Revenue and expense accounts have
       been translated at average exchange rates during the period except for
       depreciation of fixed assets, which is based on the historical rate. The
       aggregate exchange gains and losses arising from the translation of
       foreign assets and liabilities and from foreign currency transactions are
       included in income under the caption of Other income - net, and amount to
       a loss of $15,000, $178,000, and $60,000, for the years ended June 1,
       2003, June 2, 2002, and June 3, 2001, respectively. At June 2, 2002, the
       prevailing exchange rate was Q 8.0 to U.S. $1.00.

                                      F-31
<PAGE>
                   HANOVER FOODS CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 12 Reconciliation of Numerator and Denominator for Basic and Diluted
        Earnings per Share
<TABLE>
<CAPTION>
                                                   Year              Year             Year
                                                   Ended             ended            ended
                                                   June 1,           June 2,          June 3,
                                                    2003              2002             2001
                                                -----------        ----------       ----------
<S>                                             <C>                <C>              <C>
Numerator for basic earnings per share:
   Net earnings applicable to
    Common stock                                $ 9,833,000         7,230,000        6,200,000
Effect of dilutive securities:
 8 1/4% cumulative convertible
    Preferred stock                                  30,000            30,000           30,000
 4.40% cumulative convertible
    Preferred stock                                  11,000            11,000           11,000
                                                -----------        ----------       ----------

Net earnings assuming dilution                  $ 9,874,000         7,271,000        6,661,000
                                                ===========        ==========       ==========

Denominator:
 Basic weighted-average shares                      720,684           716,191          714,565
 Effect of dilutive securities:
 8 1/4% cumulative convertible
    Preferred stock                                   3,066             3,386            3,670
 4.40% cumulative convertible
    Preferred stock                                  10,000            10,000           10,000
                                                -----------        ----------       ----------

Diluted weighted-average shares                     733,750           729,577          728,235
                                                ===========        ==========       ==========

Basic earnings per share                        $     13.64             10.10             9.26
Diluted earnings per share                            13.46              9.97             9.15
                                                ===========        ==========       ==========
</TABLE>

Stock options of 13,500 shares in 2002 are not included in the earnings per
share computation as their effect would have been anti-dilutive.


Note 13  Statement of Cash Flow Information
<TABLE>
<CAPTION>
                                                   Year              Year             Year
                                                   Ended             ended            ended
                                                   June 1,           June 2,          June 3,
                                                    2003              2002             2001
                                                -----------        ----------       ----------
<S>                                             <C>                <C>              <C>
Supplemental disclosure of cash paid for:
   Interest                                     $ 2,874,000       $ 3,292,000      $ 4,698,000
   Income taxes                                   5,004,000         4,043,000        3,848,000
                                                ===========       ===========      ===========
</TABLE>


                                      F-32
<PAGE>

                            QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Dollars in thousands                                     First         Second            Third            Fourth
(except per share)                                      quarter        Quarter          quarter          quarter
------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>            <C>                <C>
2003
Net sales                                               $63,427         79,897         $73,161           $73,826
Gross profit                                            $10,340        $12,770         $12,504           $10,395
Net earnings                                             $1,772         $3,682          $2,354            $2,066
Net earnings per common share - Basic                    $ 2.47          $5.12           $3.26             $2.79
Net earnings per common share - Diluted                  $ 2.43          $5.05           $3.22             $2.70
Cash Dividends per common share                          $ .275          $.275           $.275             $.275

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

2002
Net sales                                               $60,764        $81,049         $73,259           $75,155
Gross profit                                            $ 9,273        $13,326         $11,938           $10,017
Net earnings                                             $1,441         $3,858          $1,437              $535
Net earnings per common share - Basic                    $ 2.00          $5.38           $1.99              $.73
Net earnings per common share - Diluted                  $ 1.98          $5.30           $1.97              $.72
Cash Dividends per common share                          $ .275          $.275           $.275             $.275
</TABLE>

         Net sales and gross profit for the first, second and third quarters of
fiscal 2003 and for each quarter of fiscal 2002 have been adjusted by certain
amounts previously recorded as selling and marketing expense in accordance with
EITF 01-9, and cost of sales have been adjusted by certain freight costs
previously recorded as net sales in accordance with EITF 00-10. The offset was
to reduce gross profit by $2,092,000, $5,176,000 and $954,000 for the first,
second and third quarter of fiscal 2003 respectfully, and to reduce gross profit
by $1,494,000, $3,512,000, $1,254,000 and $3,022,000 for the first, second,
third and fourth quarter of fiscal 2002.

                    MARKET FOR THE REGISTRANT'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

         Although the Corporation's Class A Common Stock is currently traded on
the OTC Bulletin Board under the symbol "HNFSA" trading in the Class A Common
Stock is very sporadic. As a result of the limited market for Class A Common
Stock, shareholders are cautioned not to place undue reliance on bid prices
contained herein as indicators of the true value of the shares of Class A Common
Stock.

         The following table sets forth the high and low bid prices per share of
the Class A Common Stock on a quarterly basis of the past two fiscal years as
provided by NASDAQ, as well as dividends paid per share. Over-the-Counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.

                                      F-33
<PAGE>

        Quarter Ended                High             Low         Dividends
        -------------                ----             ---         ---------
        September 2, 2002            $51.50          $49.00         $0.275
        December 2, 2002             $49.00          $48.00         $0.275
        March 3, 2002                $50.00          $48.00         $0.275
        June 2, 2002                 $51.75          $50.00         $0.275
        September 1, 2002            $53.00          $51.75         $0.275
        December 1, 2002             $50.75          $49.25         $0.275
        March 2, 2003                $52.75          $50.00         $0.275
        June 1, 2003                 $61.00          $54.00         $0.275

         As of August 11, 2003, there were 352 record holders and approximately
210 beneficial holders of the Class A Common Stock.

                                 DIVIDEND POLICY

         The Corporation has maintained a policy of paying a quarterly dividend
of $0.275 per share. The continuing payment by the Corporation of dividends in
the future is at the sole discretion of its Board of Directors and will depend,
among other things, upon the Corporation's earnings, its capital requirements
and financial condition, as well as other relevant factors.

                            ANNUAL AND OTHER REPORTS

         The Corporation is required to file an annual report on Form 10-K for
its fiscal year ended June 1, 2003 with the Securities and Exchange Commission.
Copies of the Form 10-K annual report and the Corporation's quarterly reports
may be obtained without charge by contacting:

                 Gary T. Knisely
                 Hanover Foods Corporation
                 1486 York Street
                 P.O. Box 334
                 Hanover, PA 17331
                 717-632-6000


                                      F-34
<PAGE>

                         OFFICERS AND BOARD OF DIRECTORS

  ----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                               OFFICERS
<S>                                         <C>                                              <C>
                                                           JOHN A. WAREHIME
                                             Chairman, President & Chief Executive Officer

           GARY T. KNISELY, ESQ.                        PIETRO D. GIRAFFA, JR.                      STEVEN E. ROBERTSON
          Chief Financial Officer                      Chief Accounting Officer                          Treasurer
          Executive Vice President                   Vice President - Controller
             Secretary, Counsel

                          ALAN T. YOUNG                                                  DANIEL E. SCHUCHART
      Senior Vice President- Purchasing and Transportation                             Vice President of Sales


                                                        BOARD OF DIRECTORS

              JOHN A. WAREHIME                            ARTHUR S. SCHAIER                          JAMES A. WASHBURN
           Chairman of the Board                 President & Chief Executive Officer              Chief Executive Officer
          Hanover Food Corporation                  Schaier Nissan, Schaier Honda               Park 100 Foods, Inc., a food
                                               Long Beach, CA, a retail auto dealership            manufacturing company
                                                                                                         Tipton, IN

            CLAYTON J. ROHRBACH                            T. EDWARD LIPPY                             CYRIL T. NOEL
  Retired Vice President of Marketing CPC                   Vice President                   Retired Vice President of Finance
       International, a food company           Lippy Brothers, Inc., a farming company           Hanover Foods Corporation
            Englewood Cliffs, NJ                            Hampstead, MD

        JAMES G. STURGILL, CPA, CVA                       JENNIFER W. CARTER                          T. MICHAEL HAUGH
              Managing Partner                        Assistant to the Chairman                          President
         Sturgil & Associates LLP,                    Hanover Foods Corporation            Hospitality Management Corporation, a
    an accounting firm, Westminster, MD                                                        contract food service company
                                                                                                      Abbottstown, PA



                       EXECUTIVE OFFICES                                               CERTIFICATE TRANSFERS

                 1486 York Street, P.O. Box 334                                  Mellon Investors Services, L.L.C.
                      Hanover, PA 17331-0334                                      Securities Transfer Services
                        (717) 632-6000                                                   P.O. Box 3312
                                                                                  South Hackensack, NJ 07606-1912
                                                                     NOTE: It is recommended that all certificates be sent via
                                                                                          registered mail.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>
<S>                                                              <C>
SHAREHOLDER INQUIRIES                                             CERTIFICATE TRANSFERS HAND DELIVERIES
Shareholder inquiries should be directed to the following         Mellon Investors Services, L.L.C.
offices and addresses.                                            120 Broadway, 13th Floor
All telephone inquiries should be made by using the toll-free     New York, NY  10271
1-800-756-3353.
Copies of 10-K report are available upon request.

SHAREHOLDER INQUIRIES ADDRESS CHANGES CONSOLIDATING               CLASS A COMMON SHARES
Hanover Foods Corporation                                         Class A Common Shares are traded in a local, unlisted market
P.O. Box 3314                                                     via various stockbrokers in Pennsylvania.
South Hackensack, NJ  07606-1914
www.melloninvestor.com
----------------------

LOST CERTIFICATES CERTIFICATE REPLACEMENT                         CERTIFIED PUBLIC ACCOUNTANTS
Mellon Investors Services, L.L.C.                                 KPMG LLP, Harrisburg, Pennsylvania
Lost Securities Department
P.O. Box 3317                                                     LEGAL COUNSEL
South Hackensack, NH  07606-1917                                  Blank Rome LLP, Philadelphia, Pennsylvania
</TABLE>