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

                           FORM 10-KSB

        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998  
                                    Commission File No 0-21522


                  WILLAMETTE VALLEY VINEYARDS, INC.

            (Name of Small Business Issuer in Its Charter)
OREGON                                            93-0981021
(State or other jurisdiction of              (I.R.S. employer
incorporation or organization)          identification number)

                      8800 Enchanted Way, S.E.
                          Turner, OR 97392                         
              (Address of principal executive offices,
                         including zip code)

                            (503) 588-9463
         (Issuer's telephone number, including area code)

            _______________________________________

Securities registered pursuant to Section 12(b) of the Act: Common 
Stock

Securities registered pursuant to Section 12(g) of the Act:  None

Check whether the Issuer (1) has filed all reports required to be 
filed by Section 13 or 15(d) of the Securities Exchange Act of 
1934 during the past 12 months (or for such shorter period that 
the Issuer was required to file such reports), and (2) has been 
subject to such filing requirements for the past 90 days.  
YES  [X] NO [ ] 

Check if there is no disclosure of delinquent filers pursuant to 
Item 405 of Regulation S-B is not contained in this form, and no 
disclosure will be contained, to the best of the Issuer's 
knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this form 10-KSB or any 
amendment to this Form 10-KSB [X].

                                          As of December 31, 1998

Issuer's revenues for its most recent fiscal year:     $6,132,355

Aggregate market value of the voting stock held by
non-affiliates of the Issuer based upon the closing
bid price of such stock:                               $8,200,819

Number of shares of Common Stock outstanding:           4,232,681

Transitional Small Business Disclosure Format:     YES [ ] No [X]

                 DOCUMENTS INCORPORATED BY REFERENCE





ITEM 1.     DESCRIPTION OF BUSINESS

Introduction

Willamette Valley Vineyards, Inc. (the "Company") was formed in 
May 1988 to produce and sell premium, super premium and ultra 
premium varietal wines (i.e., wine which sells at retail prices of 
$3 to $7, $7 to $14 and over $14 per bottle, respectively).  
Willamette Valley Vineyards was originally established as a sole 
proprietorship by Oregon winegrower Jim Bernau in 1983.  The 
Company's wines are made from grapes grown at its vineyard (the 
"Vineyard") and from grapes purchased from other nearby vineyards.  
The grapes are crushed, fermented and made into wine at the 
Company's winery (the "Winery") and the wines are sold principally 
under the Company's Willamette Valley Vineyards label.  The 
Company's Vineyard and Winery are located on 75 acres of Company-
owned land adjacent to Interstate 5, approximately two miles south 
of Salem, Oregon.  

In 1996, the Company owned 50 acres of planted vineyards--39 acres 
producing and 11 acres in development. In April 1997, the Company 
acquired 100 percent of the outstanding stock of Tualatin 
Vineyards, Inc. (TVI), adding 83 acres of producing vineyard, 60 
more plantable acres and an additional 20,000 cases of wine making 
capacity.  The purchase price paid by the Company to the Tualatin 
Valley shareholders in exchange for their shares was $1,824,000 
plus Tualatin Vineyards' current assets minus their current and 
long term liabilities as reflected in their balance sheet dated 
April 15, 1997.  The Company paid 35 percent of the purchase price 
in the form of cash with the balance paid through the issuance of 
shares of the Company's common stock at an agreed price per share.  
The final purchase price was $1,988,601 paid to the Tualatin 
Vineyard, Inc. shareholders.  

The Company also leased O'Connor Vineyards on a ten-year contract 
adding an additional 48 producing acres.  All of these highly 
regarded vineyards are within the Willamette Valley Appellation.  


Products

Under its Willamette Valley Vineyards label, the Company currently 
produces and sells the following types of wine in 750 ml bottles:  
Pinot Noir, the Company's flagship and its largest selling 
varietal in 1998; Chardonnay, Pinot Gris, Riesling, Dry Riesling, 
Gewurztraminer and Oregon Blossom (blush blend).  As a convenience 
to our restaurant customers the Company produces some of its 
products in larger sized packages.

The Company currently produces and sells small quantities of 
Oregon's Nog -- a seasonal holiday product.  

In November 1998, the Company released a new label under the 
Griffin Creek brand name.  This represents a joint effort between 
the Company and Quail Run Vineyards to develop a new brand of 
wines from the Southern Oregon growing region.  Currently, the 
Company has four varieties under this label; Merlot, Syrah, Pinot 
Gris and Pinot Noir.  The Company expects to add some additional 
varieties.


Market Overview

Wine Consumption Trends.  Wine consumption in the United States 
declined from 1987 to 1994 due to increased consumer health 
concerns and a growing awareness of alcohol abuse.  That decline 
was led by sharp reductions in the low-cost non-varietal ("jug") 
wine and wine cooler segments of the market which, prior to 1987, 
were two of the fastest growing market segments.  Beginning in 
1994, per capita wine consumption once again began to rise.  The 
Company estimates that premium, super premium and ultra premium 
wine consumption will experience a moderate increase over the next 
few years.  Consumers have restricted their drinking of alcoholic 
beverages and view premium, super premium and ultra premium wines 
as a beverage of moderation.  The Company believes this change in 
consumer preference from low quality, inexpensive wines to 
premium, super premium and ultra premium wines reflects, in part, 
a growing emphasis on health and nutrition as a principal element 
of the contemporary lifestyle as well as an increased awareness of 
the risks associated with alcohol abuse.

The Oregon Wine Industry.  Oregon is a relatively new wine 
producing region in comparison to California and France.  In 1966, 
there were only two commercial wineries licensed in Oregon.  By 
contrast, in 1998, there were 130 commercial wineries licensed in 
Oregon and over 9,000 acres of wine grape vineyards, 7,100 acres 
of which are currently producing.  Total production of Oregon 
wines in 1998 is estimated by the Company to be approximately 
753,000 cases.  Oregon's entire 1998 production would have an 
estimated retail value of approximately $75 million, assuming a 
retail price of $100 per case, and a FOB value of approximately 
one-half of the retail value, or $37.5 million.

Because of climate, soil and other growing conditions, the 
Willamette Valley in western Oregon is ideally suited to growing 
superior quality Pinot Noir, Chardonnay, Pinot Gris and Riesling 
wine grapes.  Some of Oregon's Pinot Noir and Chardonnay wines 
have developed outstanding reputations, winning numerous national 
and international awards.

Oregon wine producers enjoy certain cost advantages over their 
California and French competitors due to lower costs for grapes, 
vineyard land and winery sites.  For example, the average cost of 
unplanted vineyard land in Napa County, California is 
approximately $40,000 per acre as compared to approximately $4,300 
per acre in Oregon.  In the Burgundy region of France, virtually 
no new vineyard land is available for planting.

Oregon does have certain disadvantages, however.  As a new wine 
producing region, Oregon's wines are relatively little-known to 
consumers worldwide and the total wine production of Oregon 
wineries is small relative to California and French competitors.  
Greater worldwide label recognition and larger production levels 
give Oregon's competitors certain financial, marketing, 
distribution and unit cost advantages.  Furthermore, Oregon's 
Willamette Valley has an unpredictable rainfall pattern in early 
autumn.  If significantly above-average rains were to occur just 
prior to the autumn grape harvest, the quality of harvested grapes 
could materially diminish thereby affecting that year's wine 
quality.  Finally, phylloxera, an aphid-like insect that feeds on 
the roots of grapevines, has been found in at least 14 commercial 
vineyards in Oregon.  Contrary to the California experience, most 
Oregon phylloxera infestations have expanded very slowly and done 
only minimal damage.  Nevertheless, phylloxera does constitute a 
significant risk to Oregon vineyards.  Prior to the discovery of 
phylloxera in Oregon, all vine plantings in the Company's Vineyard 
were with non-resistant rootstock.  As of December 31, 1998, the 
Company has not detected any phylloxera at its Turner site.  
Beginning with the Company's plantings in May 1992, only 
phylloxera-resistant rootstock was planted until 1997, when the 
previous management planted non-resistant root stock on 
approximately 10 acres at the Tualatin Vineyard.  In 1997, the 
Company purchased Tualatin Vineyards, which has phylloxera at its 
site.  Since the Third Quarter of 1997, all plantings have been 
and all future planting will be on phylloxera resistant root 
stock.  The Company takes all necessary precautions to prevent the 
spread of phylloxera to its Turner site.  Also phylloxera is 
active at the O'Connor Vineyard for which the Company has a 10 
year lease.  Any care and training of new plants at the O'Connor 
will be at the expense of the Company but at this time the Company 
has chosen not to approve any additional plantings at O'Connor 
vineyard.

Several significant developments in the Oregon wine industry have 
taken place over the past ten years.  Robert J. Drouhin, a well-
known producer of French wines, purchased vineyard land near 
Dundee, Oregon on which he has planted a vineyard and constructed 
a winery.  Napa Valley's Girard and Stag's Leap Wineries have 
formed a partnership and purchased vineyard land in the Willamette 
Valley where they have planted a vineyard and begun harvesting 
Pinot Noir grapes.  Brian Croser (a noted Australian winemaker), 
in partnership with Cal Knudsen (an original investor in Erath 
Vineyards) and the French Champagne firm, Taittinger, established 
the Dundee Wine Company.  Their wines, under the Argyle label, 
have received recognition for sparkling wines, Dry Riesling, 
Chardonnay and Pinot Noir.  In 1992, a vineyard consisting of over 
200 acres of Pinot Noir grapes was planted by a California 
vineyard investor across Interstate 5 and within sight of the 
Company's Winery.  

In 1994, the largest development in the Oregon wine industry is 
King Estate Winery was completed.  The facility which is located 
22 miles southwest of Eugene, is approximately 100,000 square feet 
in size surrounded by a 180 acre vineyard.  The Company estimated 
King Estate's wine production in 1996 to be 250,000 gallons.  King 
Estate is focused on serving the national market.  The Company 
views King Estate as a welcome addition to the Oregon wine 
industry and believes they could have the same positive effect on 
wine exports as St. Michelle Winery has had on the Washington wine 
industry.  The most recent high-profile move in Oregon was the 
Benziger family's purchase of 65 acres, including 32 producing 
acres of vineyard, near Scholls.  The Benziger family created the 
huge Glen Ellen wine brand in California, before selling it off to 
Brown-Forman.  The Company believes that further investments by 
other experienced wine producers will continue, ultimately 
benefiting the Company and the Oregon wine industry as a whole by 
bringing increased international recognition to the quality of 
Oregon wines.

As a result of these factors, the Company believes that long-term 
prospects for growth in the Oregon wine industry are excellent.  
The Company believes that over the next 20 years the Oregon wine 
industry will grow at a faster rate than the overall domestic wine 
industry, and that much of this growth will favor producers of 
premium, super premium and ultra premium wines such as the 
Company's.


Company Strategy

The Company, as one of the largest wineries in Oregon, believes 
its success is dependent upon its ability to: (1) grow and 
purchase high quality vinifera wine grapes; (2) vinify the grapes 
into premium, super premium and ultra premium wine; and 
(3) achieve significant brand recognition for its wines, first in 
Oregon and then nationally and internationally.  The Company's 
goal is to continue as one of Oregon's largest wineries, and 
establish a reputation for producing some of Oregon's finest, most 
sought after wines.  

Based upon several highly regarded surveys of the US wine 
industry, the Company believes that successful wineries exhibit 
the following four key attributes:  (I) focus on production of 
high-quality premium, super premium and ultra premium varietal 
wines;  (ii) achieve brand positioning that supports high bottle 
prices for its high quality wines;  (iii) build brand recognition 
by emphasizing restaurant sales; and  (iv) development of the 
strong marketing advantages (such as a highly visible winery 
location and successful self-distribution).

The Company has designed its strategy to address each of these 
attributes.

To successfully execute this strategy, the Company has assembled a 
team of accomplished winemaking professionals, and has constructed 
and equipped a 22,934 square foot state-of-the-art Winery and a 
12,500 square foot outdoor production area for the crushing, 
pressing and fermentation of wine grapes.

The Company's marketing and sells strategy is to sell its premium, 
super premium and ultra premium cork finished wine through a 
combination of  (i) direct sales at the Winery,  
(ii) self-distribution to local and regional restaurants and 
retail outlets, and  (iii) sales through independent distributors 
and wine brokers who market the Company's wine in specific 
targeted areas where self-distribution is not economically 
feasible.  Most of the Company's wines are sold under its 
Willamette Valley Vineyards label.  

The Company believes the location of its Winery next to Interstate 
5, Oregon's major north-south freeway, significantly increases 
direct sales to consumers and facilitates self-distribution of the 
Company's products.  The Company believes this location provides 
high visibility for the Winery to passing motorists, thus 
enhancing recognition of the Company's products in retail outlets 
and restaurants.  The Company's Hospitality Center has further 
increased the Company's direct sales and enhanced public 
recognition of its wines.


Vineyard

The Property.  The Company's estate vineyard at the Turner site 
currently has 50 acres planted and 39 acres producing which 
includes 17 acres of Pinot Noir and 8 acres of Riesling grape 
vines planted in 1985.  The Company planted 8 acres of Pinot Gris 
vines in May 1992 and 6 acres of Chardonnay (Espiguette clone) 
vines in 1993.  In 1996, the Company planted its remaining 11 
acres in Chardonnay (Dijon clones) and Pinot Gris.  Grapevines do 
not bear commercial quantities until the third growing season and 
do not become fully productive until the fifth to eighth growing 
season.  Vineyards generally remain productive for 30 to 100 
years, depending on weather conditions, disease and other factors.

The Vineyard uses an elaborate trellis design known as the Geneva 
Double Curtain.  The Company has incurred the additional expense 
of constructing this trellis because it doubles the number of 
canes upon which grape clusters grow and spreads these canes for 
additional solar exposure and air circulation.  Research and 
practical applications of this trellis design indicate that it 
will increase production and improve grape quality over 
traditional designs.

In April of 1997, the Company purchased Tualatin Vineyards, Inc. 
which added 83 acres of additional producing vineyards and some 60 
acres of bare land for future plantings.  In 1997, the Company 
planted 19 acres at the Tualatin site and planted another 41 acres 
in 1998, the majority being Pinot Noir which is the Company's 
flagship varietal.  All of the new planting will be available to 
harvest in the next three to five years.

Also in 1997, the Company entered into a 10 year lease with 
O'Connor Vineyards (48 acres) located near Salem to manage and 
obtain the supply of grapes from O'Connor Vineyards.  In 1998 the 
Company received a portion of the grapes produced at O'Connor due 
to the phase out of certain preexisting grape sales contracts. 

The Company now controls 241 acres (including 41 acres planted in 
1998) of vineyard land.  At full production, these vineyards 
should enable the Company to grow approximately 30% of the grapes 
needed to meet the Winery's ultimate production capacity of 
298,000 gallons (124,000 cases).

Grape Supply.  In 1998, the Company's 39 acres of producing estate 
vineyard yielded approximately 86 tons of grapes for the Winery's 
tenth crush.  Tualatin Vineyards produced 174 tons of grapes in 
1998.  O'Connor Vineyards produced 99 tons of which about 40% were 
sold to other wineries because of previous commitments.  In 1998, 
the Company purchased an additional 849 tons of grapes from other 
growers.  However, the Company sold about 87 tons of the grapes 
and juice harvested from its vineyards or purchased from 
contracted vineyards in 1998 in an effort to optimize inventory 
levels and improve wine quality by processing fewer tons than the 
Company originally projected it would need for the year.  The 
Company expects to produce 171,256 gallons in 1999 (72,032 cases) 
from its 1998 crush.  The Winery's 1998 total wine production was 
183,220 gallons (77,064 cases) from its 1997 crush.  The Vineyard 
cannot and will not provide the sole supply of grapes for the 
Winery's near-term production requirements.  The Company has also 
entered into grape purchase contracts with certain directors of 
the Company.  See "CERTAIN TRANSACTIONS."

The Company fulfills its remaining grape needs by purchasing 
grapes from other nearby vineyards at competitive prices.  The 
Company believes high quality grapes will be available for 
purchase in sufficient quantity to meet the Company's requirements 
except in the Pinot Noir varietal, where there is increasing 
demand.  The grapes grown on the Company's vineyards establish a 
foundation of quality upon which the purchase of additional grapes 
is built.  In addition, wine produced from grapes grown in the 
Company's own vineyards may be labeled as "Estate Bottled" wines.  
These wines traditionally sell at a premium over non-estate 
bottled wines.

Viticultural Conditions.  Oregon's Willamette Valley is recognized 
as a premier location for growing certain varieties of high 
quality wine grapes, particularly Pinot Noir, Chardonnay, Riesling 
and Pinot Gris.  The Company believes that the Vineyard's growing 
conditions including its soil, elevation, slope, rainfall, evening 
marine breezes and solar orientation are among the most ideal 
conditions in the United States for growing certain varieties of 
high-quality wine grapes.  The Vineyard's grape growing conditions 
compare favorably to those found in some of the famous 
viticultural regions of France.  Western Oregon's latitude 
(42 -46  North) and relationship to the eastern edge of a major 
ocean is very similar to certain centuries-old wine grape growing 
regions of France.  These conditions are unduplicated anywhere 
else in the world except the great wine grape regions of Northern 
Europe.  The Company's property is located at the same latitude as 
the famous Haut Brion vineyards in Bordeaux, France.

The Vineyard's soil type is Jory/Nekia, a dark reddish-brown silky 
clay loam over basalt bedrock noted for being well drained, 
acidic, of adequate depth, retentive of appropriate levels of 
moisture and particularly suited to growing high quality wine 
grapes.  

The Vineyard's elevation ranges from 533 feet to 700 feet above 
sea level with slopes from 2 percent to 30 percent (predominately 
12-20 percent).  The Vineyard's slope is oriented to the south, 
southwest and west.  Average annual precipitation at the Vineyard 
is 41.3 inches, average annual air temperature is 52 to 54 degrees 
Fahrenheit, and the length of each year's frost-free season 
averages from 190 to 210 days.  These conditions compare favorably 
with conditions found throughout the Willamette Valley 
viticultural region and other domestic and foreign viticultural 
regions which produce high quality wine grapes.

In the Willamette Valley, permanent vineyard irrigation is not 
required.  The average annual rainfall provides sufficient 
moisture to avoid the need to irrigate the Vineyard.  However, if 
the need should arise, the Company's property contains one water 
well which can sustain sufficient volume to meet the needs of the 
Winery and to provide auxiliary water to the Vineyard for new 
plantings and unusual drought conditions.  



Winery

Wine Production Facility.  The Company's Winery and production 
facilities, built at an initial cost of approximately $1,500,000, 
were originally capable of producing up to 75,000 cases of wine 
per year, depending on the type of wine produced.  In 1996 the 
Company invested an additional $750,000 to increase its capacity 
from 75,000 cases to its present capacity of 104,000 cases 
(250,000 gallons).  It added one large press, six stainless steel 
fermenters, and handling equipment to increase its capacity to the 
new level.  It also expanded the size of its crush pad to meet the 
needs of the additional tons of grapes crushed.  In 1998, the 
Winery produced 183,220 gallons (77,064 cases) of wine from its 
1997 crush.  The Winery is 12,784 square feet in size and contains 
areas for the processing, fermenting, aging and bottling of wine, 
as well as an underground wine cellar, a tasting room, a retail 
sales room and administrative offices.  A 12,500 square foot 
outside production area was added for the crushing, pressing and 
fermentation of wine grapes.  In 1993, a 4,000 square foot 
insulated storage facility with a capacity of 30,000 cases of wine 
was constructed at a cost of approximately $70,000.  This facility 
has now been converted to barrel storage in order to accommodate 
an additional 750 barrels for aging wines.  This change increases 
the Company's barrel aging capacity at the Turner site.  The 
production area is equipped with a settling tank and sprinkler 
system for disposing of waste water from the production process in 
compliance with environmental regulations.  The settling tank and 
sprinkler system were installed at a total cost of approximately 
$20,000. 

In 1997, the Company constructed a 20,000 square foot storage 
building to store all of its bottled product at an approximate 
cost of $750,000.  In the past, the Company rented a storage 
facility with an annual rental cost to the Company of $96,000.

With the purchase of Tualatin Vineyards, Inc., the Company added 
20,000 square feet of additional production capacity.  Although 
the Tualatin facility was constructed over twenty years ago, it 
will add 20,000 cases of wine production capacity to the Company 
which the Company felt at the time of purchase was needed.  
However due to lower sales forecasts of higher priced wines, the 
facility is not needed at this time.  The Company decided to move 
current production to its Turner site to meet short term 
production requirements.  The capacity at Tualatin is still 
available to the Company to meet any future production expansion 
needs.  The book value of the assets at Tualatin facility is less 
than the original appraised value at the time of the purchase of 
Tualatin Vineyards.

Construction of Hospitality Facility.  In May 1995, the Company 
completed construction of a large tasting and hospitality facility 
of 19,470 square feet (the "Hospitality Center").  The first floor 
of the Hospitality Center includes retail sales space and a "great 
room" designed to accommodate approximately 400 persons for 
gatherings, meetings, weddings and large wine tastings.  An 
observation tower and decking around the Hospitality Center will 
enable visitors to enjoy the view of the Willamette Valley and the 
Company's Vineyard.  The Hospitality Center is joined with the 
present Winery by an underground cellar tunnel.  The facility 
includes a basement cellar of 10,150 square feet (including the 
2,460 square foot underground cellar tunnel) to expand storage of 
the Company's wine in a proper environment.  The cellar provides 
the Winery with ample space for storing up to 3,000 barrels of 
wine for aging.

Just outside the Hospitality Center, the Company has planned a 
landscaped park setting consisting of one acre of terraced lawn 
for outdoor events and five wooded acres for picnics and social 
gatherings.  The area between the Winery and the Hospitality 
Center forms a 20,000 square foot quadrangle.  As designed, the 
quadrangle can be covered by a removable fabric top making it an 
all-weather outdoor facility to promote sale of the Company's 
wines through outdoor festivals and social events.

The Company believes the addition of the Hospitality Center and 
the park and quadrangle will make the Winery an attractive 
recreational and social destination for tourists and local 
residents, thereby enhancing the Company's ability to sell its 
wines.

Mortgages on Properties.  The Company's winery facilities are 
subject to two mortgages.  The facility at Turner had a principal 
balance of $2,937,479 on December 31, 1998.  In 1997, the Company 
entered into a second separate mortgage to fund the Tualatin 
acquisition and development of its vineyards.  This separate 
mortgage, secured by Tualatin assets, had a principal balance of 
$1,299,908 on December 31, 1998.  The Company's total mortgages 
had a balance of $4,237,387 on December 31, 1998, as compared to 
the principal balance of $4,044,943 December 31, 1997   These 
mortgages are payable in annual aggregate installments including 
interest of approximately $510,000 through 2012.  After 2012, the 
Company's annual aggregate  mortgage payment including interest 
will be $144,000 until the year 2014. 

Wine Production.  The Company operates on the principle that 
winemaking is a natural but highly technical process requiring the 
attention and dedication of the winemaking staff.  The Company's 
Winery is equipped with the latest technical innovations and uses 
modern laboratory equipment and computers to monitor the progress 
of each wine through all stages of the winemaking process.

Beginning with the Company's first vintage in 1989, the Company's 
annual grape harvest and wine production are as follows: 

            Tons of
            Grapes     Production                           Case
Crush Year  Crushed    Year        Gallons Produced  Equivalents

1989          203                     
1990          206      1990           31,383              13,200
1991          340      1991           31,900              13,400
1992          565      1992           52,600              22,100
1993          633      1993           90,908              38,237
1994          590      1994           97,822              41,145
1995          885      1995           96,077              40,411
1996         1290      1996          127,655              53,693
1997         1426      1997          199,353              83,850
1998         1109      1998          169,652              71,357


The quantity of grapes crushed in 1997 does not include 228 tons 
of grapes that were purchased and resold on the open market 
because the Company had contracted for more grapes than were 
needed.  The Company was unable to sell 270 tons of grapes before 
crush, this tonnage converts to 44,000 gallons of bulk wine which 
the Company sold in 1998.


Sales and Distribution 

Marketing Strategy.  The Company markets and sells its wines 
through a combination of direct sales at the Winery, sales 
directly and indirectly through its shareholders, self-
distribution to local restaurants and retail outlets in Oregon, 
directly through mailing lists, and through distributors and wine 
brokers who sell in specific targeted areas outside of the state 
of Oregon.  As the Company has increased production volumes and 
achieved greater brand recognition, sales to other domestic  
markets have increased both in terms of absolute dollars and as a 
percentage of total Company sales.

Direct Sales.  The Company's Winery is located adjacent to the 
state's major north-south freeway (Interstate 5), approximately 2 
miles south of the state's third largest metropolitan area 
(Salem), and 50 miles in either direction from the state's first 
and second largest metropolitan areas (Portland and Eugene, 
respectively).  The Company believes the Winery's unique location 
along Interstate 5 has resulted in a greater amount of wines sold 
at the Winery as compared to the Oregon industry standard.  Direct 
sales from the Winery are an important distribution channel and an 
effective means of product promotion.  To increase brand 
awareness, the Company offers educational Winery tours and product 
presentations by trained personnel.

The Company holds eight major festivals and events at the Winery 
each year.  In addition, open houses are held at the Winery during 
major holiday weekends such as Memorial Day, Independence Day, 
Labor Day and Thanksgiving, where barrel tastings and cellar tours 
are given.  Numerous private parties, wedding receptions, 
political and other events are also held at the Winery.  Finally, 
the Company participates in many wine and food festivals 
throughout Oregon.  Each of these events results in direct sales 
of the Company's wines and promotion of its label to event 
attendees.

Direct sales are profitable because the Company is able to sell 
its wine directly to consumers at retail prices rather than to 
distributors or retailers at wholesale prices.  Sales made 
directly to consumers at retail prices result in an increased 
profit margin equal to the difference between retail prices and 
distributor or wholesale prices, as the case may be.  For 1998, 
direct sales make up approximately 24% of the Company's revenue. 

Self-Distribution.  The Company has established a self-
distribution system to sell its wines to restaurant and retail 
accounts located primarily in Oregon.  The self-distribution 
program is currently carried out by 17 sales representatives who 
market the Company's wine exclusively, take wine orders and make 
deliveries on a commission-only basis.  The Company believes this 
program of self-representation and delivery has allowed its 
relatively new wines to gain a strong presence in the Oregon 
market with over 1,000 restaurant and retail accounts established 
as of December 31, 1998.  The Company further believes that the 
location of its Winery along Interstate 5 facilitates self-
distribution throughout the entire Willamette Valley where 
approximately 70% of Oregon's population resides.

The Company has expended significant resources to establish its 
self-distribution system.  The system initially focused on 
distribution in the Willamette Valley, but then expanded to the 
Oregon coast, and then into southern Oregon.  For 1998, 
approximately 37% of the Company's net revenues were attributable 
to self-distribution.  

Distributors and Wine Brokers.  The Company uses both independent 
distributors and wine brokers primarily to market the Company's 
wines in specific targeted areas where self-distribution is not 
feasible.  Only those distributors and wine brokers who have 
demonstrated a knowledge of and a proven ability to market 
premium, super premium, and ultra premium wines are utilized.

Shareholders.  As a consumer-owned company, the Company has a 
unique marketing opportunity available to only a few of its 
competitors.  The Company has approximately 3500 shareholders of 
record which represents approximately 5,000 wine consumers since 
many shares are held jointly by family members.  The Company 
believes its shareholders, as a group, purchase a significant 
portion of the Company's cork-finished wines directly from the 
Winery.

The Company encourages its shareholders to enjoy the Winery's 
products and promote them to their friends and business 
associates.  The Company's shareholders have been very active 
throughout the Winery's operations, providing valuable assistance 
at little or no cost.  Throughout the year, shareholders have 
helped with cellaring duties.  Over 300 shareholders have 
qualified with the Oregon Liquor Control Commission as licensed 
wine servers and have poured wine at various Winery events.  The 
Winery's tasting facilities are often staffed with volunteer 
shareholders.  With their own personalized Company business cards, 
shareholders have made numerous contacts with restaurants and 
retail outlets interested in selling the Company's wines.  The 
Company views its shareholders as an army of volunteer marketers 
promoting the Company's products to their friends and 
acquaintances in both social and business settings.  On an ongoing 
basis, shareholders provide valuable leads and feedback to the 
Company's management and staff.

Tourists.  Oregon wineries are experiencing an increase in on-site 
visits by consumers.  In California, visiting wineries is a very 
popular leisure time activity.  Napa Valley is California's 
second-largest tourist attraction with over 2.5 million visitors 
in 1987.  Wineries in Washington are also experiencing strong 
interest from tourists.  Chateau Ste. Michelle, located near 
Woodinville, Washington, attracts approximately 200,000 visitors 
per year.

The Winery is located less than one mile from The Enchanted 
Forest, a gingerbread village/forest theme park which, in 1985, 
was Oregon's eleventh most visited tourist attraction (fifth among 
those charging admission).  The Enchanted Forest, which operates 
from March 15 to September 30 each year, attracts approximately 
200,000 paying visitors per year.  Adjacent to the Enchanted 
Forest is the Thrillville Amusement Park and the Forest Glen 
Recreational Vehicle Park which contains approximately 110 
overnight recreational vehicle sites.  The Company believes that 
some of the visitors to the Enchanted Forest and RV Park do visit 
the Winery.  More importantly, the Company believes its convenient 
location, adjacent to Interstate 5,  enables the Winery to attract 
a significant number of visitors.

Competition

The wine industry is highly competitive.  In a broad sense, wines 
may be considered to compete with all alcoholic and nonalcoholic 
beverages.  Within the wine industry, the Company believes that 
its principal competitors include wineries in Oregon, California 
and Washington, which, like the Company, produce premium, super 
premium, and ultra premium wines.  Wine production in the United 
States is dominated by large California wineries which have 
significantly greater financial, production, distribution and 
marketing resources than the Company.  Currently, no Oregon winery 
dominates the Oregon wine market.  Several Oregon wineries, 
however, are older and better established and have greater label 
recognition than the Company.

The Company believes that the principal competitive factors in the 
premium, super premium, and ultra premium segment of the wine 
industry are product quality, price, label recognition, and 
product supply.  The Company believes it competes favorably with 
respect to each of these factors.  The Company has received good 
reviews in tastings of its wines and believes its prices are 
competitive with other Oregon wineries.  Large production is 
necessary to satisfy retailers' and restaurants' demand and the 
Company believes that its current level of production is adequate 
to meet that demand.  Furthermore, the Company believes that its 
ultimate forecasted production level of 298,000 gallons (124,000 
cases) per year will give it significant competitive advantages 
over most Oregon wineries in areas such as marketing, distribution 
arrangements, grape purchasing, and access to financing.  The 
current production level of most Oregon wineries is generally much 
smaller than the projected production level of the Company's 
Winery.  With respect to label recognition, the Company believes 
that its unique structure as a consumer-owned company will give it 
a significant advantage in gaining market share in Oregon as well 
as penetrating other wine markets.


Governmental Regulation of the Wine Industry

The production and sale of wine is subject to extensive regulation 
by the Federal Bureau of Alcohol, Tobacco and Firearms and the 
Oregon Liquor Control Commission.  The Company is licensed by and 
meets the bonding requirements of each of these governmental 
agencies.  Sale of the Company's wine is subject to federal 
alcohol tax, payable at the time wine is removed from the bonded 
area of the Winery for shipment to customers or for sale in its 
tasting room.  The current federal alcohol tax rate is $1.07 per 
gallon; however, wineries that produce not more than 250,000 
gallons during the calendar year are allowed a graduated tax 
credit of up to $0.90 per gallon on the first 100,000 gallons of 
wine (other than sparkling wines) removed from the bonded area 
during that year.  The Company also pays the state of Oregon an 
excise tax of $0.67 per gallon on all wine sold in Oregon.  In 
addition, all states in which the Company's wines will be sold 
impose varying excise taxes on the sale of alcoholic beverages.  
As an agricultural processor, the Company is also regulated by the 
Oregon Department of Agriculture and, as a producer of waste 
water, it is regulated by the Oregon Department of Environmental 
Quality.  The Company has secured all necessary permits to operate 
its business.

Prompted by growing government budget shortfalls and public 
reaction against alcohol abuse, Congress and many state 
legislatures are considering various proposals to impose 
additional excise taxes on the production and sale of alcoholic 
beverages, including table wines.  Some of the excise tax rates 
being considered are substantial.  The ultimate effects of such 
legislation, if passed, cannot be assessed accurately since the 
proposals are still in the discussion stage.  Any increase in the 
taxes imposed on table wines can be expected to have a potentially 
adverse impact on overall sales of such products.  However, the 
impact may not be proportionate to that experienced by producers 
of other alcoholic beverages and may not be the same in every 
state.  Recently, there have been national efforts to reduce the 
legal blood alcohol level to .08 to combat driving under the 
influence.  The Company believes that if such legislation is 
passed, it may discourage wine consumption in restaurants.  
Although the .08 rule is in effect in Oregon, the Company's 
principal sales territory, it has not yet affected local 
restaurant sales although it is possible that it will on a 
national level.


Employees

As of December 31, 1998 the Company had 41 full-time employees and 
9 part-time employees.  In addition, the Company hires additional 
employees for seasonal work as required.  The Company's employees 
are not represented by any collective bargaining unit.  The 
Company believes its relations with its employees are good.


ITEM 2.     DESCRIPTION OF PROPERTY

See "DESCRIPTION OF BUSINESS -- Winery" and "-- Vineyard".


ITEM 3.     LEGAL PROCEEDINGS

There are no material legal proceedings pending to which the 
Company is a party or to which any of its property is subject, and 
the Company's management does not know of any such action being 
contemplated. 


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

There were no matters submitted to a vote of security holders 
during the Company's Fourth Quarter ended December 31, 1998.


ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

The Company's Common Stock is traded on the NASDAQ Small Cap 
Market under the symbol "WVVI."  As of December 31, 1998, there 
were 3,503 stockholders of record of the Common Stock.

The table below sets forth for the quarters indicated the high and 
low bids for the Company's Common Stock as reported on the NASDAQ 
Small Cap Market.  The Company's Common Stock began trading 
publicly on September 13, 1994. 

                             Quarter Ended
 
            3/31/98       6/30/98       9/30/98         12/31/98
High        $1.94          $3.63         $2.88           $2.25
Low         $1.38          $1.56         $1.75           $1.50

                             Quarter Ended

            3/31/97       6/30/97       9/30/97         12/31/97
High        $3.63          $3.50         $3.25           $2.25
Low         $2.25          $2.00         $1.75           $1.19

The Company has not paid any dividends on the Common Stock, and it 
is not anticipated that any dividends will be paid by the Company 
in the foreseeable future.


ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS

Forward Looking Statement

This Management's discussion and Analysis of Financial Condition 
and Results of Operation and other sections of this Form 10K 
contain forward-looking statements within the meaning of the 
Private Securities Litigation Reform Act of 1995.  Words such as 
"expects", "anticipates", "intends", "plans", "believes", "seeks", 
"estimates", and variations of such words and similar expressions 
are intended to identify such forward-looking statements.  Such 
forward-looking statements include, for example, statements 
regarding general market trends, predictions regarding growth and 
other future trends in the Oregon wine industry, expected 
availability of adequate grape supplies, expected positive impact 
of the Company's recently constructed Hospitality Center on direct 
sales effort, expected positive impacts of recent management 
changes are related to restructuring efforts on future operating 
results, expected increases in future sales, expected improvements 
in gross margin.  These forward-looking statements involve risks 
and uncertainties that are based on current expectations, 
estimates and projections about the Company's business, and 
beliefs and assumptions made by management.  Actual outcomes and 
results may differ materially from what is expressed or forecasted 
in such forward-looking statements due to numerous factors, 
including, but not limited to:  availability of financing for 
growth, availability of adequate supply of high quality grapes, 
successful performance of internal operations, impact of 
competition, changes in wine broker or distributor relations or 
performance, impact of possible adverse weather conditions, impact 
of reduction in grape quality or supply due to disease, impact of 
governmental regulatory decisions, successful assimilation of 
Tualatin Vineyard Inc.'s business with that of the Company and 
other risks detailed below as well as those discussed elsewhere in 
this Form 10K and from time to time in the Company's Securities 
and Exchange Commission filing and reports.  In addition, such 
statements could be affected by general industry and market 
conditions and growth rates, and general domestic economic 
conditions.


OVERVIEW

Beginning the third quarter of 1997, the Company fundamentally 
changed its direction and returned to its historically 
conservative approach to growth and focus on producing the highest 
quality varietal wines.  In late 1996, the Company had embarked on 
an aggressive growth plan aimed at addressing several major 
issues.  First, sales demand exceeded supply of certain varietals, 
requiring allocation of certain products and decreasing the time 
for bottle aging to speed release into the market.  Second, sales 
and production growth made the Company highly dependent upon 
outside sources of grapes which were at higher market prices and 
becoming more difficult to secure.  Third, growers were forcing 
the Company to purchase lower demanded grapes not needed by the 
Company in order to purchase the high demand grapes like Pinot 
Noir.  Fourth, the previous management's internal sales 
projections indicated the Company needed more winemaking capacity 
than was available at its Turner site and significantly more wine 
storage.

As a result of positive reviews by national wine writers and 
critics the Company has experienced over the last several years 
high demand for some of its products.  For example, Wine 
Enthusiast Magazine named Willamette Valley Vineyards as "One of 
America's Great Pinot Noir Producers", noted wine critic Robert 
Parker stated, "Willamette Valley Vineyards Whole Berry Fermented 
Pinot Noir may be the world's most delicious and accessible Pinot.  
It has been a knockout in some vintages."  With the Company's 1996 
Pinot Gris, noted Wine Spectator writer Matt Kramer stated, "In 
short, it's a winner."

The May 15,1998 issue of the Wine Spectator rated the Company's 
`96 Chardonnay as the leading "World Chardonnay Value" and 
featured the `96 Pinot Gris as the best match with poached salmon 
in a full page color layout.  On a number of occasions, the Wine 
Spectator rated the Company's wines as "Best Buys".  As a result 
of this coverage and the attractive prices of the Company's wines, 
the Company experienced shortages in the marketplace, requiring 
allocation of available supply to distributors.  

In 1996 and early 1997, the Company planted the remaining 11 acres 
of available land and added 29,000 cases of winemaking capacity at 
its Turner site, purchased Tualatin Vineyards to add additional 
vineyard (83 acres in production and 60 available for planting) 
and winemaking capacity (20,000 cases), leased O'Connor Vineyards 
(48 producing acres) and constructed a 20,000 sq. ft. warehouse on 
its Turner property (capable of storing 180,000 cases).  In a very 
short time period, the Company increased its vineyard from 40 to 
241 acres, its winemaking capacity from 75,000 cases to 124,000 
cases, its barrel aging capacity from 25,000 cases to 50,000 cases 
and its finished case storage capacity from 30,000 cases to 
200,000 cases.  This growth was financed by debt rising from $2.24 
million at the beginning of 1996 to $5.95 million by the end of 
1998, an increase of 166% and the issuance of the Company's Common 
Stock of over 440,00 shares (part of Tualatin purchase) increasing 
the shares outstanding by 12%.

Problems resulting from this aggressive expansion showed up 
quickly.  The Company's actual sales in the period after the 
Tualatin acquisition did not meet the previous management's 
internal sales projections upon which its expansion activities 
were premised.  Operating expenses were exceeding budget.  The 
prices of the Company's products had not kept pace with rising 
costs.  Low priced, fast moving products (Lot 27 & 28) were being 
introduced that were inconsistent with the Willamette Valley 
Vineyards brand positioning and were being sold at a loss.  The 
Board of Directors moved quickly in April 1997 by appointing an 
Executive Committee to work with the General Manager on 
operational issues.  The Executive Committee later worked with the 
co-founder and Vice President in operating the Company after the 
General Manager resigned at the end of July 1997.  In connection 
with the Company's restructuring efforts, co-founder and current 
CEO, Jim Bernau returned to operate the Company beginning mid 
September of 1997.  Activity at its Tualatin winery facility was 
limited, the Tualatin Estate Tasting Room was re-opened, a number 
of mid-level manager positions eliminated and budget discipline 
was reinstated.  The Company experienced a dramatic turn-around in 
the Fourth Quarter of 1997, generating $316,314 in operating 
income, enough to erase the record losses experienced in the first 
three quarters of 1997.

However, the Company continued to be confronted by the costs of 
the expansion.  In 1997, the Company borrowed an additional $1.3 
million to support the Tualatin acquisition and provide cash 
required to pay the front end lease payment of the O'Connor 
Vineyard and cover vineyard operating expenses for both new 
properties.  These new borrowings significantly increased the 
reliance on the Company's line of credit which in turn increased 
interest payments, as did the completion of the $750,000 warehouse 
at the Turner site.

The Company believes its overall debt load is comparable with 
wineries its size, and therefore that its debt service obligations 
were not the ultimate cause of the Company's lack of profitability 
during this period.  Rather, the Company believes that its 
unprofitability was primarily the result of underpricing its 
products. 

While costs to purchase grapes have climbed dramatically, 
especially for Pinot Noir (increasing by 15% per year), the 
Company hadn't raised most of its wine prices since 1995.  The 
Company implemented price increases combined with sales commission 
reductions for Oregon sales in July 1998.  The goal of this change 
is to generate a 10% after-tax return from wholesale sales in 
Oregon.  Price increases for out-of-state sales with the same net 
return goal went into effect September 1, 1998, due to the lead 
time needed by the Company's out-of-state distributors.  Retail 
prices for all products and hospitality services, which accounted 
for 22% of the Company's net revenues in 1998, were increased by 
like amounts in July 1998.  These price increases were instituted 
after the excessive inventories built in 1996 and early 1997 were 
significantly reduced.  

The fundamental issues affecting the Company's profitability are 
product mix and the positioning of those products in the 
marketplace.  Although the Company's cost of making and selling 
wine by the case is nearly the same as its profitable competitors, 
the average collected revenue per case is considerably less.  The 
Company has determined to make more high margin varietals, 
especially Pinot Noir, and less low margin white, blush and off-
dry wines.  The Company discontinued making and selling a low 
margin "Lot 27 and 28" Pinot Noir and Chardonnay (retailing for 
$7-$8 per bottle) and successfully converted Oregon grocery store 
shelf placements to higher quality, higher margin "Vintage 
Selection" Pinot Noir and Chardonnay (retailing for $12-$15 per 
bottle).

The Company has prepared a detailed five year plan by brand, 
variety, and package size.  The Company's goal is to significantly 
increase average gross margins, by re-positioning Willamette 
Valley Vineyards branded products, eliminating lower margin 
products that are inconsistent with its brand strategy and take up 
valuable production capacity.  The Company also plans to 
revitalize its Tualatin brand with a re-positioning of the new 
Tualatin Estate products made in limited quantities and sold at 
higher price points.  The Company expects the introduction of a 
high margin Southern Oregon brand of warm climate varieties such 
as of Merlot and Syrah, etc., under the brand of Griffin Creek 
will help to increase gross margins.

For example, Willamette Valley Vineyards now offers a Vintage 
Selection Pinot Noir and Whole Cluster Fermented Pinot Noir for 
$15 per bottle retail (up from $10), a Founders' Reserve for $28 
per bottle (up from $18), a Single Vineyard Designate for $35 per 
bottle and a Signature Cuvee for $48 per bottle.  The two top end 
offerings will be released in 1999 and replace the "OVB" label 
designation which retailed for $35 per bottle.  The Signature 
Cuvee has already been named by Clive Coats, Master of Wine in The 
Vine as the leading Oregon Pinot Noir of the 1996 Vintage.  
Management retained Oregon's top wine label design firm, Anstey 
Healy, who upgraded the Willamette Valley Vineyards label 
beginning with the release of the `97 Vintage.  The main purpose 
of the redesign was to support the repositioning effort.  

The Tualatin brand has been revitalized with better wines and a 
new label, Tualatin Estate, prepared by the design firm Anstey 
Healy.  Its flagship Pinot Noir will be launched as the `97 
Vintage in the fall of 1999 and will retail for $21.50 per bottle, 
up from $12.50.  The Tualatin Riesling, previously selling for $5 
per bottle, has been replaced by a dry Tualatin Estate Riesling 
retailing for $8 per bottle.  A new variety, Pinot Blanc has been 
released with a retail price of $15 per bottle and has already 
earned four stars and a plus from the Restaurant Wine Magazine.  A 
Semi-Sparkling Muscat has been released for $14 per bottle.  Since 
the Pinot Noir and Chardonnay were not ready to release in 1998, 
management conducted a limited brand roll-out with the Semi-
Sparkling Muscat and Riesling resulting in marketing expenses of 
approximately $4,900 in the Fourth Quarter.  Distribution is 
currently being established for this brand.  The Company did not 
meet its budgeted depletion rates for Tualatin Estate inventories 
in 1998 due to delays in the projected release dates for the 
Tualatin Estate wines and the generally poor condition of the 
Tualatin distribution network.  Both the Willamette Valley 
Vineyards and Griffin Creek brands exceeded goal.

The Griffin Creek Merlot, retailing for $35 per bottle, and Pinot 
Gris, retailing for $17 per bottle, were released in the Fourth 
Quarter of 1998.  The brand roll-out for Griffin Creek resulted in 
a one-time marketing expense of approximately $25,000 in the 
Fourth Quarter.  The Syrah and Pinot Noir, both of which will 
retail for $35 per bottle are expected to be released in mid year 
1999.  The Merlot has garnered a score of "90" from Wine 
Enthusiast and the Pinot Noir earned a Gold Metal at the prominent 
Dallas Morning News judging in Texas.

The Gross Profit Margin improved from 44% in the Fourth Quarter of 
1997 to 49% in the Fourth Quarter of 1998.  Profits from retail 
operations improved 24% and Wholesale/FOB operations improved 6% 
for the year.  The Company regards this as good progress given the 
large amount of inventory which had been built up in 1996 and 1997 
and needed to be sold at less than target prices to bring 
inventory levels back in line with orderly distributor depletion 
rates.  In 1998, the Company saved $42,917 in production labor 
over 1997 or a reduction of 12% over the previous period. Although 
selling, general and administration costs increased in 1998 over 
1997, targeted selling, general, and administration costs were 
reduced from the previous year.  For example in 1998, dues and 
publications were reduced by $11,764, a 37% reduction, office 
supplies by $36,587, a 61% reduction, legal fees by $2,508, a 6% 
reduction and in-state sales commissions by $46,178, a 9% 
reduction. 

The loss the Company has experienced in 1998 is due to one-time 
occurrences.  Resulting from the price paid for the Tualatin wine 
inventory relative to its sale price, the Company experienced an 
83% cost of goods on the Tualatin wine sold in 1998 because of 
sales of lower margin product.  The Tualatin operation contributed 
a loss of $87,352 to the Company.  A reserve for the doubtful 
collection of a $81,000 sale made to the Company's United Kingdom 
agent in 1997 was established for the year end 1998 financial 
statements.  The agent was involuntarily placed in 
"administration" in September 1998, a British form of bankruptcy, 
and has been permitted to emerge from "administration" and 
continue in business by a vote of the creditors including the 
Company.  The Company continues to make a concerted effort to 
collect these funds.  After deducting the year end reserve 
adjustments (reserve for impaired inventory and doubtful 
collection of the receivable from the United Kingdom) and the loss 
from Tualatin, the income from operations would have been $543,009 
or a 17% increase over the $465,501 operating income in 1997.

The profitability of the Company is dependent principally upon the 
level of success it achieves in attaining market acceptance of its 
higher prices and the level of distribution it achieves for its 
higher margin brands and products.  The Company has 
professionalized its Central and East Coast representation by 
accepting the retirement of its agents, winery stockholders who 
grew into the agent positions.  A Sales Manager for that 
territory, recruited from one of the winery's top distributors, 
Winebow of New Jersey and New York began in January of 1999.  A 
West Coast Sales Manager was recruited from Oregon's largest wine 
distributor, Columbia Distributing and began in February of 1999.  
Two top winery employees were recently reassigned to direct sales 
positions in key Oregon markets to call upon target prospects for 
the purpose of increasing the placement of the Company's high end 
wines.

Other issues that are affecting profits are the production 
facilities at Tualatin and the sizable investment in facilities at 
Willamette Valley Vineyards.  The Company is pursuing ways to 
lease the wine production facilities at Tualatin Estate and 
increase paid usage of the facilities at its Turner site.

The Company's ability to make more and better Pinot Noir is 
constrained by fruit supply.  The Company has completed planting 
all remaining acreage at Tualatin Estate (41 acres) in Pinot Noir, 
which will provide 150 more tons at full production (9,750 
additional cases) which will be in full production in the next 
three to five years.  Tualatin is the only vineyard in Oregon to 
have won the Governor's Trophy, the state's most prestigious wine 
award, two years consecutively in 1995 and 1996 for its 1993 and 
1994 Reserve Pinot Noir, respectively.  Tualatin is the only 
vineyard in the world to have captured the Best of Show in the red 
and white categories at the 1984 London International Wine Judging 
in the same year.  The Company believes Tualatin Estate's soil and 
climate produces among the highest quality Pinot Noir in Oregon.

The Company is also developing alternative approaches to 
increasing Pinot Noir grapes supply without incurring capital 
expenses, like working with winegrowers on increasing planting, 
grafting over current low demand varieties and assisting owners of 
desirable vineyard sites to develop their property.  The Griffin 
Creek brand grape supply comes from a winegrowing family in the 
Rogue Valley, who are paid a small portion of the fruit costs 
after harvest and the remainder when the wine is sold. This 
"grower financing" approach provides the winery with a long term 
supply for the brand and the winegrower with a long term market 
for the grapes and the potential to earn a higher than market 
price for their grapes depending upon the average price the wine 
receives.


Results of Operations

Seasonal and Quarterly Results.  The Company has historically 
experienced and expects to continue experiencing seasonal 
fluctuations in its revenues and net income.  In the past, the 
Company has reported a net loss or modest net income during its 
First Quarter and expects this trend to continue in future First 
Quarters, including the First Quarter of 1999.  Sales volumes  
increase progressively beginning in the Second Quarter through the 
Fourth Quarter because of consumer buying habits.

The following table sets forth certain information regarding the 
Company's revenues from Winery operations for each of the last 
eight fiscal quarters:

          Fiscal 1998 Quarter Ended    Fiscal 1997 Quarter Ended
               (in thousands)               (in thousands)
                3/31  6/30  9/30  12/31  3/31  6/30  9/30  12/31
Tasting room and 
retail sales    $155  $224  $274   $284  $140  $212  $244   $272
On-site and off-site
festivals        118   108   132    207    86    92   145    177
In-state sales   426   575   530    747   317   462   552    827
Bulk/Grape sales 235    88     0    131     0    38    19    408
Out-of-state 
sales            437   500   811    376   298   510   400    727
Total winery 
revenues       1,371 1,495 1,747  1,745   841 1,314 1,360  2,411


Period to Period Comparisons

Revenue.  The following table sets forth, for the periods 
indicated, select revenue data from Company operations:

                                      Year Ended December 31
                                          (in thousands)
                                    1998        1997        1996
Tasting room and retail sales      $ 937      $  868       $ 982
On-site and off-site festivals       565         500         474
In-state sales                     2,278       2,158       1,765
Bulk /Grape Sales                    454         465           0
Out-of-state sales                 2,124       1,935       1,113
Revenues from winery operations   $6,358      $5,926      $4,334

Less Excise Taxes                    226         212          99

Net  Revenue                      $6,132      $5,714      $4,235

1998 Compared to 1997.  Tasting room sales for the year ended 
December 31, 1998 increased 8% to $936,585 from $868,531 for the 
same period in 1997.  The Company has begun to track the buying 
habits of the customers who visit the tasting room.  In the past 
several years, the Company did not track customers buying habits 
which means the tasting room did not focus on a targeted group of 
customers to increase its sales.  In 1996 and early 1997 the 
previous management allowed the Wholesale Division to sell wine 
that in previous years has been exclusively sold in the tasting 
room.  In 1998, the Company returned to the practice of selling 
certain exclusive wines in the tasting room at higher profit 
margins.  The tasting room had additional higher value products 
added in 1998.  Specifically, a Founders' Pinot Noir, a Merlot 
from Griffin Creek and a Founder Reserve Cabernet were available 
to the customers at higher average prices.  In 1998, the Company 
contracted its hospitality and catering services to an outside 
company.  This allowed the Company to reduce one full time 
position and offer a more complete set of services.  The Company 
experienced an increase in revenue during 1998 in Hospitality 
rental income (included in the tasting room and retail sales 
category) over the same period in 1997.  The total of rental 
income and related wine sales was $209,856 in 1998 as compared to 
$187,257 in 1997.  This rental income comes primarily through 
weddings, business meetings and educational conferences held at 
the Winery's Hospitality Center.  

On-site and off-site festival sales and telephone sales for the 
year ended December 31, 1998 increased 13% to $564,828 from 
$500,124 for the same period in 1997.  The most significant change 
in operations for this group was that the Company paid commissions 
to several employees to solicit sales by phone.  The Company 
increased its sales by phone solicitation in 1998 to $252,000 in 
1998 from $132,000 in 1997.  The Company eliminated several on and 
off site festivals by analyzing each event to determine if the 
event was going to return a certain profit percentage.

Wholesale sales in the state of Oregon for the year ended 
December 31, 1998, through the Company's independent sales force, 
increased 6% to $2,277,676 from $2,157,896 for the same period in 
1997.  This increase is not as significant as in previous years 
due to the 1998 price increases but the company still maintains a 
strong presence in its own home state.  Costco, a large retailer, 
remains the largest in-state customer of the Company.  The sales 
to Costco were $463,000 in 1998, up from $409,000 in 1997.  During 
the last part of 1997, the Company added an in-state sales manager 
whose main focus was to increase in-state sales. Beginning July 
1, 1998, the Company increased the price of its wine by an 
average of 8% in state.  In July and August of 1998, sales 
decreased 7% and 8% respectively over 1997. In the Fourth Quarter 
of 1998, the sales were down by 10% but the Company expects the 
sales to rebound in 1999.  Part of the decrease in sales in the 
Fourth Quarter was due to the Company's decision to reduce 
production of its lower priced Holiday wine.  Its sales for this 
product decreased from nearly 4,000 cases in 1997 to 2,100 cases 
in 1998.

The Company contracted in early 1997 for more grapes than were 
needed to meet the revised sales forecasts in the next few years.  
The Company sold some of its own grapes and some of its contracted 
grapes for $465,030 in 1997 and $454,281 in 1998.  

Out-of-state sales for the year ended December 31, 1998, increased 
10% to $2,124,826 from $1,934,877 for the same period in 1997.  
The Company now sells wine in 39 states.  The Pinot Noir variety 
led sales in 1998.  The Vintage and Whole Cluster Pinot Noir 
products increased in case sales 10% in 1998 over 1997. Pinot 
Noir, which now constitutes about one-third of the Company's 
production, is among the fastest growing wine varietals.  Positive 
press, regarding the healthful use of wine, continues to stimulate 
demand.  The Company expects demand for its wines to continue to 
increase.  However, the Company notes that new formidable entries 
into the Oregon wine industry from out of state will increase 
competition and put additional pressure on Pinot Noir grape 
supplies.  

In addition, the management believes the industry in Oregon, 
Washington, and California will experienced crush volumes in 
future years higher than annual consumption rate increases, thus 
potentially putting pressure on prices and margins. 

For the first half of 1998 out-of-state sales increased 16% over 
1997.  A large part of the increase was due to favorable pricing 
offered to distributors to reduce the Company's excess inventory.  
The May 15, 1998 issue of the Wine Spectator magazine rated the 
1996 Willamette Valley Vineyards Chardonnay as a leading "top 
pick\best buy" in the world class category.  The article also 
quoted Harvey Steiman, editor at large, "Willamette Valley 
Vineyards, Oregon's second largest winery, is on its way to 
becoming that state's most reliable producer of widely available 
wine...The best is yet to come."  Based on this endorsement, the 
Company spent a considerable amount of funds in advertising to 
project the Company's Chardonnay image as a best value in its 
class.  The funds were spent to project the Company's brand as a 
leading brand of Oregon wineries.  In the months of May through 
September, the Company sold 5,722 cases of Vintage Chardonnay as 
compared to 1,516 cases in the prior year.

Effective September 1st, the Company raised its price to all out-
of-state distributors which caused the distributors to make large 
purchases in August to beat the price increase.  The out-of-state 
revenue in August 1998 exceeded August 1997 by $262,000.  The 
price increase was followed by declining out-of-state revenues in 
the Fourth Quarter of 1998.  
     

The Company reclassified its income statement to subtract excise 
taxes from its gross revenue to equal a net revenue since the 
Company only collects the excise tax on behalf of the Bureau of 
Alcohol, Tobacco, and Firearms, and Oregon Liquor Control Board. 
The total excise taxes collected in 1998 were $225,842 as compared 
to $212,402 in 1997.  Before 1996, excise taxes were included in 
the "selling, general, and administrative expenses". Sales data in 
the discussion above is quoted before the exclusion of excise 
taxes. 


Gross Margin

As a percentage of net revenue (i.e., gross sales less related 
excise taxes), gross margin for all winery operations was 50% for 
fiscal year 1998 as compared to 51% for 1997.  The sales of bulk 
juice and grapes at harvest at a slim margin reduced the gross 
margin in 1997 and 1998.  After adjusting for these sales, the 
gross margin would be 54% in 1998 as compared to 54% in 1997.  The 
sales of existing Tualatin product at lower margins reduced the 
margin in 1997 and 1998, as well as, promotional pricing of 
certain Willamette Valley products to reduce inventory in late 
1997 and the first half of 1998.  The price increases in July of 
1998 for in state customers and September of 1998 for out-of-state 
customers are expected to increase the gross margin next year. 
 
Selling, general, and administrative expenses for the year ended 
December 31, 1998, increased to $2,694,488 compared to $2,434,867 
for the same period in 1997.  As a percentage of revenue from 
winery operations, the selling, general, and administrative 
expenses were 44% in 1998 as compared to 43% in 1997.  The 
management has taken significant steps to control expenses in this 
category in 1998.  All key managers are required to review their 
monthly expenses against budget and make appropriate changes to 
bring their budgets into balance.  The Company employs an "open 
book" policy as to its accounting records and ensures that key 
managers and employees understand and can adjust their spending 
habits as needed.

The largest part of the increase in expenses in 1998 over 1997 was 
a reserve for the doubtful collection of a $81,000 sale made to 
the Company's United Kingdom agent in 1997.  The agent was 
involuntarily placed in "administration" in September 1998, a 
British form of bankruptcy, and has been permitted to emerge from 
"administration" and continue in business by a vote of the 
creditors including the Company.  The Management continues to make 
a concerted effort to collect these funds.

Other income for the year ended December 31, 1998 was $10,013 as 
compared to $19,471 for the year ended December 31, 1997.  
Interest income increased to $22,967 in fiscal year 1998 from 
$31,296 in fiscal year 1997.  Interest expense increased to 
$493,901 in fiscal year 1998 from $396,118 in fiscal year 1997.  
The increase in the interest expense was the result of the Company 
taking on more long term debt to finance the purchase of Tualatin 
Vineyards, Inc. in 1997, plant additional land at Tualatin in 1997 
and 1998, and fund increases in inventory.

The provision for income taxes and the Company's effective tax 
rate were $(27,581) and (28)% in fiscal year 1998 with $52,288 or 
44% of pre-tax income recorded for fiscal year 1997. 

As a result of the above factors, net income/(loss) decreased to 
$(71,980) in fiscal 1998 from $67,862 for the fiscal year of 1997.  
Earnings per share were $(.02), $.02, and $.05 in fiscal years 
1998, 1997 and 1996, respectively. 


1997 Compared to 1996.  Tasting room sales for the year ended 
December 31, 1997 decreased 12% to $868,531 from $981,804 for the 
same period in 1996.  The Company saw a drop in the average 
tasting room "ring", meaning that customers were purchasing the 
wine elsewhere as witnessed by increased sales in the in-state 
sales category.  In the last part of 1997, the Company began 
tracking the buying habits of the customers who visit the tasting 
room.  In the past several years, the Company did not track 
customers buying habits which means the tasting room did not focus 
on a targeted group of customers to increase its sales.  In the 
past year, the Company has allowed the Wholesale Division to sell 
wine that in previous years had been exclusively sold in the 
tasting room.  In 1998, the Company will return to the practice of 
selling certain exclusive wines in the tasting room at higher 
profit margins.  The Company experienced an increase in revenue 
during 1997 in Hospitality rental income over the same period in 
1996.  The total of rental income and related wine sales was 
$187,257 in 1997 as compared to $159,741 in 1996.

On-site and off-site festival sales for the year ended 
December 31, 1997 increased 5% to $500,124 from $474,405 for the 
same period in 1996.  One off-site event, "The Bite of Salem", had 
an increase in revenue of $11,500 over last year's event, but it 
had a sponsor's fee of $8,000 which made the event unprofitable.  
As a consequence, the Company reinstituted a strict policy 
requiring a cost/benefit analysis for each event before the 
decision is made to participate in the event and began to reduce 
its overhead in the Retail Department by only participating in 
events that return to the Company a positive cash flow.

Wholesale sales in the state of Oregon for the year ended 
December 31, 1997, through the Company's independent sales force, 
increased 22% to  $2,157,896 from $1,765,340 for the same period 
in 1996.  PriceCostco, a large retailer, placed the Company's 
products in several new locations in 1997 which resulted in 
$277,000 additional sales to that chain.  The Company saw a 
significant increase in the sales of its Riesling product line 
which nearly doubled in sales in 1997, resulting in an increase of 
approximately $235,000 in sales over 1996, most of which was sold 
Price Costco.  During the last part of 1997, the Company added an 
in-state sales manager whose main focus was to increase in-state 
sales.  This increased focus by the Company resulted in record 
breaking sales in the Fourth Quarter of 1997. 

The Company contracted in early 1997 for more grapes than what was 
needed to meet the revised sales forecasts in the next few years.  
The Company sold some of its own grapes and some of its contracted 
grapes for $465,030 and generated a small profit in doing so.

Out-of-state sales for the year ended December 31, 1997, increased 
74% to $1,934,877 from $1,112,690 for the same period in 1996.  By 
the end of 1997, the Company was selling wine in 39 states as 
compared to 28 states in 1996.  The Pinot Noir variety led the way 
in increased sales in 1997.  The vintage and whole berry Pinot 
Noir product lines sold 6,097 more cases in 1997 resulting in a 
$439,000 increase in sales.  

Pinot Noir, which now constitutes about one-third of the Company's 
production, is among the fastest growing wine varietals.  Positive 
press, regarding the healthful use of wine, continues to stimulate 
demand.  The Company expects demand for its wines to continue to 
increase.  However, the Company notes that new formidable entries 
into the Oregon wine industry from out of state will increase 
competition and put additional pressure on  Pinot Noir grape 
supplies.  In addition, the industry in Oregon, Washington, and 
California has experienced crush volumes in 1997 higher than 
annual consumption rate increases, thus potentially putting 
pressure on prices and margins. 

The Company reclassified its income statement to subtract excise 
taxes from its gross revenue to equal a net revenue.  Since the 
Company only collects the excise tax on behalf of the Bureau of 
Alcohol, Tobacco, and Firearms, and Oregon Liquor Control Board, 
these taxes should not be considered as a legitimate expense for 
the Company.  The total excise taxes collected in 1997 were 
$212,402 as compared to $99,219 in 1996.  Before 1996, excise 
taxes were included in the "selling, general, and administrative 
expenses". 

As a percentage of net revenue after removing the excise taxes, 
gross margin for all winery operations was 51% for fiscal year 
1997 as compared to 56% for 1996. The sales of bulk juice and 
grapes at harvest at a slim margin reduced the gross margin in 
1997.  After adjusting for these sales, the gross margin would be 
54% as compared to 56% in 1996.  The sales of existing Tualatin 
product at lower margins reduced the margin in 1997, as well as, 
promotional pricing of certain Willamette Valley products to 
reduce inventory.
 
Selling, general, and administrative expenses for the year ended 
December 31, 1997, increased 25% to $2,434,867 compared to 
$1,951,120 for the same period in 1996.  As a percentage of 
revenue from winery operations, the selling, general, and 
administrative expenses were 43% in 1997 as compared to 46% in 
1996. 

During the year of 1997, increased sales revenues over 1996 
resulted in increased commissions paid to our independent sales 
force.  Commissions were paid to the sales force on a specified 
percentage of revenue resulting in no adverse affect on the net 
income ratio.  The commissions paid in 1997 amounted to $642,709 
as compared to $521,832 in 1996.  The Company experienced 
increased expenses relating to samples, travel, point-of-sale 
expenses, and shipping charges for the development of new markets 
and the expansion of sales outside of the state.  The out-of-
state sales representatives are allowed a set percentage of 
revenue for wine samples and point of sale material.  Thus, as 
the gross revenues increase, the actual dollar expenditures for 
wine samples and point-of-sale material increases, as well.

Other income for the year ended December 31, 1997 was $19,471 as 
compared to $28,241 for the year ended December 31, 1996.  
Interest income increased to $31,296 in fiscal year 1997 from 
$25,145 in fiscal year 1996.  Interest expense increased to 
$396,118 in fiscal year 1997 from $214,380 in fiscal year 1996.  
The increase in the interest expense was the result of the Company 
taking on more long term debt to finance the purchase of Tualatin 
Vineyards, Inc., plant additional land at Tualatin, and fund 
increases in inventory.

The provision for income taxes and the Company's effective tax 
rate were $52,288 and 44% in fiscal year 1997 with $98,685 or 37% 
of pre-tax income recorded for fiscal year 1996. 

As a result of the above factors, net income decreased 60% to 
$67,862 in fiscal 1997 from $170,430 for the fiscal year of 1996.  
Earnings per share were $.02, $.05 and $.002 in fiscal years 1997, 
1996 and 1995, respectively. 


Liquidity and Capital Resources

Willamette Valley Vineyards was originally established as a sole 
proprietorship by Oregon winegrower Jim Bernau in 1983.  The 
Company was organized on May 2, 1988, and sold its first wine in 
late April 1990.  Prior to April 1990, the Company's working 
capital and Vineyard development and Winery construction costs 
were principally funded by cash contributed by James Bernau and 
Donald Voorhies, the Company's co-founders, and by $1,301,354 in 
net proceeds received from the Company's first public stock 
offering, which began in September 1988 and was completed in June 
1989 with the sale of 882,352 shares at a price of $1.70 per share 
pursuant to Federal Regulation A.  

Since April 1990, the Company has operated on revenues from the 
sale of its wine and related products and the net proceeds from 
three additional stock offerings.  The Company's second public 
stock offering began in July 1990 and was completed in July 1991 
with the sale of 731,234 shares at prices of $2.65 and $2.72 per 
share exclusively to Oregon residents, resulting in net proceeds 
to the Company of $1,647,233.

In 1992, the Company conducted two stock offerings pursuant to 
Federal Regulation A.  The Company commenced an offering on July 
18, 1992 which was completed on September 30, 1992, with the sale 
of 428,216 shares of Common Stock at a price of $3.42 per share 
and net proceeds to the Company of $1,290,364.  On October 2, 
1992, as a result of the oversubscription of the first offering in 
1992, the Company commenced another offering of Common Stock which 
was completed on October 31, 1992 with the sale of 258,309 shares 
at a price of $3.42 per share, resulting in net proceeds to the 
Company of $775,726.  

Cash and cash equivalents increased to $149,401 at December 31, 
1998 from $13,541 at December 31, 1997.  

Inventories increased 9% as of December 31, 1998, to $4,601,808 
from the December 31, 1997 level of $4,171,027. 

Property, plant and equipment, net, decreased 1% as of 
December 31, 1998, to $6,790,985 from $6,859,835 as of 
December 31, 1997.  

Long term debt increased to $4,292,948 as of December 31, 1998, 
from $4,044,943 as of December 31, 1997.  The increase in debt was 
the result of cash borrowings for the purchase and vineyard 
expansion of Tualatin Vineyards.

The Company has a line of credit from Farm Credit Services with a 
limit of $2,000,000.  As of December 31, 1998 the outstanding  
balance of the line was $1,652,667 as compared to $1,517,297 in 
1997.  These funds were used to meet operational expenditures 
primarily to fund the increase in the inventory.  At the present 
time the $2,000,000 line of credit is not sufficient to meet the 
current Company needs.  The Company has applied to Farm Credit 
Services for additional $500,000 which will be used to make the 
remaining grape payments from its 1998 harvest. Farm Credit 
Services has given their approval to increase the line of credit.  
Farm Credit Services has established credit line targets based 
upon the Company's cash flow plan and will increase the interest 
rate on the credit line if those targets are not met in August and 
December of 1999.  They have also increased their lending rate .5% 
above their base rate for 1999.  The Company paid a rate of 8.5% 
in 1998 and will pay a lower rate of 8.25% for 1999


YEAR 2000 COMPLIANCE

The Company began to develop its strategy in the first part of 
1998 to make itself business ready for the year 2000.  Its first 
step was to make all levels of the Company aware of the basic 
problems that the Company can expect as the year 2000 approaches. 
Each month the Company holds an all staff meeting.  The Company 
began to set aside time in each meeting to discuss the problem in 
detail.  The Company has made educational awareness and education 
a priority in 1999.  The Company's small staff makes it easy to 
communicate with its employees and develop  strategy plans.

In November of 1998, the Company's outside computer consultants 
identified each of the different computer based systems which 
support the Company's business and production needs.  Once the 
equipment was identified, tests were performed to determine which 
equipment passed or failed the Y2K compliance testing.  A list of 
the equipment was made and the Company started to replace the 
critical equipment immediately.  From its plan the Company expects 
to replace the majority of the equipment by the year 2000.  At 
this date, there are only two pieces of equipment for which the 
test results have not been received.  These are the telephone 
system and the tank control system.  Both of these systems will be 
corrected if necessary by the year 2000.

From tests performed by the consultants and contacting equipment 
manufacturers, the Company is beginning its assessment evaluation 
to determine the severity of the problem and what needs to be 
fixed.  All critical items on the equipment list have been taken 
care of, which would be the financial reporting, networking 
communications, and Point-of-Sale system in the tasting room.  At 
this time the Company has spent $15,000 on software and hardware 
upgrades in 1998 and expects to spend an additional $30,000 in 
1999 to insure that its basic needs are taken care of by December 
31, 1999.

The Company feels, due to the nature of the winemaking business,  
most of the critical needs are fulfilled now. The Company is 
currently testing all temperature control systems for its 
stainless steel tanks and is prepared to take any necessary action 
to make them compliant for the year 2000.  However, in January, 
typically, there is very little activity on the production side of 
the winery.  At this time, the wine is aging in stainless steel 
tanks and oak barrels.  It will not be necessary to bottle any 
wine during the first few months after January 2000 unless a need 
arises.  The Winery's average temperature ranges from 40 to 50 
degrees in these months so the wine will not be in danger of 
spoiling.

The Company has prepared a short survey to mail to its primary 
vendors and all distributors to inquire as to their abilities for 
compliance in the year 2000.  The surveys will be sent out in the 
first part of April 1999 with a response requested by May 1, 1999.  
From the returned survey, the Company will determine any critical 
needs to be met by the end of the year.  The majority of the 
Company's customers in the state of Oregon are on a cash-
collected-at-delivery basis so there is no need to see if their 
payable software is compliant for the year 2000.  The out-of-state 
customers will need to assure us their business is 2000 year 
ready.


ITEM 7.     FINANCIAL STATEMENTS

The financial statements required by this item are presented at 
page F-1.


ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.


ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL  
PERSONS

Directors, nominees for election as a director, and each such 
person's age at June 30, 1999 and position with the Company.  

Name                         Position(s) with the Company    Age
James W. Bernau ***              Chairperson of the Board, 
                                 President and Director      45
James L. Ellis ***               Secretary and Director      54
Betty M. O'Brien*                Director                    56
Daniel S. Smith                  Director                    59
Delna L. Jones**  ****           Director                    59
Stan G. Turel * **  ***    ****  Director                    51
William H. Malkmus *             Director                    64
_______________________________
*Member of the Compensation Committee              
**Member of the Audit Committee
***Member of the Executive Committee              
****Member of the Affiliated Transaction Committee

All directors hold office until the next annual meeting of 
Shareholders or until their successors have been elected and 
qualified.  Executive officers are appointed by the Board of 
Directors and serve at the pleasure of the Board of Directors.  
Set forth below is additional information as to each director and 
executive officer of the Company.

James W. Bernau.  Mr. Bernau has been President and Chairperson of 
the Board of Directors of the Company since its inception in May 
1988.  Willamette Valley Vineyards was originally established as a 
sole proprietorship by Oregon winegrower Jim Bernau in 1983, and 
he co-founded the Company in 1988 with Salem grape grower, Donald 
Voorhies.  From 1981 to September 1989, Mr. Bernau was Director of 
the Oregon Chapter of the National Federation of Independent 
Businesses ("NFIB"), an association of 15,000 independent 
businesses in Oregon.  After founding and serving as President and 
Chairman of several regional brewing companies (See "Certain 
Relationships and Related Transactions") between 1992 and 1997, 
Mr. Bernau elected in September of 1997 to turn his full time 
attention and effort to the Company.

James L. Ellis.  Mr. Ellis has served as a Director since July 
1991 and Secretary since June 1997.  Mr. Ellis has served as the 
Company's Director of Human Resources from January 1993.  From 
1993 to 1997 he also served the Director of Human Resources for  
several regional brewing companies (see "Certain Relationships and 
Related Transactions) founded by Mr. Bernau.  Mr. Ellis returned 
full time to the Company in September of 1997.  From 1990 to 1992, 
Mr. Ellis was a partner in Kenneth L. Fisher, Ph.D. & Associates, 
a management consulting firm.  From 1980 to 1990, Mr. Ellis was 
Vice President and General Manager of R.A. Kevane & Associates, a 
Pacific Northwest personnel consulting firm.  From 1962 to 1979, 
Mr. Ellis was a member of and administrator for the Christian 
Brothers of California, owner of Mont La Salle Vineyards and 
producer of Christian Brothers wines and brandy.

Betty M. O'Brien.  Ms. O'Brien has served as a Director since July 
1991.  Ms. O'Brien has been employed by Willamette University as 
its Director of News and Publications since 1988.  Ms. O'Brien is 
a partner in Elton Vineyards, a commercial vineyard located in 
Eola Hills in Yamhill County, Oregon.  She is a member of the 
Oregon Winegrowers Association having previously served as its 
President and Treasurer as well as a director.

Daniel S. Smith.  Mr. Smith has served as a Director since July 
1991.  Since 1973, Mr. Smith has been an owner in and the manager 
of Danco Company, a commercial refrigeration business.  Mr. Smith 
owns 65 acres of commercial vineyards near Eugene, Oregon.

Delna L. Jones.  Ms. Jones has served as a Director since November 
1994.  Ms Jones was elected in 1998 and now serves as a County 
Commissioner for Washington county, Oregon.  Ms. Jones has served 
as project director for the CAPITAL Center, an education and 
business consortium from 1990 to 1998.  From 1985 to 1990, Ms. 
Jones served as Director of Economic Development with US West 
Communications.  Beginning in 1982, she was elected six times to 
the Oregon House as the State Representative for District 6.  
During her tenure, she served as the Assistant Majority Leader; 
she also chaired the Revenue and School Finance committee, and 
served on the Legislative Rules and Reorganization committee and 
the Business and Consumer Affairs committee.  In addition, Ms. 
Jones presently serves on many community and business boards and 
advisory panels.

Stan G. Turel.  Mr. Turel has served as a Director since November 
of 1994.  Mr. Turel is part owner and the CEO of Columbia Turel, 
Inc., (formerly Columbia Bookkeeping, Inc.) a position he has held 
since 1974.  Columbia Turel, Inc. has sixteen offices in Oregon 
and Washington, servicing 4,000 small business and 26,000 tax 
clients annually.  Mr. Turel is a licensed tax consultant, a 
member of the National Association of Public Accountants, a 
private pilot, and a former delegate to the White House Conference 
on Small Business.  In addition, Mr. Turel serves his community on 
a number of advisory boards and panels.

William H. Malkmus. Mr. Malkmus has served as a Director since 
August of 1997.  Mr. Malkmus spent over 20 years as an investment 
banker in San Francisco.  For six years, following his banking 
career and until his retirement in 1995, Mr. Malkmus was the Chief 
Financial Officer of Vivea Inc., a healthcare service company 
listed on the New York Stock Exchange.  In 1973, Mr. Malkmus co-
founded Tualatin Vineyards, one of Oregon's original wineries, and 
was President/Treasurer until Tualatin merged with Willamette 
Valley Vineyards, Inc. in 1997.

Board of Directors Committees.  The Board of Directors acts as a 
nominating committee for selecting nominees for election as 
directors.  The Board of Directors has appointed a standing Audit 
Committee which, during the year ended December 31, 1998, 
conducted one meeting.  The elected members of the Audit Committee 
are Delna L. Jones and Stan G. Turel.  The Audit Committee reviews 
the scope of the independent annual audit, the independent public 
accountants' letter to the Board of Directors concerning the 
effectiveness of the Company's internal financial and accounting 
controls and the Board of Directors' response to that letter, if 
deemed necessary.  The Board of Directors also has appointed a 
Compensation Committee which reviews executive compensation and 
makes recommendations to the full Board regarding changes in 
compensation, and also administers the Company's 1992 Stock 
Incentive Plan.  During the fiscal year ended December 31, 1998, 
the Compensation Committee held two meetings.  The members of the 
Compensation Committee currently are  Betty M. O'Brien, Chair,  
Stan Turel, and William Malkmus.  In 1994, the Board of Directors 
created an Affiliated Transactions Committee that reviewed 
transactions deemed to involve a conflict of interest between the 
Company and its former affiliates, current members of the 
Affiliated Transaction Committee are Delna Jones and Stan Turel.  
The Committee held no meetings in 1998.  In 1997 the Board 
appointed an Executive Committee, members are: James Bernau, James 
Ellis, and Stan Turel.  The Executive Committee met six times 
during 1998.


ITEM 10.  EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table provides certain summary information 
concerning compensation paid or accrued by the Company, to or on 
behalf of the Company's Chief Executive Officer, James W. Bernau 
(the "named executive officer") for the years ending December 31, 
1996, 1997, and 1998.

Name and Principle Position      Year      Annual Compensation     
                                           Salary ($)    Bonus

James W. Bernau                  1996   $   6,500           -
President and Chairperson of     1997      19,385           -
the Board of Directors           1998      84,865      10,000

As discussed under "Election of Directors", Mr. Bernau previously 
served as President of certain affiliates of the Company.  Each of 
these companies paid a pro rata portion of Mr. Bernau's monthly 
salary based on the amount of time that Mr. Bernau  devoted to the 
respective company's business in that month.  However, Mr. Bernau 
has now turned his full time attention and effort to the Company's 
business.  In addition to his salary, Mr. Bernau may receive an 
annual bonus from the Company based on the Company's performance 
and Mr. Bernau's contribution to the  Company as determined solely 
by the Company's Board of Directors.

Bernau Employment Agreement
The Company and Mr. Bernau are parties to an employment agreement 
dated August 3, 1988 and amended in February 1997 and again 
amended in January of 1998.  Under the amended agreement, Mr. 
Bernau is paid an annual salary of $90,000 with annual increases 
tied to increases in the consumer price index.  Pursuant to the 
terms of the employment agreement, the Company must use its best 
efforts to provide Mr. Bernau with housing on the Company's 
property.  Mr. Bernau and his family will live in the house free 
of rent and must continue to reside there for the duration of his 
employment in order to provide additional security and lock-up 
services for late evening events at the Winery and Vineyard.  The 
employment agreement provides that Mr. Bernau's employment may be 
terminated only for cause which is defined as non-performance of 
his duties or conviction of a crime.


Stock Options

In order to reward performance and retain high-quality employees, 
the Company often grants stock options to its employees.  The 
Company does not ordinarily grant shares of stock to its 
employees.  Options are typically issued at a per share exercise 
price equal to the closing price as reported by NASDAQ at the time 
the option is granted.  The options vest to the employee over 
time.  Three months following termination of the employee's 
employment with the Company, any and all unexercised options 
return to the Company.  No stock options were granted to the named 
executive officer during the year ended December 31, 1998 under 
the Company's 1992 Stock Incentive Plan.

Option Exercises and Holdings
The following table provides information, with respect to the 
named executive officer, concerning exercised options during the 
last fiscal year and unexercised options held as of December 31, 
1998.

                 Options          Number of            Value of
                Exercised        Securities          Unexercised
               in the last       Underlying         In-the-Money
               fiscal year      Unexercised          Options
             Number   Value    Options at FY-End    at FY-End(2)
Name       of shares Realized(1) Exer- Unexer- -   Exer-  Unexer-
                               cisable cisable   cisable  cisable
James W. Bernau -0-    -0 -  37,500  37,500($1.65) 10,762  10,762
______________________________
(1) The value realized is based on the difference between the 
market price at the time of exercise of the options and the 
applicable exercise price.

(2) Options are "in the money" at the fiscal year-end if the fair 
market value of the underlying securities on such date exceeds the 
exercise price of the option.  The amounts set forth represent the 
difference between the fair market value of the securities 
underlying the options on December 31, 1998 ($1.94 per share based 
on the NASDAQ closing price for the Company's Common Stock on the 
NASDAQ Small Cap Market on that date), and the exercise price of 
the option ($3.42 per share), multiplied by the applicable number 
of options.


Director Compensation
The members of the Company's Board of Directors do not receive 
cash compensation for their service on the Board, but are 
reimbursed for out-of-pocket and travel expenses incurred in 
attending Board meetings.  Under the Company's Stock Incentive 
Plan adopted by the shareholders in 1992 and further amended by 
the shareholders in 1996, beginning in 1997 an option to purchase 
1,500 shares of Common Stock is granted to each Director for 
service on the Board during the year.  In addition, each director 
receives 50 shares of Common Stock for each Board or committee 
meeting attended. 


Section 16(a) Beneficial Ownership Reporting Compliance

None


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
MANAGEMENT

The following table sets forth certain information with respect to 
beneficial ownership of the Company's Common Stock as of March 31, 
1999, by  (i) each person who beneficially owns more than 5% of 
the Company's Common Stock  (ii) each Director of the Company  
(iii) each of the Company's named executive officers, and  
(iv) all directors and executive officers as a group.

                                     Shares Beneficially Owned  
        .                         Number of           Percent of
                                  Shares       Outstanding Stock


James W. Bernau     President/CEO, Chair of the Board
2545 Cloverdale Road                 1,057,203.5 (1)       25.0%
Turner, OR  97392                                             

James L. Ellis      Secretary, Director
7850 S.E. King Road                     30,373.5 (2)          **
Milwaukie, OR  97222

Delna L. Jones      Director
PO Box 5969                              2,800   (3)          **  
Aloha, OR  97006                                            

Betty M. O'Brien    Director 
22500 Ingram Lane NW                     8,000  (4)          **
Salem, OR  97304                                             

Daniel S. Smith     Director
26978 Briggs Hill Road                  28,384   (5)          **
Eugene, OR  97405                                          

Stan G. Turel       Director
13909 S.E. Stark Street                100,635   (6)        2.3%
Portland, OR  97233                                     

William H. Malkmus   Director
415 Manzanita Way                      171,378              4.0%
Woodside, CA  94062 

Donald Voorhies
78356 Golden Reed Dr                   212,518              5.0%
Palm Desert, CA   92211

All Directors, executive             1,611,292             38.0%
officers and persons owning
5% or more as a group (8 persons)
______________________________
**         Less than one percent.

(1)       Includes 15,000 shares issuable upon the exercise of an 
outstanding warrant and 76,500 shares issuable upon exercise of 
options.

(2)       Includes 25,928.5 shares issuable upon the exercise of 
options.

(3)       Includes 2,100 shares issuable upon the exercise of 
options.

(4)       Includes 4,500 shares issuable upon the exercise of 
options.

(5)       Includes 4.500 shares issuable upon the exercise of 
options.

(6)       Includes 2,100 shares issuable upon the exercise of 
options.



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


During 1998 and 1997, the Company purchased grapes from Elton 
Vineyards for $77,097 and $95,594, respectively.  Betty M. 
O'Brien, a Director of the Company, is a principal owner of Elton 
Vineyards.  Also during 1998 and 1997, the Company purchased 
grapes from Sweet Cheeks Vineyards owned by Director, Daniel S. 
Smith, for $29,215 and $128,460.

On June 1, 1992, the Company granted Mr. Bernau a warrant to 
purchase 15,000 shares of the Company's Common Stock as 
consideration for his personal guarantee of the Real Estate Loan 
and the Line of Credit from Farm Credit Services pursuant to which 
the Company borrowed $1.2 million.  The warrant is exercisable 
anytime through June 1, 2012, at an exercise price of $3.42 per 
share.

Each of the following companies--Nor'Wester Brewing, Willamette 
Valley Inc,-Microbreweries across America (WVIMAA), Aviator Ales, 
Mile High Brewing, Bayhawk Ales and North Country Brewing was 
affiliated with the Company in that James W. Bernau, the Company's 
founder, President and Chairperson of the Board of Directors, was 
also President and Chairperson of the Board of Directors of each 
such affiliated company.  Mr. Bernau was also a significant 
shareholder in Nor'Wester and WVIMAA.

During 1993 and through June 1994, the Company provided management 
services to Nor'Wester and WVI.  The management services consisted 
of secretarial, accounting, marketing, administrative, stock 
transfer and warehousing services which were provided on a cost-
plus-fees basis.  Beginning in July 1994, such services were 
performed primarily by WVI employees.  The Company provided 
services to the affiliated companies on a limited basis.  For the 
years ended December 31, 1995 and 1994, charges to the Company for 
such management services aggregated approximately $230,000 and 
$58,000, respectively, and are included in selling, general and 
administrative expenses in the accompanying statement of 
operations.  In addition, the Company entered into a beer sale and 
distribution contract with Nor'Wester.  No sales were made under 
the terms of this contract in 1996 or 1995.

In 1996, the Company began contracting for these services with 
Nor'Wester under a general services agreement.  Nor'Wester, WVI, 
and the Company each provided various administrative and stock 
offering services to the affiliated companies.  During 1996, total 
amounts charged to the Company by Nor'Wester and WVI aggregated 
$47,025; amounts charged by the Company to the various affiliated 
companies aggregated $86,450.  As a result of these and other 
transactions, the Company aggregate payable balance of $7,221 is 
netted against other receivable in the accompanying balance sheet.  
During 1997, charges to the Company aggregated $164,716; amounts 
charged by the Company aggregated $92,600.  The charges to the 
Company were composed of reimbursements for combined purchases of 
health insurance and telephone services which were paid through 
the former affiliates.  In the fall of 1997, the Company ceased 
all transactions with these affiliated companies due to the fact 
that these affiliated companies ceased doing business or were no 
longer providing services.  At December 31, 1998, the Company has 
no receivables or payables from the former affiliates.  In 1998, 
the Company recovered $3,100 of receivables from the former 
affiliates.
 
On December 3, 1992, James W. Bernau borrowed $100,000 from the 
Company.  The loan is secured by Mr. Bernau's stock in the 
Company, and is payable, together with interest at a rate of 7.35% 
per annum, on March 14, 2009.  At December 31, 1998, the 
outstanding balance of the loan was $46,937 including accrued 
interest.

The Company believes that the transactions set forth above were 
made on terms no less favorable to the Company than could have 
been obtained from unaffiliated third parties.  All future 
transactions between the Company and its officers, directors, and 
principal shareholders will be approved by a disinterested 
majority of the members of the Affiliated Transactions Committee 
of the Company's Board of Directors, and will be on terms no less 
favorable to the Company than could be obtained from unaffiliated 
third parties.



ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K

      (a)     Exhibits

             (3)     Articles of Incorporation and Bylaws:

                    (a)     Articles of Incorporation of 
Willamette Valley Vineyards, Inc. 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

                    (b)     Bylaws of Willamette Valley Vineyards, 
Inc.(incorporated by reference from the 
Company's Regulation A Offering Statement on 
Form 1-A [File No. 24S-2996])


            (10)     Material Contracts

                    (a)     Employment Agreement between 
Willamette Valley Vineyards, Inc. and James 
W. Bernau dated August 3, 1988 (incorporated 
by reference from the Company's Regulation A 
Offering Statement on Form 1-A [File No. 24S-
2996])

                    (b)     Indemnity Agreement between Willamette 
Valley Vineyards, Inc. and James W. Bernau 
dated May 2, 1988 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

                   (c)      Indemnity Agreement between Willamette 
Valley Vineyards, Inc. and Donald E. Voorhies 
dated May 2, 1988 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

                    (d)     Shareholders Agreement among 
Willamette Valley Vineyards, Inc. and its 
founders, James Bernau and Donald Voorhies, 
dated May 2, 1988 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

                    (h)     Revolving Note and Loan Agreement 
dated May 28, 1992 by and between Northwest 
Farm Credit Services, Willamette Valley 
Vineyards, Inc. and James W. and Cathy Bernau 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

                    (i)     Founders' Escrow Agreement among 
Willamette Valley Vineyards, Inc., James W. 
Bernau, Donald Voorhies and First Interstate 
Bank of Oregon, N.A. dated September 20, 1988 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

                    (j)     Amendment to Founders' Escrow 
Agreement dated September 20, 1988 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

                    (k)     Stock Escrow Agreement among 
Willamette Valley Vineyards, Inc., Betty M. 
O'Brien and Charter Investment Group, Inc. 
dated July 7, 1992 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

                    (l)     Stock Escrow Agreement among 
Willamette Valley Vineyards, Inc., Daniel S. 
Smith and Piper Jaffray & Hopwood, Inc. dated 
July 7, 1992 (incorporated by reference from 
the Company's Regulation A Offering Statement 
on Form 1-A [File No. 24S-2996])

                    (m)     Acquisition of Tualatin Vineyards, 
Inc. dated April 15, 1997. (File No.   ) 


      (b)           Reports on Form 8-K

                    Not applicable.


                            SIGNATURES

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

                               WILLAMETTE VALLEY VINEYARDS, INC.
                              (Registrant)


Date: March 30, 1999.       By:__________________________________
                               James W. Bernau, 
                               Chairperson of the Board,
                               President

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

Signature                       Title                  Date       


_____________________  Chairperson of the Board,   March 30, 1999
James W. Bernau        President 
                       (Principal Executive Officer)

_____________________  Controller                  March 30, 1999
John E. Moore          (Principal Accounting Officer)



_____________________  Director and Vice-President March 30, 1999
James L. Ellis         and Secretary

_____________________  Director                    March 30, 1999
Betty M. O'Brien

_____________________  Director                    March 30, 1999
Daniel S. Smith

_____________________  Director                    March 30, 1999
Stan G. Turel

_____________________  Director                    March 30, 1999
William H. Malkmus 

_____________________  Director                    March 30, 1999
Delna Jones





Willamette Valley
Vineyards, Inc.
Report and Financial Statements
December 31, 1998, 1997 and 1996



Willamette Valley Vineyards, Inc.

Index to Financial Statements



Report of Independent Accountants                           F-1

Balance Sheet                                               F-2

Statement of Operation                                      F-3

Statement of Shareholders' Equity                           F-4

Statement of Cash Flows                                     F-5

Notes to Financial Statements                               F-6



                     Report of Independent Accountants


To the Board of Directors and Shareholders of
Willamette Valley Vineyards, Inc.


In our opinion, the accompanying balance sheet and the related 
statements of operations, of shareholders' equity and of cash 
flows present fairly, in all material respects, the financial 
position of Willamette Valley Vineyards, Inc. at December 31, 
1998 and 1997, and the results of its operations and its cash 
flows for each of the three years in the period ended 
December 31, 1998, in conformity with generally accepted 
accounting principles.  These financial statements are the 
responsibility of the Company's management; our responsibility is 
to express an opinion on these financial statements based on our 
audits.  We conducted our audits of these statements in 
accordance with generally accepted auditing standards which 
require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of 
material misstatement.  An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the 
financial statements, assessing the accounting principles used 
and significant estimates made by management, and evaluating the 
overall financial statement presentation.  We believe that our 
audits provide a reasonable basis for the opinion expressed 
above.




PricewaterhouseCoopers LLP

Portland, Oregon
March 12, 1999

                                F-1


Willamette Valley Vineyards, Inc.
Balance Sheet
December 31, 1998 and 1997

_________________________________________________________________


                                             1998          1997     
             Assets
Current assets:
    Cash and cash equivalents           $  149,401   $     13,541
    Accounts receivable, net (Note 3)      371,537        820,526
    Income taxes receivable (Note 11)       24,436         24,436
    Inventories (Note 4)                 4,601,808      4,171,027
    Prepaid expenses and other
           current assets                   86,986         78,293
    Deferred income taxes (Note 11)        234,203         94,813
                                        ._________.     _________
          Total current assets           5,468,371      5,202,636

Vineyard development costs, net 
  (Notes 1 and 2)                        1,892,538      1,506,906
Property and equipment, net 
  (Notes 1, 2 and 5)                     6,790,985      6,859,835
Investments (Note 6)                         4,974        105,040
Note receivable (Note 12)                   46,937        148,448
Debt issuance costs                        119,244        122,870
Other assets                                67,813             - 
                                        ._________.     _________
                                      $ 14,390,862   $ 13,945,735
                                       ===========    ===========
Liabilities and Shareholders' Equity
Current liabilities:
    Line of credit (Note 7)           $  1,652,667   $  1,517,297
    Current portion of long-term debt and
      capital lease obligations (Note 8)   191,176        124,192
    Accounts payable                       315,185        363,419
    Accrued commissions and payroll costs  213,210        225,297
    Grape payables (Note 12)               581,294        501,238
                                        ._________.     _________
               Total current liabilities 2,953,532      2,731,443

Long-term debt and capital
 lease obligations (Note 8)              4,101,772      3,920,751
Deferred income taxes (Note 11)            300,083        188,275
                                        ._________.     _________
               Total liabilities         7,355,387      6,840,469
                                         =========      =========
Commitments and contingencies (Note 13)    
Shareholders' equity (Note 9 and 10):
     Common stock, no par value -
       10,000,000 shares authorized,
       4,232,681 and 4,231,431 shares
       issued and outstanding at   
       December 31, 1998 and 1997         6,781,256     6,779,067
     Retained earnings                      254,219       326,199
                                        .__________.    _________
               Total shareholders' equity 7,035,475     7,105,266
                                        .__________.    _________
                                        $14,290,862    13,945,735
                                         ==========    ==========

             The accompanying notes are an integral 
               part of these financial statements.
                               F-2



Willamette Valley Vineyards, Inc.
Statement of Operations  
Years Ended December 31, 1998, 1997 and 1996

_________________________________________________________________


                                1998         1997          1996  
Net revenues             $   6,132,355  $  5,714,132 $ 4,235,020

Cost of goods sold           3,076,507     2,813,764   1,853,791
                            ._________.    _________   _________
          Gross margin       3,055,848     2,900,368   2,381,229

Selling, general and 
  administrative expenses    2,694,488     2,434,867   1,951,120
                            ._________.    _________   _________
Income from operations         361,360       465,501     430,109
                            ._________.    _________   _________
Other income (expenses): 
     Interest income            22,967         31,296     25,145
     Interest expense (Note 1)(493,901)      (396,118)  (214,380)
     Other income               10,013         19,471     28,241 
                             ._________.    _________   _________
                              (460,921)      (345,351)  (160,994)
                             ._________.    _________   _________
Income (loss) before income 
  taxes                        (99,561)       120,150    269,115

Income taxes (benefit)
  provision (Note 11)          (27,581)        52,288     98,685
                             ._________.    _________   _________
Net income (loss)            $  (71,980)    $  67,862   $ 170,430
                             ._________.    _________   _________
Basic net income per 
  common share (Note 1)      $    ( .02)    $     .02   $     .05
                             ._________.    _________   _________
Diluted net income per
   common share (Note 1)     $    ( .02)    $     .02   $     .04
                             ._________.    _________   _________


             The accompanying notes are an integral 
               part of these financial statements.
                               F-3




Willamette Valley Vineyards, Inc.
Statement of Shareholders' Equity
Years Ended December 31, 1998, 1997 and 1996

_________________________________________________________________


                                                Retained
                           Common stock         earnings
                        Shares       Dollars    (deficit)       Total
                     ._________  _____________  _________   __________
Balances at 
  December 31, 1995  3,785,356  $   5,369,868  $  87,907  $ 5,457,775

Net income                 -                -    170,430      170,430
                     ._________  _____________  _________   __________
Balances at 
  December 31, 1996  3,785,356      5,369,868    258,337    5,628,205

Stock issuance for 
  purchase of Tualatin
  Valley Vineyard      444,825      1,406,699         -     1,406,699

Stock issuance 
  for compensation       1,250          2,500          -        2,500

Net income                   -              -     67,862       67,862
                     ._________  _____________  _________   __________
Balances at 
  December 31, 1997  4,231,431      6,779,067    326,199    7,105,266

Stock issuance 
  for compensation       1,250          2,189          -        2,189

Net loss                     -              -    (71,980)     (71,980)
                     ._________  _____________  _________   __________
Balances at 
  December 31, 1998  4,232,681      6,781,256    254,219    7,035,475
                     ==========  =============  =========   =========



             The accompanying notes are an integral 
               part of these financial statements.
                               F-4



Willamette Valley Vineyards, Inc.
Statement of Cash Flows
Years Ended December 31, 1998, 1997 and 1996

_________________________________________________________________


                             1998           1997            1996  
Cash flows from operating 
  activities:
Net income (loss)        $  (71,980)    $   67,862    $  170,430
Reconciliation of net 
  income (loss) to net 
  cash (used for) provided by 
  operating activities:
   Depreciation and 
    amortization            657,536        533,444       377,855
  Deferred income taxes     (27,582)        90,872        39,524
Bad debt expense             83,148         44,384        27,382
Loss on disposition 
  of assets                       -            895             -
Changes in assets and liabilities: 
  Accounts receivable       365,841       (519,198)     (184,215)
  Inventories              (428,592)      (953,956)     (953,005)
  Prepaid expenses and
    other current assets     (8,693)        29,041       (24,240)
  Notes receivable          101,511         (9,937)       (9,509)
  Other assets              (67,813)             -             -
  Accounts payable          (48,234)        90,133       (18,541)
  Accrued commissions and payroll
    costs                   (12,087)        16,593        93,832
  Income taxes receivable         -        (24,436)            -
  Grape payables             80,056        (49,776)      206,372 
                          ._________       _________     ________
Net cash (used for) 
  operating activities      623,111       (684,079)     (274,115) 
                          ._________       _________     ________
Cash flows from investing activities:
  Additions to property 
    and equipment          (458,805)    (1,101,354)     (931,110)   
  Vineyard development 
    expenditures           (445,507)      (165,794)      (31,943)
  Cash received upon sale 
    of investments          100,066         10,178        38,675
  Payments to acquire 
    Tualatin Valley Vineyards     -       (684,624)            -
  Proceeds from sale of
    property and equipment        -          6,000             - 
                          ._________      __________     ________
Net cash used for 
  investing activities     (804,246)    (1,935,594)     (924,378)  
                          ._________     ___________     ________

Cash flows from financing activities:
  Debt issuance costs        (6,707)       (74,285)      (20,477) 
  Net increase in line 
    of credit balance       135,370      1,037,671       318,326
  Issuance of long-term 
    debt                    312,760        982,164     1,162,127 
  Repayments of long-term 
    debt                   (124,428)      (107,221)      (66,493) 
                          ._________     ___________     ________
Net cash provided by 
  financing activities      316,995      1,838,329     1,393,483
                          ._________     ___________     ________
Net (decrease) increase in 
  cash and cash equivalents 135,860       (781,344)      194,990

Cash and cash equivalents 
  Beginning of year          13,541        794,885       599,895
                          ._________     ___________     ________
  End of year           $   149,401     $   13,541  $    794,885
                           =========     ===========     ========


             The accompanying notes are an integral 
               part of these financial statements.
                               F-5



Willamette Valley Vineyards, Inc.
Notes to Financial Statements
December 31, 1998, 1997 and 1996
_________________________________________________________________


1. Summary of Operations, Basis of Presentation and Significant
   Accounting Policies

Organization and operations
Willamette Valley Vineyards, Inc. (the "Company") owns and 
operates vineyards and a winery located in the state of 
Oregon, and produces and distributes premium and super premium 
wines, primarily pinot noir, chardonnay, and white riesling.  
The majority of the Company's wine is sold to grocery stores 
and restaurants in the state of Oregon through the Company's 
sales force.  Out-of-state and foreign sales represented 
approximately 35% of revenues.  The Company also sells its 
wine from the hospitality room at its winery.

Basis of presentation
The accompanying financial statements have been prepared in 
accordance with generally accepted accounting principles which 
require management to make certain estimates and assumptions.  
These estimates and assumptions affect the reported amounts of 
assets and liabilities and the disclosure of contingent assets 
and liabilities as of the date of the financial statements, 
and the reported amounts of revenues and expenses during the 
reporting period.  Actual results could differ from those 
estimates.

Cash and cash equivalents
Cash and cash equivalents include short-term investments with 
an original maturity of less than ninety days.

Revenue recognition
The Company recognizes revenue upon the delivery of its 
products to its customers.  Sales are recorded as trade 
accounts receivable and no collateral is required.

Inventories

After a portion of the vineyard becomes commercially 
productive, the annual crop and production costs relating to 
such portion are recognized as work-in-process inventories.  
Such costs are accumulated with related direct and indirect 
harvest, wine processing and production costs, and 
are transferred to finished goods inventories when the wine is 
produced, bottled, and ready for sale.  The cost of finished
goods is recognized as cost of sales when the wine product is 
sold.  Inventories are stated at the lower of cost or market 
using the average cost method by variety and vintage to 
determine the first-in, first-out (FIFO) cost of inventories.  
In accordance with general practices in the wine industry, 
wine inventories are included in current assets in the 
accompanying balance sheet, although a portion of such 
inventories may be aged for more than one year.

Vineyard development costs
Vineyard development costs consist primarily of the costs of 
the vines and expenditures related to labor and materials to 
prepare the land and construct vine trellises.  The costs are 
capitalized until the vineyard becomes commercially 
productive, at which time annual amortization is recognized 
using the straight-line method over the estimated economic 
useful life of the vineyard, which is estimated to be 30 
years.  Accumulated amortization of vineyard development costs 
aggregated $176,067 and $116,193 at December 31, 1998 and 
1997, respectively.


                             F-6


Property and equipment
Property and equipment are stated at cost or the historical 
cost basis of the contributing shareholders, as applicable, 
and are depreciated on the straight-line basis over their 
estimated useful lives as follows:

    Land improvements                      15 years
    Winery building                        30 years
    Equipment                             5-7 years

Expenditures for repairs and maintenance are charged to 
operating expense as incurred.  Expenditures for additions and 
betterments are capitalized.  When assets are sold or 
otherwise disposed of, the cost and related accumulated 
depreciation are removed from the accounts, and any resulting 
gain or loss is included in operations.

Debt issuance costs
Debt issuance costs are amortized on a straight-line basis, 
which approximates the effective interest method, over the 
life of the debt.

Income taxes
The Company accounts for income taxes using the asset and 
liability approach prescribed by Statement of Financial 
Accounting Standards No. 109, "Accounting for Income Taxes."  
Under this approach, deferred income taxes are calculated for 
the expected future tax consequences of temporary differences 
between the book basis and tax basis of the Company's assets 
and liabilities.  The Company files stand-alone federal and 
state income tax returns.

Basic and diluted net income per share
The Company adopted Statement of Financial Accounting 
Standards No. 128 ("SFAS 128"), "Earnings Per Share," in 1997.  
SFAS 128 requires disclosure of basic and diluted earnings per 
share.  All prior years have been restated to reflect the 
adoption of SFAS 128.  Basic earnings per share are computed 
based on the weighted average number of common shares 
outstanding each year.  

                            1998     
           .______________________________________. 
                          Weighted 
                           average
                            shares        Earnings
              Loss        outstanding    per share
             _________     __________     _________
Basic       $(71,980)      4,232,578     $    (.02)
Options            -               -
Warrants           -               -  
            _________     __________      _________
Diluted     $(71,980)      4,232,578     $    (.02)
            =========     ==========      =========


                            1997     
            .______________________________________. 
                          Weighted 
                           average
                            shares        Earnings
             Income       outstanding    per share
            _______        __________    _________
Basic       $67,862        4,103,669     $     .02
Options           -              638
Warrants          -                -
            _______        __________    _________
Diluted     $67,862        4,104,307     $     .02
            =======        ==========    =========


                            1996     
           .______________________________________. 
                          Weighted 
                           average
                            shares        Earnings
             Income       outstanding    per share
             _______        _________     _________
Basic       $170,430       3,785,356    $      .05 
Options            -          20,532
Warrants           -               -
            _______        _________     _________
Diluted     $170,430       3,805,888     $     .04
            ========       =========     =========

                             F-7


Basic and diluted net income per share (continued)
Options to purchase 402,000 shares of common stock were 
outstanding at December 31, 1998, but were not included in the 
computation of diluted earnings per share because the effect 
would be dilutive due to the Company's loss in 1998.  Options 
to purchase 161,500 and 92,000 shares of common stock were 
outstanding at December 31, 1997 and 1996, respectively, but 
were not included in the computation of diluted earnings per 
share because the options' exercise prices were greater than 
the average market price of the common shares.  In addition, 
the warrant outstanding since 1992 (see Note 9) was not 
included in the computation of diluted earnings per share in 
1998, 1997 or 1996 because the exercise price of $3.42 was 
greater than the average market price of the common shares 
during all three years.

Statement of cash flows

Supplemental disclosure of cash flow information:
                               1998         1997        1996 
                         .__________.   _________    _________
Interest paid            $   556,000  $   321,000  $   166,000
Income taxes paid                  -       15,000      112,000
Supplemental schedule of noncash investing and financing 
activities:
  Capital leases              59,673            -            - 
  Assets transferred from 
    related companies              -       19,279            -
  Issuance of common stock awards
    to employees(Note 9)       2,189        2,500            -
Acquisition of Tualatin Valley, Inc.:
  Common stock issued in connection with acquisition
    Issued to stockholders 
      of TVI                       -    1,292,591            -
    Fee to Acquisitions
      Northwest, Inc.              -      114,108            -
  Tangible assets acquired, net of cash paid
     Fixed assets                  -      143,376            -
     Vineyard development          -      996,000            -
Other assets acquired, net of cash acquired
  Accounts receivable              -       56,807            -
  Inventory                        -      371,518            -
  Prepaids                         -          156            -
Liabilities assumed
  Accounts payable                 -      269,966            -

During the year ended December 31, 1996, the Company 
capitalized approximately $38,000 of interest related to the 
construction of its hospitality center. 

Fair market value of financial instruments
The fair market values of the Company's recorded financial 
instruments approximate their respective recorded balances, as 
the recorded assets and liabilities are stated at amounts 
expected to be realized or paid, or carry interest rates 
commensurate with current rates for instruments with a similar 
duration and degree of risk.

                             F-8

Reclassifications
   Certain reclassifications have been made to the 1996 and 1997 
financial statements to conform with financial statement 
presentation for the year ended December 31, 1998.  These 
reclassifications have no effect on previously reported 
results of operations or shareholders' equity.


2. Acquisition

   On April 15, 1997, Willamette Valley Vineyards, Inc. ("WVV") 
acquired the assets of Tualatin Vineyards, Inc. ("TVI"), a 
winery located in Oregon, for a purchase price of $1,824,000, 
plus TVI's net current assets of $164,601 as of the closing 
date.  The acquisition was accounted for using the purchase 
method of accounting, and the results of operations include 
the revenues and expenses generated with the TVI assets from 
the acquisition date through December 31, 1997.  WVV paid 35 
percent of the purchase price in cash and the balance was paid 
through the issuance of WVV common stock. 

The following unaudited pro forma information represents the 
results of operations of the Company as if the acquisition had 
occurred as of January 1, 1997, after giving effect to 
increased interest expense for debt issued related to the 
acquisition, depreciation based on current costs, and the 
effect of the benefit from provision for income taxes.

                                                        1997
                                                     (unaudited)
                                                     .__________.
Net revenues                                          5,874,733

Gross margin                                          2,972,077

Net loss                                                (53,395)


3. Accounts Receivable

Oregon law prohibits the sale of wine in Oregon on credit; 
therefore, the Company's accounts receivable balances are the 
result of sales to out-of-state and foreign distributors.  
Accounts receivable include an outstanding balance of 
approximately $81,000 and $185,200 at December 31, 1998 and 
1997, respectively, from a European customer to which extended 
credit terms have been granted.  Due to a bankruptcy filing, 
the entire receivable of $81,000 has been reserved.  At 
December 31, 1998 and 1997, the Company's accounts receivable 
balance is net of an allowance for doubtful accounts of 
$111,000 and $30,000, respectively.


                             F-9

4. Inventories

Inventories consist of:
                                          1998         1997
                                       .________.  _________
Winemaking and packaging materials    $  211,550 $   189,062
Work-in-process (costs relating 
  to unprocessed and/or unbottled 
  wine products)                       1,923,852   1,725,910
Finished goods (bottled wine and
 related products                      2,466,406   2,256,055
                                       .________.  _________

                                     $ 4,601,808 $ 4,171,027
                                       =========   =========


5. Property and Equipment

                                      1998                 1997 
                                ____________         ___________
Land and improvements          $  1,041,326        $   1,031,115
Winery building and hospitality 
  center                          4,539,821            4,506,344 
Equipment                         3,715,612            3,263,633 
                                 ____________         ___________

                                  9,296,759            8,801,092 
Less accumulated depreciation    (2,505,774)          (1,941,257) 
                                 ____________         ___________
                               $  6,790,985            6,859,835 
                                 ============         ===========

During 1998, the Company entered into two capital lease 
arrangements for certain winery equipment.  The cost of the 
leased equipment and related accumulated amortization 
aggregated $59,673 and $5,312, respectively, at December 31, 
1998.  Minimum lease payments in 1999 through 2002 approximate 
$13,000 per year.  Subsequent minimum lease payments aggregate 
approximately $8,000 per year through 2005.


6. Investments

Investments consist of:
                                          1998          1997
                                      _________     __________
Oregon Liquor Control Commissions and Bureau 
  of Alcohol, Tobacco and Firearms  $         -    $   88,066 
Farm Credit Securities                    3,000        15,000 
Other                                     1,974         1,974 
                                      _________     __________
                                     $    4,974    $  105,040 
                                      =========     ==========

                             F-10

The Oregon Liquor Control Commission and the Bureau of 
Alcohol, Tobacco and Firearms require restricted short-term 
investments to cover future excise tax payments.  During 1998, 
the these investments were liquidated as they were no longer 
required by the agencies.  Farm Credit Securities investments 
are required as a condition of the Northwest Farm Credit 
Service loan and line of credit facility (see Note 7).  
However, in 1998, Farm Credit reduced the amount of stock the 
Company was required to have on deposit.  These investments 
are classified as held-to-maturity investments and are 
recorded at historical cost.


7. Line of Credit Facility

The Company has a $2,000,000 credit facility with Northwest
Farm Credit Services.  Borrowings under this facility bear 
interest at 7.75%.  At December 31, 1998 and 1997, $1,652,667 
and $1,517,297 were outstanding under this facility, 
respectively.


8. Long-Term Debt

Long-term debt consists of:
                                          1998         1997     
                                      ___________   __________
Northwest Farm Credit Services Loan  $  4,237,134   4,044,943  
Capital lease obligations                  55,814           -
                                        4,292,948   4,044,943

Less current portion                     (191,176)   (124,192) 
                                      ___________   __________
                                      $ 4,101,772 $ 3,920,751
                                      ===========   =========

The Company entered into an agreement with Northwest Farm 
Credit Services ("NWFCS") in 1997 containing two separate 
notes bearing interest at a rate of 7.96%.  These notes 
require monthly payments ranging from $12,171 to $30,102 until 
the notes are fully repaid in 2014.  During 1998, the Company 
renegotiated their agreement with Farm Credit to adjust the 
terms to a fixed rate of 7.85%.  The loan agreements contain 
covenants which require the Company to maintain certain 
financial ratios and balances.  At December 31, 1998, the 
Company was not in compliance with these covenants. However, 
the Company has obtained a letter dated March 26, 1999 waiving 
the debt covenants through December 31, 1999.

                             F-11


Future minimum principal payments of long-term debt mature as 
follows:
Year ending
December 31,
____________
     1999                                $    191,176
     2000                                     206,173 
     2001                                     223,285    
     2002                                     241,607  
     2003                                     256,752 
     Thereafter                             3,173,955 
                                           .__________
                                         $  4,292,948
                                            =========


9. Shareholders' Equity

The Company is authorized to issue 10,000,000 shares of its 
common stock.  Each share of common stock is entitled to one 
vote.  At its discretion, the Board of Directors may declare 
dividends on shares of common stock, although the Board does 
not anticipate paying dividends in the foreseeable future. 
Willamette Valley Vineyards, Inc.

On June 1, 1992, the Company granted its president a warrant 
to purchase 15,000 shares of common stock as consideration for 
his personal guarantee of the real estate loans and the line 
of credit with Northwest Farm Credit Services (see Notes 7 and 
8).  The warrant is exercisable through June 1, 2012 at an 
exercise price of $3.42 per share.  As of December 31, 1998 
and 1997, no warrants had been exercised.

In each of the years ended December 31, 1998 and 1997, the 
Company granted 1,250 shares of stock valued at $2,189 and 
$2,500, respectively, as compensation to its winemaker.  The 
cost of these grants were capitalized as inventory.  The 
effects of these non-cash transactions have been excluded from 
the cash flow statements in both periods.


10. Stock Incentive Plan

In 1992, the Board of Directors adopted a stock incentive plan 
and reserved 175,000 shares of common stock for issuance to 
employees, consultants, and directors of the Company under the 
plan.  In 1996 and 1998, the Board of Directors reserved an 
additional 150,000 and 275,000 shares, respectively.  In 1998, 
the Board repriced options for 145,390 unvested shares with a 
weighted average exercise price of $2.91 to the current market 
price of $1.50 on the date of approval.  Administration of the 
plan, including determination of the number, term, and type of 
options to be granted, lies with the Board of Directors or a 
duly authorized committee of the Board of Directors.  

                             F-12

At December 31, 1998, 1997 and 1996, the following 
transactions related to stock options occurred:
                         1998          1997           1996  
                   ______________  _____________  ____________
                             Wtd         Wtd             Wtd
                             Avg         Avg             Avg
                          Exercise      Exercise      Exercise
                   Shares   Price  Shares  Price Shares  Price
                   _______  _____  ______  _____  ______  ____
Outstanding at
beginning of year  173,000  $2.94  246,500 $2.87  45,000 $3.72
Granted            229,000   1.71  100,000  2.63 248,500  2.81
Exercised                -      -        -     -       -     -
Forfeited                -      - (173,500) 2.66 (47,000) 3.38
                   _______  _____  ______  _____  ______  ____
Outstanding at 
  end of year      402,000  $1.73  173,000 $2.94 246,500 $2.87
                   =======  =====  =======  ====  ======  ====
Weighted average fair value of options granted 
during the year             $ .85         $ 1.47        $ 1.87
                               _____         ______        ______


   Weighted average options outstanding and exercisable at 
December 31, 1998 are as follows:

                 Options outstanding         Options exercisable
                 ___________________         ___________________
                      Weighted
           Number     average     Weighted   Number     Weighted
       outstanding at remaining  average  exercisable at average
Exercise December 31, contractual exercise December 31, exercise
  price      1998      life       price     1998         price
_______    ________     _____    _______    _______        _____
$ 1.50      155,890      7.38    $  1.50     39,959        1.50 
  1.65       75,000      9.00       1.65     37,500        1.65  
  1.75      143,500      9.25       1.75     28,700        1.75 
  2.50        1,350      7.67       2.50      1,350        2.50 
  2.75        9,500      7.50       2.75      9,500        2.75  
  3.00       10,760      7.08       3.00     10,760        3.00 
  3.62        4,000      6.56       3.62      4,000        3.62 
  4.50        2,000      6.08       4.50      2,000        4.50
_______    ________     _____    _______    _______        _____

$1.50-4.50  402,000      1.73       1.73    133,769        1.92
__________ ________     _____    _______    _______        _____


The Company adopted Statement of Financial Accounting 
Standards No. 123 ("SFAS 123") in 1996 and has elected to 
account for its stock-based compensation under Accounting 
Principles Board Opinion 25.  As required by SFAS 123, the 

Company has computed for pro forma disclosure purposes the 
value of options granted during each of the three years ended 
December 31, 1998 using the Black-Scholes option-pricing model 
with the following weighted-average assumptions used for the 
grants in 1998, 1997 and 1996:

                                1998       1997       1996
                                _____      _____      _____
Risk-free interest rate         5.54%      6.31%      6.33%
Expected dividend yield            -          -          - 
Expected lives                  8 years    8 years    8 years
Expected volatility               70%        57%        57%

                             F-13

Options were assumed to be exercised upon vesting for purposes 
of this valuation.  Adjustments are made for options forfeited 
prior to vesting.  For the years ended December 31, 1998, 1997 
and 1996, the total value of the options granted was computed 
to be $192,540, $146,700 and $371,034, respectively, which 
would be amortized on a straight-line basis over the vesting 
period of the options.

Had compensation cost for the Company's stock option plans 
been determined based on the fair value at the grant date for 
awards consistent with the provisions of SFAS 123, the 
Company's net earnings would have been reduced to the pro 
forma amounts indicated as follows:

                                1998         1997         1996 
                               _________   _______    _________
Net income (loss) - as 
  reported                   $  (71,980) $  67,862   $  170,430
Per share:            
    Basic                         (0.02)      0.02         0.05  
    Diluted                       (0.02)      0.02         0.04

Net income (loss) - pro forma  (175,860)    41,838      116,786
Per share:
     Basic                        (0.04)      0.01         0.03
     Diluted                      (0.04)      0.01         0.03


   The effects of applying SFAS 123 for providing pro forma 
disclosures for the three years ended December 31, 1998 are 
not likely to be representative of the effects on reported net 
income and earnings per share for future years, because 
options vest over several years and additional awards 
generally are made each year.


11. Income Taxes

The provision for income taxes consists of:
                              1998         1997         1996 
                             ______       ______       ______ 
 Current tax expense (benefit)                  
   Federal               $       -   $          - $    47,197
   State                         -              -      11,964    
                             ______       ______       ______ 
                                 -              -      59,161 
                             ______       ______       ______ 
   Deferred tax (expense):                  
     Federal               (24,291)        46,530      35,032
     State                  (3,291)         5,758       4,492
                             ______        ______       ______ 
                           (27,582)        52,288      39,524
                             ______        ______       ______ 
 Total                   $ (27,582)     $  52,288  $   98,685
                           ========       =======      =======

                             F-14

During the year ended December 31, 1996, the Company utilized 
its net operating loss carryforwards of approximately $28,000 
to reduce its taxable income.

The effective income tax rate differs from the federal 
statutory rate as follows:
                                       Year ended December 31     
                                       1998     1997    1996  
                                       ____     ____    ____ 
Federal statutory rate                (34.0%)   34.0%   34.0%  
State taxes, net of federal benefit    (4.4)     4.4     4.9
Permanent differences                   9.3      3.8     0.6
Benefit of federal rate bracket           -        -    (2.9)  
Other                                   1.4      1.3     0.1  
                                       ____     ____    ____ 

                                      (27.7)%   43.5%   36.7%
                                       ======   =====   ===== 


Deferred tax assets and (liabilities) consist of:

                                                 December 31,
                                           1998            1997   
                                        __________     __________
Accounts receivable                   $    42,580     $   11,508  
Inventory                                  38,368         34,538
   Net operating loss carryforwards       132,746         37,888        
   Other                                   20,509         10,879
                                        __________     __________
          Gross deferred tax assets       234,203         94,813
                                        __________     __________
    Capital assets                       (300,083)      (188,275)
                                        __________     __________
          Gross deferred tax liability   (300,083)      (188,275)
                                        __________     __________
    Net deferred tax (liability) asset $  (65,880)    $  (93,462)
                                        ==========     ==========


12. Related Parties

   In 1996, the Company began contracting for management 
services with Nor'Wester Brewing Company ("Nor'Wester") and 
Willamette Valley, Inc. ("WVI"), companies formerly controlled 
by the Company's president, under a general services 
agreement.  Nor'Wester, WVI, and the Company each provided 
various administrative services, including design and print 
work, and stock offering services to the affiliated companies, 
subsidiaries of WVI: Aviator Ales, Inc. ("AAI"); Mile High 
Brewing Company ("MHBC"); Bayhawk Ales, Inc. ("BAI"); and 
North Country Brewing Company, Inc. ("NCBCI").  During 1996,

total amounts charged to the Company by Nor'Wester and WVI 
aggregated $47,025; amounts charged by the Company to the 
various affiliated companies aggregated $86,450.  As a result 
of these and other transactions, the Company had an aggregate 
payable balance of $7,221 which is netted against other 
receivables in the accompanying balance sheet.  During 1997, 
charges to the Company aggregated $164,716; amounts charged by 

                             F-15


the Company aggregated $92,601.  Prior to December 31, 1997, 
all intercompany transactions ceased and as of December 31, 
1997 all balances are zero.

   During 1998, 1997 and 1996, the Company purchased grapes 
from other shareholders at an aggregate price of $105,332, 
$262,795 and $138,656, respectively.  At December 31, 1998, 
1997 and 1996, grape payables included $52,667, $130,893 and 
$92,706, respectively, owed to these shareholders. 

   On December 3, 1992, the Company issued a loan to its 
president in the amount of $100,000.  The loan was due on 
December 3, 1993, bearing interest at 7.35%.  On March 14, 
1994, the loan was extended to March 14, 2009.  The loan is 
secured by the common stock of the Company held by its 
president.  This note, including the related interest 
receivable, is classified as a long-term note receivable in 
the accompanying balance sheet.


13. Commitments and Contingencies

   Litigation
   From time to time, in the normal course of business, the 
Company is a party to legal proceedings.  Management believes 
that these matters will not have a material adverse effect of 
the Company's financial position or results of operations, but 
due to the nature of the litigation, the ultimate outcome 
cannot presently be determined.

   Operating leases
   The Company entered into a lease agreement for approximately 
45 acres of vineyards and related equipment in 1997.  The 
Company is also committed to lease payments for various office 
equipment.  As of December 31, 1997, the Company was obligated 
under various long-term operating leases requiring future 
minimum lease payments as follows:

        Year ending
       December 31,
___________________
         1999                                   $  92,984
         2000                                      92,702
         2001                                      83,827
         2002                                      83,827
         2003                                      83,827
         Thereafter                               251,481
                                                 ________
         Total minimum payments required        $ 688,648
                                                 ========

  Total rental expense for all operating leases excluding the 
vineyards, amounted to $30,647 and $17,827 in 1998 and 1997, 
respectively.  In addition, payments for the leased vineyards 
have been included in inventory and aggregate approximately 
$77,000 and $60,000, respectively, for each of the years ended 
December 31, 1998 and 1997.


                             F-16


13. Commitments and Contingencies  (continued)

Susceptibility of vineyards to disease
The Tualatin vineyard purchased during 1997 and the leased 
vineyards are known to be infested with phylloxera, an aphid-
like insect which can destroy vines.  Although management has 
begun planting with phylloxera-resistant rootstock, a portion 
of the vines at the Tualatin vineyard are susceptible to 
phylloxera.  The Company has not detected any phylloxera at 
its Turner vineyard.


                             F-17



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