1 of 59 Pages


                    STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    Form 10-K


 (Mark One)

     [X]  Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934 (Fee Required)

                     For the Fiscal Year Ended June 27, 1998

     [ ]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
Exchange Act of 1934

                        For the Transition Period from to
                                File No. 0-20539
                            PRO-FAC COOPERATIVE, INC.
             (Exact Name of Registrant as Specified in Its Charter)

           New York                                        16-6036816
  (State or other jurisdiction of                         (IRS Employer
  incorporation or organization                        Identification Number)

          90 Linden Place, PO Box 682, Rochester, NY       14603
            (Address of Principal Executive Offices)     Zip Code)


    Registrant's telephone number, including area code: (716) 383-1850
        Securities Registered Pursuant to Section 12(b) of the Act: None
           Securities Registered Pursuant to Section 12(g) of the Act:

                       Class A Cumulative Preferred Stock
                       Liquidation Preference $25.00/Share
                              Par Value $1.00/Share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                    YES X NO

Indicate by check mark if disclosure of delinquent  filers  pursuant to ITEM 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of voting stock held by  non-affiliates of the registrant
as of August 1, 1998

                            Common Stock: $8,444,385

(based upon par value of shares  since  there is no market for the  Registrant's
common stock)

             Number of common shares outstanding at August 1, 1998:

                             Common stock: 1,822,513



<PAGE>


                         FORM 10-K ANNUAL REPORT - 1998
                            PRO-FAC COOPERATIVE, INC.
                                TABLE OF CONTENTS
<TABLE>

                                     PART I
                                                                                                                PAGE

<S>                                                                                                              
ITEM  1.    Description of Business                                                                              <C>
                General Development of Business.............................................................      3
                Relationship with Agrilink..................................................................      3
                Narrative Description of Business...........................................................      4
                Financial Information About Industry Segments...............................................      6
                Packaging and Distribution..................................................................      6
                Trademarks..................................................................................      7
                Raw Material Sources........................................................................      7
                Environmental Matters.......................................................................      8
                Seasonality of Business.....................................................................      8
                Practices Concerning Working Capital........................................................      8
                Significant Customers.......................................................................      9
                Backlog of Orders...........................................................................      9
                Business Subject to Government Contracts....................................................      9
                Competitive Conditions......................................................................      9
                New Products and Research and Development...................................................     10
                Employees...................................................................................     10
                Cautionary Statement on Forward-Looking Statements..........................................     10
ITEM  2.    Description of Properties.......................................................................     10
ITEM  3.    Legal Proceedings...............................................................................     12
ITEM  4.    Submission of Matters to a Vote of Security Holders.............................................     12

                                     PART II

ITEM  5.    Market for Registrant's Common Stock and Related Security Holder Matters........................     13
ITEM  6.    Selected Financial Data.........................................................................     14
ITEM  7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...........     15
ITEM  8.    Financial Statements and Supplementary Data.....................................................     23
ITEM  9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............     45

                                    PART III

ITEM 10.    Directors and Executive Officers of the Registrant..............................................     46
ITEM 11.    Executive Compensation..........................................................................     49
ITEM 12.    Security Ownership of Certain Beneficial Owners and Management..................................     51
ITEM 13.    Certain Relationships and Related Transactions..................................................     53

                                     PART IV

ITEM 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................     55

            Signatures......................................................................................     58

</TABLE>

<PAGE>

                                                              
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

                         GENERAL DEVELOPMENT OF BUSINESS

Pro-Fac  Cooperative,  Inc.  ("Pro-Fac" or "the Cooperative") is an agricultural
cooperative  corporation formed in 1960 under New York law to process and market
crops grown by its members.  Pro-Fac crops  include  fruits  (cherries,  apples,
blueberries,  peaches,  and plums),  vegetables (snap beans,  beets,  cucumbers,
peas, sweet corn, carrots, cabbage, squash,  asparagus,  potatoes, turnip roots,
and leafy greens),  and popcorn.  Only growers of crops marketed through Pro-Fac
(or  associations  of such  growers)  can become  members of  Pro-Fac;  a grower
becomes  a  member  of  Pro-Fac  through  the  purchase  of  common  stock.  Its
approximately  600  members are growers  (or  associations  of growers)  located
principally in New York, Pennsylvania,  Illinois, Michigan,  Washington, Oregon,
Iowa, Nebraska, Florida, and Georgia.

Agrilink Foods, Inc. ("Agrilink" or the "Company"),  incorporated in New York in
1961, is a producer and marketer of processed  food products,  including  canned
and frozen fruits and vegetables, canned desserts and condiments, fruit fillings
and toppings, canned chilies and stews, salad dressings,  pickles, peanut butter
and snack foods.  Agrilink has three primary business units: Curtice Burns Foods
("CBF"), Nalley Fine Foods, and its Snack Foods Group. Each business unit offers
different  products  and is  managed  separately.  The  majority  of each of the
business  unit's net sales is within the United States.  In addition,  currently
all of the Company's operating facilities are within the United States.

On  November  3,  1994,  Pro-Fac  acquired  Agrilink,   and  Agrilink  became  a
wholly-owned  subsidiary of Pro-Fac.  Pro-Fac and Agrilink have a  long-standing
contractual  relationship pursuant to which Pro-Fac provided crops and financing
to Agrilink,  Agrilink provided a market and management to Pro-Fac,  and Pro-Fac
shared in the profits of  Agrilink.  The  purchase  price and fees and  expenses
related  to the  Acquisition  were  financed  with  borrowings  under  a  credit
agreement  (the "Credit  Agreement")  with  CoBank,  ACB (the  "Bank"),  and the
proceeds of the Company's 12.25 percent Senior  Subordinated Notes due 2005 (the
"Notes"). Pro-Fac has guaranteed the obligations of the Company under the Credit
Agreement and the Notes.

On July 27,  1998,  the  Company  announced  that it had  reached  a  definitive
agreement  with Dean Foods  Company  ("Dean") of  Franklin  Park,  Illinois,  to
acquire Dean's  vegetable  operations  which includes the nationally known Birds
Eye brand and Dean's Freshlike and VegAll brands (the "Dean Foods Acquisition").
The Dean Foods Vegetable  Company ("DFVC")  reported  revenues of $620.6 million
and  operating   earnings  of  $42.4  million  for  fiscal  1998.  DFVC  employs
approximately  2,000  full-time  employees in 13 plants,  located in California,
Minnesota,  New York, Texas, and Wisconsin. The acquisition is expected to close
in September 1998 and will be accounted for as a purchase.

On September 18, 1997, the Cooperative's wholly-owned subsidiary,  Curtice Burns
Foods,  Inc.  changed  its name to  Agrilink  Foods,  Inc.  The  three  recently
consolidated business units, Comstock Michigan Fruit, Southern Frozen Foods, and
Brooks Foods, are now called Curtice Burns Foods ("CBF").

                           RELATIONSHIP WITH AGRILINK

Upon  consummation  of the  Acquisition,  Pro-Fac and Agrilink  entered into the
Pro-Fac   Marketing  and   Facilitation   Agreement   (the  "Pro-Fac   Marketing
Agreement").

The  Pro-Fac  Marketing  Agreement  provides  for  Pro-Fac  to supply  crops and
additional  financing  to  Agrilink,  for  Agrilink  to  provide  a  market  and
management  services  to  Pro-Fac,  and for  Pro-Fac to share in the profits and
losses of  Agrilink.  Pro-Fac is required to reinvest at least 70 percent of the
additional  patronage  income  received  back into  Agrilink.  To  preserve  the
independence  of Agrilink,  the Pro-Fac  Marketing  Agreement also requires that
certain of the  directors of Agrilink be  individuals  who are not  employees or
shareholders  of,  or  otherwise   affiliated  with,   Pro-Fac  or  the  Company
("Disinterested  Directors") and requires that certain  decisions be approved by
the Disinterested Directors.

The Credit  Agreement and the Notes restrict the ability of Pro-Fac to amend the
Pro-Fac Marketing and Facilitation Agreement. The Credit Agreement and the Notes
also restrict the amount of dividends and other payments that may be made by the
Company to Pro-Fac.

Under the Pro-Fac Marketing Agreement, Agrilink manages the business and affairs
of Pro-Fac and provides  all  personnel  and  administrative  support  required.
Pro-Fac pays Agrilink a quarterly fee of $25,000 for these services.

<PAGE>
                                                                 
Purchase of Crops From Pro-Fac: Under the Pro-Fac Marketing Agreement,  Agrilink
purchases  crops from Pro-Fac at the  commercial  market value  ("CMV") of those
crops.  CMV is defined as the weighted  average  price paid by other  commercial
processors  for similar  crops sold under  preseason  contracts  and in the open
market  in the same or  competing  market  area.  Under  the  Pro-Fac  Marketing
Agreement, Agrilink paid Pro-Fac $58.5 million, $51.4 million, and $44.7 million
as CMV for crops  purchased  from Pro-Fac in fiscal years 1998,  1997, and 1996,
respectively.   The  crops  purchased  by  Agrilink  from  Pro-Fac   represented
approximately  76 percent,  71 percent,  and 72 percent of all raw  agricultural
crops purchased by Agrilink in fiscal 1998, 1997, and 1996, respectively.

CMV is determined by a joint committee of the Boards of Directors of Pro-Fac and
Agrilink.   The  Pro-Fac  Marketing   Agreement   requires  a  majority  of  the
Disinterested  Directors  approve  the  recommendation  of the joint  committee.
Although  CMV is intended to be no more than the fair market  value of the crops
purchased by Agrilink,  it may be more or less than the price Agrilink would pay
in the open market in the absence of the Pro-Fac Marketing Agreement.

Under the Marketing and  Facilitation  Agreement  between  Pro-Fac and Agrilink,
Pro-Fac agrees to sell and deliver to Agrilink all of the Agrilink annual profit
plan  requirements   (i.e.  crops  needed  to  support   anticipated  sales  and
production). The profit plan is determined by the Boards of Directors of Pro-Fac
and Agrilink.  Approval of the profit plan by the Board of Directors of Agrilink
requires  the  affirmative  vote of a majority of the  Disinterested  Directors.
Subject only to its  inability to deliver  because of the vagaries of weather or
other  causes  validly  preventing  growing  such  crops  as  set  forth  in the
agreements  between  Pro-Fac and its members,  Pro-Fac is required to deliver to
Agrilink the crops  described in the profit plan, and Agrilink agrees to process
and market such crops.

Patronage  Income of Pro-Fac:  In addition to CMV,  under the Pro-Fac  Marketing
Agreement,  Agrilink will pay to Pro-Fac as additional  patronage  income in any
year in which the Company has  earnings on products  which were  processed  from
crops supplied by Pro-Fac ("Pro-Fac Products") up to 90 percent of such earnings
but in no case more than 50 percent of all pretax earnings (before dividing with
Pro-Fac)  of the  Company.  In years in which the  Company has losses on Pro-Fac
Products, the Company reduces the CMV it would otherwise pay to Pro-Fac by up to
90 percent of such losses,  but in no case by more than 50 percent of all pretax
losses (before dividing with Pro-Fac) of the Company.  This additional patronage
income is paid to Pro-Fac for  services  provided  to  Agrilink,  including  the
provision of a long term, stable crop supply,  favorable payment terms for crops
and the  sharing  of risks in  losses of  certain  operations  of the  business.
Earnings  and  losses are  determined  at the end of the  fiscal  year,  but are
accrued on an estimated basis during the year.

Agrilink paid additional  patronage income to Pro-Fac of $12.5 million and $10.3
million  (including  Pro-Fac's share of an accounting change) in fiscal 1998 and
1997, respectively, for those years. In fiscal 1996, Agrilink reduced the amount
of CMV due to  Pro-Fac  by $9.0  million  based  on an  allocation  of a loss at
Agrilink on Pro-Fac products.

Additional  patronage  income  received by Pro-Fac is  deductible to Pro-Fac for
federal tax purposes only to the extent distributed to its members.  Pro-Fac may
make this  distribution to its members through a combination of cash and retains
as long as a minimum of 20 percent of the amount is paid in cash as  required by
federal tax law.  Pro-Fac has  historically  paid its members between 20 percent
and 30 percent of additional  patronage income in cash and the remaining portion
in retains.  Funds made available by the  distribution  of retains to members in
lieu  of  cash  have  historically  been  reinvested  by  Pro-Fac  in  Agrilink.
Subsequent  to the  Acquisition,  Pro-Fac is  required  to  reinvest at least 70
percent of the additional patronage income in Agrilink.

                        NARRATIVE DESCRIPTION OF BUSINESS

The  Company  sells  products  in  three  principal  categories:  (i)  "branded"
products, which are sold under various Company trademarks,  (ii) "private label"
products, which are sold to grocers who in turn use their own brand names on the
products  and  (iii)  "foodservice"  products,  which  are  sold to  foodservice
institutions such as restaurants,  caterers,  bakeries,  and schools.  In fiscal
1998,  approximately  52 percent of the Company's net sales were branded and the
remainder  divided between private label and foodservice.  The Company's branded
products are listed under the "Trademarks" section of this report. The Company's
private  label  products  include salad  dressings,  salsa,  fruit  fillings and
toppings,  canned  puddings,  canned  and  frozen  vegetables,  Southern  frozen
vegetable specialty products,  and frozen and breaded products which are sold to
customers such as Food Lion, Kroger, Piggly Wiggly, Safeway,  SuperValu,  Topco,
Wegmans  and  Winn-Dixie.  The  Company's  foodservice  products  include  salad
dressings,  pickles, fruit fillings and toppings,  canned and frozen vegetables,
frozen  Southern  specialties,  frozen  breaded and  battered  products,  canned
puddings, cheese sauces and canned and frozen fruit, which are sold to customers
such as Alliant Food Service, Carvel, Church's,  Disney, Foodservice of America,
KFC, MBM, McDonald's, PYA, and SYSCO.

<PAGE>

A description of the Company's three major business units is as follows:

Curtice Burns Foods ("CBF"): On September 18, 1997, the Comstock Michigan Fruit,
Southern Frozen Foods, and Brooks Foods business units were consolidated and are
now called  Curtice  Burns Foods,  headquartered  in  Rochester,  New York.  The
consolidated entity currently  represents the largest business unit of Agrilink.
This business unit produces products in several food categories, including fruit
fillings and toppings;  aseptically-produced  products; canned and frozen fruits
and  vegetables  and  popcorn.  Well-known  brand names  include  "Chill  Ripe,"
"Comstock," "Greenwood," "Just for Chili," "McKenzie's," "McKenzie's Gold King,"
"Pops-Rite,"  "Rich and Tangy,"  "Super  Pop,"  "Southern  Farms,"  "Thank You,"
"Tropic Isle," and "Wilderness." In fiscal 1998, approximately 36 percent of net
sales  for these  businesses  represented  branded  products,  approximately  18
percent   represented  private  label  products  and  approximately  46  percent
represented foodservice/industrial products.

This business unit  processes  fruits and  vegetables  under Company  brands and
private labels.  Additional  products include  value-added  items such as canned
specialty fruits, frozen vegetable blends, and Southern-specialty  products such
as black-eyed peas, okra,  Southern squash,  and Southern specialty side dishes.
Canned beans and tomato products are sold in several Midwestern states under the
Brooks label. These categories include value-added items such as Chili Hot Beans
and stewed tomatoes.  This business unit is also a major supplier of branded and
private label fruit fillings to retailers and foodservice  institutions  such as
restaurants,  caterers, bakeries and schools. Success in the fruit and vegetable
processing  business  is driven,  among other  things,  by an ability to control
costs.

Aseptic  operations  produce  puddings and cheese  sauces for sale.  The aseptic
production process involves  preparation of the product in a sterile environment
beginning with batch formulation and continuing through packaging.  As a result,
once  packaged,  the product  requires no further  cooking.  As part of the Dean
Foods Acquisition, the Company has agreed to sell to Dean its aseptic operations
located in Benton  Harbor,  Michigan.  The fiscal  1998 net sales of the aseptic
operations were $97.9 million. The fiscal 1998 earnings before interest,  taxes,
depreciation,  and amortization  ("EBITDA") was approximately $17.5 million. The
sale price is  approximately  $83.0 million.  It is anticipated the Company will
recognize a gain on this sale.

Effective May 1, 1998, the Company acquired  Nutrition  Medical's  private label
adult  nutrition  formula  business.  Under  terms of the  Agreement,  Nutrition
Medical will be paid royalty  payments for two years.  The Company also received
existing product and packaging inventories. It is anticipated this contract will
be  transferred  to DFVC in  conjunction  with the  pending  sale of the aseptic
operations.

Effective  March  31,  1998,  the  Company  entered  into a  multiyear  logistic
agreement under which GATX Logistics will provide freight management,  packaging
and  labeling  services,   and  distribution  support  to  and  from  production
facilities  owned by the Company in and around Coloma,  Michigan.  The agreement
included the sale of the Company's labeling equipment and distribution center.

Effective  March 30, 1998,  the Company  acquired the majority of assets and the
business of DelAgra Corp. of Bridgeville,  Delaware. DelAgra Corp. is a producer
of private label frozen vegetables.

In the  fall of  1997,  the  Company  was  named  the sole  supplier  of  frozen
vegetables for all Sam's club stores across the United States.  Shipments  began
in the fourth quarter of fiscal 1998, and it is  anticipated  full  distribution
will occur in the first quarter of fiscal 1999.

Effective July 1, 1997, the Company and Flanagan  Brothers,  Inc. of Bear Creek,
Wisconsin contributed all their assets involved in sauerkraut production to form
a new sauerkraut company. This new company, Great Lakes Kraut Company,  operates
as a New York limited  liability  company with  ownership  and earnings  divided
equally between the two companies.  This joint venture includes the Silver Floss
and Krrrrisp Kraut Brands.

On June 27, 1997,  Americold  acquired the Company's  frozen foods  distribution
center in Montezuma,  Georgia.  In addition,  the two  companies  entered into a
long-term  logistics  agreement under which Americold  manages this facility and
all frozen food transportation operations of Agrilink in Georgia and New York.

In May 1997,  Agrilink  sold its private  label  canned  vegetable  operation to
Seneca  Foods,  along  with its Blue Boy brand.  Included  in this sale were the
Leicester,  New York  manufacturing  facility and LeRoy,  New York  distribution
warehouse.  The disposal did not include the  Greenwood and Silver Floss labels,
or  sauerkraut,  beets in glass  jars,  or  frozen  vegetable  businesses.  This
transaction  also  included  an  agreement  requiring  Agrilink  to  handle  all
vegetable sourcing for Seneca Foods at its New York plants.

<PAGE>
Nalley Fine Foods:  Nalley is  headquartered in Tacoma,  Washington.  It markets
canned meat products such as chilies and stews, pickles, salad dressings, peanut
butter,  salsa,  and syrup,  which are sold throughout the Northwest and Western
United States and Western  Canada.  Approximately  74 percent of Nalley products
are  branded;  however,  private  label and  foodservice  accounts for a growing
percentage of Nalley business.

Several  of  Nalley's  products  have  leading  market  shares  in  the  Pacific
Northwest,  such as chili and "Nalley" and  "Farman's"  pickles.  In the Pacific
Northwest,  the Company's  "Nalley" and "Bernstein's"  brands of salad dressings
have a combined market share of approximately 20 percent.

In April 1997, the Company acquired certain  businesses from Nalley Canada Ltd.,
a  privately  held,  independent  snack food  company and former  subsidiary  of
Agrilink.  The acquired  Canadian  operations  include a $12.0 million  consumer
products  business that includes  Nalley's  chili and snack dips;  Adams Natural
Peanut Butter; Bernstein's Salad Dressings;  LaRestaurante Salsa and other niche
dressing and sauce products marketed throughout the western Provinces of Canada.

Snack Foods Group:  During fiscal 1998,  two of the Agrilink  snack  businesses,
Snyder of Berlin and Husman Snack Foods, were united under one management group.
The  two  entities  combined   resources  to  obtain  the  most  cost  efficient
operations. Tim's Cascade Potato Chips represents the Company's other snack food
operation. A brief description of each follows:


     Snyder of  Berlin:  Snyder of  Berlin,  located  in  Berlin,  Pennsylvania,
     produces and markets several  varieties of potato chips  including  regular
     and  kettle  fried,  as well  as  several  varieties  of  corn-based  snack
     products, primarily under the "Snyder of Berlin" brand. Snyder products are
     recognized for their unique taste and freshness among users in Mid-Atlantic
     states.

     Effective  March 10, 1998, the Company  acquired the majority of assets and
     the  business of C&O  Distributing  Company  ("C&O") of Canton,  Ohio.  C&O
     distributes snack products for Snyder of Berlin.

     Effective July 21, 1998, the Company acquired J.A. Hopay  Distributing Co.,
     Inc.  ("Hopay")  of  Pittsburgh,   Pennsylvania.  Hopay  distributes  snack
     products for Snyder of Berlin.

     Husman  Snack  Foods:  Husman Snack  Foods,  located in  Cincinnati,  Ohio,
     manufactures  and  markets  potato  chips,  popcorn,  and cheese  curls and
     distributes  other snack items in Cincinnati and Dayton,  Ohio and areas of
     Northern Kentucky. Husman creates a unique product niche by customizing its
     product  development  and  promotions  to  local  tastes.  Multi-packs  and
     licensing agreements with local restaurants are two ways Husman creates its
     value-added products.

     Tim's Cascade Potato Chips: Tim's Cascade Potato Chips,  located in Auburn,
     Washington,  produces kettle-fried potato chips, popcorn, cheese curls, and
     snack mix in the  Washington,  Northern  Idaho,  Oregon,  and Montana area.
     Kettle frying produces a potato chip that is thicker and crisper than other
     potato chips.

                  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The business of the Company is  principally  conducted in one industry  segment,
the processing and sale of various food products.  The financial  statements for
the fiscal years ended June 27, 1998,  June 28, 1997,  and June 29, 1996,  which
are included in this report,  reflect the  information  relating to that segment
for each of the Company's last three fiscal years.

                           PACKAGING AND DISTRIBUTION

The food products  produced by the Company are  distributed to various  consumer
markets in all 50 states. International sales account for a small portion of the
Company's activities.  Branded lines of the CBF business unit are primarily sold
through  food  brokers  who sell  primarily  to  supermarket  chains and various
institutional entities. Nalley has its own sales personnel responsible for sales
within the Pacific  Northwest and uses food brokers for sales in other marketing
areas.  Snyder's,  Tim's and Husman products are marketed  through  distributors
(some of which are owned and  operated  by the  Company)  who sell  directly  to
retail outlets in the Midwest, Mid-Atlantic and Pacific Northwest.

<PAGE>

                                                               
Customer brand operations encompass the sale of products under private labels to
chain stores and under the controlled  labels of buying groups.  The Company has
developed  central storage and  distribution  facilities that permit  multi-item
single shipment to customers in key marketing areas.

Curtice Burns Express ("CBX"), a subsidiary of the Company, is a licensed common
carrier  with  authority  in 48  states.  It is used by the  Company  to  obtain
backhaul volume on shipments using the Company's trucks or contract haulers. The
other  business  units of the  Company  lease their  equipment  to CBX for these
backhauls.

                                   TRADEMARKS

The major  brand  names  under  which  the  Company  markets  its  products  are
trademarks  of the Company.  Such brand names are  considered  to be of material
importance  to the  business  of the  Company  since  they  have the  effect  of
developing brand  identification  and maintaining  consumer loyalty.  All of the
Company's trademarks are of perpetual duration so long as periodically  renewed,
and it is currently  intended that the Company will maintain them in force.  The
major brand names utilized by the Company are:

<TABLE>
     Product                                             Brand Name

<S>                                 <C>
Chilies, stews and soups            Brooks, Mariners Cove, Nalley, Riviera

Fruits and vegetables               Brooks, Chill-Ripe, Gold King, Gracias,  Greenwood,  Hoosier Sweets, Just for Chili, McKenzie's,
                                    McKenzie's Gold King, Naturally Good, Ritter, Southern Farms, Southland, Thank You, Tropic Isle

Fruit fillings and toppings         Comstock, Globe, Gracias, Thank You, Wilderness

Peanut butter                       Adams

Pickles                             Farman's, Nalley

Popcorn                             Pops-Rite, Super Pop

Puddings(1)                         Gracias, Thank You

Salad dressings                     Bernstein's, Bernstein's Light Fantastic, Nalley

Snack food                          Cheese Pleezers, Husman, La Restaurante, Snyder of Berlin, Thunder Crunch, Tim's Cascade Chips,
                                    Naturally Good, Matthews

Syrup                               Lumberjack

Sauerkraut(2)                       Silver Floss, Farman's Krrrrisp Kraut

<FN>
(1)  It is  anticipated  that these brand names will be licensed to Dean for the
     production and sale of puddings in conjunction with the anticipated sale of
     the aseptic operations.

(2)  Represents trademarks of Great Lakes Kraut Company  The Company owns a 50 percent interest in this joint venture.
</FN>
</TABLE>

                              RAW MATERIAL SOURCES

In fiscal  1998,  the  Company  acquired  approximately  76  percent  of its raw
agricultural  products  from  Pro-Fac.  The Company  also  purchased on the open
market some crops of the same type and quality as those  purchased from Pro-Fac.
Such open market  purchases  may occur at prices higher or lower than those paid
to Pro-Fac for similar products. See further discussion of the relationship with
Pro-Fac in NOTE 2 to the "Notes to Consolidated Financial Statements."

The vegetable and fruit portions of the business can be positively or negatively
affected  by weather  conditions  nationally  and the  resulting  impact on crop
yields.  Favorable  weather  conditions  can  produce  high crop  yields  and an
oversupply  situation.  This situation  typically  results in depressed  selling
prices and reduced  profitability  on the  inventory  produced  from that year's
crops.  Excessive  rain or drought  conditions can produce low crop yields and a
shortage  situation.  This  typically  results  in  higher  selling  prices  and
increased  profitability.  While the  national  supply  situation  controls  the
pricing, the supply can differ regionally because of variations in weather.

<PAGE>

The Company  purchases all of its  requirements  for  nonagricultural  products,
including  containers,  in  the  open  market.  Although  the  Company  has  not
experienced  any  difficulty  in  obtaining  adequate  supplies  of such  items,
occasional periods of short supply of certain raw materials may occur.

                              ENVIRONMENTAL MATTERS

The disposal of solid and liquid waste material  resulting from the  preparation
and  processing  of foods and the  emission of wastes and odors  inherent in the
heating of foods during  preparation are subject to various federal,  state, and
local environmental laws and regulations.  Such laws and regulations have had an
important  effect  on  the  food  processing  industry  as  a  whole,  requiring
substantially  all firms in the  industry  to incur  material  expenditures  for
modification of existing processing facilities and for construction of new waste
treatment  facilities.  The  Company  is also  subject to  standards  imposed by
regulatory  agencies  pertaining  to the  occupational  health and safety of its
employees.  Management believes that continued measures to comply with such laws
and  regulations  will not have a material  adverse effect upon its  competitive
position or financial condition.

Among the various programs for the protection of the environment which have been
adopted by the Company to date,  the most  important  for the  operations of the
Company  are the waste  water  discharge  permit  programs  administered  by the
environmental  protection  agencies in those  states in which the  Company  does
business  and  by the  federal  Environmental  Protection  Agency.  Under  these
programs, permits are required for processing facilities which discharge certain
wastes into  streams and other  bodies of water,  and the Company is required to
meet  certain  discharge  standards  in  accordance  with  compliance  schedules
established  by  such  agencies.  The  Company  has  received  permits  for  all
facilities  for  which  permits  are  required.  Each year the  Company  submits
applications for renewal permits for some of the facilities.

While the Company  cannot  predict with  certainty the effect of any proposed or
future  environmental  legislation or regulations on its processing  operations,
management of the Company believes that the waste disposal systems which are now
in operation or which are being constructed or designed are sufficient to comply
with all currently applicable laws and regulations.

The Company is cooperating with  environmental  authorities in remedying various
leaks and spills at several of its  plants.  Such  actions  are being  conducted
pursuant to procedures approved by the appropriate  environmental authorities at
a cost that is not expected to be material.

Expenditures related to environmental  programs and facilities have not had, and
are not expected to have, a material  effect on the earnings of the Company.  In
fiscal 1998,  total capital  expenditures  of Pro-Fac and the Company were $14.1
million of which  approximately $0.6 million was devoted to, the construction of
environmental  facilities.  The Company estimates that the capital  expenditures
for  environmental   control   facilities   principally   wastewater   treatment
facilities,  will be  approximately  $0.8  million  for the  1999  fiscal  year.
However, there can be no assurance that expenditures will not be higher.

                             SEASONALITY OF BUSINESS

From the point of view of sales,  the  business  of the  Company  is not  highly
seasonal,  since the demand for its products is fairly  constant  throughout the
year.  Exceptions  to this general rule include some  products  that have higher
sales volume in the cool weather  months (such as canned fruits and  vegetables,
chili,  and fruit  fillings  and  toppings),  and others that have higher  sales
volume in the warm weather months (such as potato chips and  condiments).  Since
many of the raw  materials  processed  by the  Company are  agricultural  crops,
production of these products is  predominantly  seasonal,  occurring  during and
immediately following the harvest seasons of such crops.

                      PRACTICES CONCERNING WORKING CAPITAL

The Company must maintain substantial  inventories  throughout the year of those
finished  products  produced from seasonal raw materials.  These inventories are
generally financed through seasonal borrowings.

A short-term  line of credit is available to the Company under  agreements  with
the Bank.  This line of credit is used  primarily  for seasonal  borrowing,  the
amount of which  fluctuates  during  the year.  The line of credit is subject to
annual renewal.

Both the  maintenance  of substantial  inventories  and the practice of seasonal
borrowing are common to the food processing industry.

<PAGE>
                              SIGNIFICANT CUSTOMERS

The Company's one principal  industry segment is not dependent upon the business
of a single customer or a few customers. The Company does not have any customers
to whom  sales are made in an amount  which  equals  10  percent  or more of the
Company's net sales.

                                BACKLOG OF ORDERS

Backlog of orders has not  historically  been significant in the business of the
Company.  Orders are filled  shortly after receipt from  inventories of packaged
and processed foods.

                   BUSINESS SUBJECT TO GOVERNMENTAL CONTRACTS

No material  portion of the business of the Company is subject to  renegotiation
of contracts with, or termination by, any governmental agency.

                             COMPETITIVE CONDITIONS

All products of the Company,  particularly branded products,  compete with those
of  national  and  major  regional  food  processors  under  highly  competitive
conditions.  Many  of the  national  manufacturers  have  substantially  greater
resources  than the Company.  The principal  methods of  competition in the food
industry are a ready availability of a broad line of products,  product quality,
price, and advertising and sales promotion.

Quality  of  product  and  uniformity  of  quality  are  important   methods  of
competition.  The  Company's  relationship  with Pro-Fac gives the Company local
sources of supply,  thus  allowing  the  Company to  exercise  control  over the
quality  and  uniformity  of much of the raw  product  which it  purchases.  The
members of Pro-Fac generally operate relatively large production operations with
emphasis on mechanized growing and harvesting techniques. This factor is also an
advantage in producing uniform, high-quality food products.

The  Company's  pricing  is  generally  competitive  with  that  of  other  food
processors  for  products of  comparable  quality.  The branded  products of the
Company are currently  marketed under regional brands and its marketing programs
are focused on local tastes and  preferences  as a means of developing  consumer
brand loyalty. The Company's  advertising program utilizes local media, national
magazines, and in-store promotions.

Although  the  relative  importance  of  the  above  factors  may  vary  between
particular products or customers,  the above description is generally applicable
to all of the  products of the Company in the various  markets in which they are
distributed.

Profit  margins  for canned and frozen  fruits  and  vegetables  are  subject to
industry  supply and  demand  fluctuations,  attributable  to changes in growing
conditions, acreage planted, inventory carryover, and other factors. The Company
has  endeavored  to  protect  against   changing  growing   conditions   through
geographical  expansion of its sources of supply. The Company has emphasized the
merchandising of its own brands and expanded service and product development for
its high volume private label and foodservice customers. The percentage of sales
under brand names owned and promoted by the Company (including franchise brands)
amount  to  approximately  52  percent;   sales  to  the  foodservice   industry
(restaurants and institutional  customers)  represent  approximately 23 percent;
private label sales currently represent  approximately 15 percent;  and sales to
other manufacturers are approximately 10 percent of total sales.

An estimate of the number of competitors in the markets served by the Company is
very difficult.  Currently, nearly all products sold by the Company compete with
the  nationally  advertised  brands of the leading  food  processors,  including
Borden, DelMonte,  Green Giant, Heinz, Frito-Lay,  Kraft, Vlasic, Birds Eye, and
similar major brands,  as well as with the branded and private label products of
a number of regional  processors,  many of which operate only in portions of the
marketing area served by the Company.

In conjunction  with the anticipated  Dean Foods  Acquisition,  the Company will
obtain the Birds Eye brand name.  Management  believes  that the addition of the
DFVC  branded  products to the  Company's  portfolio  will  enhance its existing
business and provide for significant opportunities for growth.

<PAGE>
                    NEW PRODUCTS AND RESEARCH AND DEVELOPMENT

The amount expensed during the last three fiscal years on Company-sponsored  and
customer-sponsored  research  activities  relating  to  the  development  of new
products or the  improvement  of existing  products  was not  material,  and the
number of employees  engaged  full-time in such research  activities is also not
material.  While the Company  operates  test  kitchens  and pilot plants for the
development of new products,  the emphasis generally has been on the development
of related  products or  modifications  of existing  products for the  Company's
brands and customized  products for the Company's  private label and foodservice
businesses. No new products which require the investment of a material amount of
assets have been publicly announced.

                                    EMPLOYEES

As of June 27, 1998, the Company had 3,727  full-time  employees,  of whom 2,428
were  engaged  in  production   and  the  balance  in   management,   sales  and
administration.  As of that date,  the Company also employed  approximately  334
seasonal  and other  part-time  employees,  almost  all of whom were  engaged in
production.  Most of the  production  employees  are  members of  various  labor
unions. The Company believes its relationship with its employees is good.

               CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

From  time to time,  the  Cooperative  and/or  Company  makes  oral and  written
statements  that may constitute  "forward-looking  statements" as defined in the
Private  Securities  Litigation  Reform  Act  of  1995  (the  "Act")  or by  the
Securities  and  Exchange  Commission  ("SEC")  in its rules,  regulations,  and
releases.  The Cooperative and/or Company desires to take advantage of the "safe
harbor" provisions in the Act for  forward-looking  statements made from time to
time, including,  but not limited to, the forward-looking  information contained
in the Management's Discussion and Analysis (pages 15 to 23 and other statements
made in this Form 10-K) and in other filings with the SEC.

The Cooperative  and/or Company cautions  readers that any such  forward-looking
statements made by or on behalf of the  Cooperative  and/or Company are based on
management's  current  expectations and beliefs but are not guarantees of future
performance.  Actual  results could differ  materially  from those  expressed or
implied in the forward-looking  statements.  Among the factors that could impact
the Cooperative's and/or Company's ability to achieve its goals are:

     the impact of strong competition in the food industry;

     the impact of weather on the volume and quality of raw product;

     the  inherent  risks  in  the  marketplace   associated  with  new  product
     introductions, including uncertainties about trade and consumer acceptance;

     the  continuation  of  the   Cooperative's   and/or  Company's  success  in
     integrating  operations and the  availability  of acquisition  and alliance
     opportunities; and

     the  Cooperative's  and/or  Company's  ability  to  achieve  the  gains  in
     productivity and improvements in capacity utilization.

ITEM 2. DESCRIPTION OF PROPERTIES

All plants, warehouses, office space and other facilities used by the Company in
its business are either owned by Agrilink or one of its  subsidiaries  or leased
from third  parties.  All of the  properties  owned by  Agrilink  are subject to
mortgages in favor of the Bank. In general, each business unit occupies offices,
processing  plants and  warehouse  space.  Some business  units have  processing
plants located in rural areas that are convenient for the delivery of crops from
Pro-Fac members and warehouse locations dispersed to facilitate the distribution
of  finished  products.  Agrilink  believes  that  its  facilities  are in  good
condition and suitable for the operations of the Company.

Four of the properties are held for sale. These properties are located in Alton,
New York; Rushville, New York, Mt. Summit, Indiana; and Wall Lake, Iowa.



<PAGE>


The following  table  describes all material  facilities  leased or owned by the
Company (other than the  properties  held for sale,  certain  public  warehouses
leased by the Company from third parties from time to time, and facilities owned
by the Company's joint venture,  Great Lakes Kraut).  Except as otherwise noted,
each facility set forth below is owned by the Company.
<TABLE>
                       FACILITIES UTILIZED BY THE COMPANY

          Type of Property (By Business Unit)                                Location          Square Feet

<S>
  CURTICE BURNS FOODS:                                                    <C>                    <C>    
   Office building, manufacturing plant and warehouse1                    Benton Harbor, MI      239,252
   Manufacturing plant and warehouse                                      Fennville, MI          350,000
   Canning plant and warehouse                                            Lawton, MI             142,000
   Warehouse                                                              Sodus, MI              243,138
   Warehouse and office; public storage facility2                         Vineland, NJ           191,710
   Freezing plant; warehouse; office and dry storage                      Barker, NY             123,600
   Freezing plant                                                         Bergen, NY             138,554
   Cold storage and repack facility and public storage warehouse          Brockport, NY          429,052
   Canning plant and warehouse; freezing plant                            Oakfield, NY           263,410
   Canning plant and warehouse                                            Red Creek, NY          153,076
   Manufacturing plant                                                    Ridgway, IL             50,000
   Distribution and warehouse                                             North Bend, NE          50,000
   Office, freezing plant, cold storage and repackaging facility          Montezuma, GA          591,300
   Office, freezing plant and cold storage                                Alamo, TX              114,446
   Manufacturing plant and warehouse                                      Bridgeville, DE        104,383


NALLEY FINE FOODS:
   Office building, warehouse and tank farm                               Enumclaw, WA            87,313
   Office building, manufacturing plant and warehouse                     Tacoma, WA             412,564
   Parking lot and yards2                                                 Tacoma, WA             305,470
   Warehouses2                                                            Tacoma, WA             493,556
   Receiving and grading station2                                         Cornelius, OR           11,700
   Receiving and grading station2                                         Mount Vernon, WA       150,373
   Office building - Fuller Building2                                     Tacoma, WA              60,000


SNACK FOODS GROUP:
   Office, plant and warehouse                                            Berlin, PA             190,225
   Administrative, plant, warehouse and distribution center - Tim's2      Auburn, WA              34,000
   Plant, warehouse, and distribution center - Matthews2                  Auburn, WA              37,442
   Office, plant and warehouse                                            Cincinnati, OH         113,576
   Distribution center2                                                   Elwood City, PA         13,000
   Distribution center2                                                   Monessen, PA            20,000
   Distribution center2                                                   Canton, OH               8,200


CORPORATE HEADQUARTERS:

   Headquarters office2 (Includes office space for CBF
   as well as a Corporate Conference Center)                              Rochester, NY           62,500

<FN>
1    It is anticipated  this facility will be sold to Dean in  conjunction  with
     the sales of the Company's aseptic operations.

2    Leased from third parties,  although certain related  equipment is owned by
     the Company.
</FN>
</TABLE>

<PAGE>


ITEM 3. LEGAL PROCEEDINGS

The  Company  is a party to legal  proceedings  from time to time in the  normal
course of its business.  In the opinion of  management,  any liability  that the
Company might incur upon the  resolution of these  proceedings  will not, in the
aggregate,  have a material adverse effect on the Company's business,  financial
condition, and results of operations.  Further, no such proceedings are known to
be contemplated  by  governmental  authorities.  The Company  maintains  general
liability insurance coverage in amounts deemed to be adequate by management.

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

Not applicable.


<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS

The  information  required by this item is  contained in NOTES 5, 8 and 9 to the
"Notes to Consolidated Financial Statements," at "Quarterly Financial Data," and
at "Selected Financial Data."

During  fiscal  1998,  the  Cooperative  issued  8,796  shares  of its  Class  A
Cumulative  Preferred  Stock  in  exchange  for  shares  for its  Non-cumulative
Preferred  Stock,  on a  share-for-share  basis.  Such exchanges are exempt from
registration  under section 3(a)(9) of the Securities act of 1933. The dates and
amounts of the exchanges are set forth below:

<TABLE>
     Date                       Number of Shares         Value of Shares

<S>                                   <C>                     <C>     
January 8, 1998                       4,487                   $112,175
April 8, 1998                         3,485                     87,125
June 27, 1998                           824                     20,600
                                      -----                   --------
  Total                               8,796                   $219,900
                                      =====                   ========
</TABLE>


<PAGE>
                                                                
ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
Consolidated Operating Data:
(Dollars in Thousands, Except Capital Stock Data)
<CAPTION>
                                                                                              Five Year Summary
                                                                           1998         1997         1996        1995        1994

<S>                                                                     <C>          <C>          <C>          <C>        <C>       
Net sales                                                               $719,665     $730,823     $739,094     $522,413   $ 58,237
Cost of sales                                                            524,082      539,081      562,926      384,838     58,237
                                                                        --------     --------     --------     --------   --------
Gross profit                                                             195,583      191,742      176,168      137,575          0
Income from Agrilink prior to Acquisition                                      0            0            0       11,239     34,229
Interest income                                                                0            0          770        4,402          0
Income from Great Lakes Kraut Company                                      1,893            0            0            0          0
Selling, administrative, and general (expenses)/income                  (141,739)    (145,214)    (151,671)     (99,341)     1,056
Gain on sale of Finger Lakes Packaging                                         0        3,565            0            0          0
Restructuring charge                                                           0            0       (5,871)           0          0
Additional costs incurred as a result of fire                                  0            0            0       (2,315)         0
                                                                        --------     --------     ---------    --------   --------
Operating income                                                          55,737       50,093       19,396       51,560     35,285
Interest expense                                                         (30,767)     (36,473)     (41,998)     (29,035)   (11,587)
                                                                        --------     --------     --------     --------   -------- 
Pretax income/(loss) before dividends, allocation of net proceeds, and
   cumulative effect of an accounting change                              24,970       13,620      (22,602)      22,525     23,698
Tax (provision)/benefit                                                   (7,840)      (5,529)      13,071        7,028        844
                                                                        --------     --------     --------     --------   --------  
Income/(loss) before cumulative effect of an accounting change, 
   dividends and allocation of net proceeds                               17,130        8,091       (9,531)      29,553     24,542
Cumulative effect of an accounting change                                      0        4,606            0            0          0
                                                                        --------     --------     --------     --------   --------
Net income/(loss)                                                       $ 17,130     $ 12,697     $ (9,531)    $ 29,553   $ 24,542
                                                                        ========     ========     ========     ========   ========
Allocation of Net Proceeds:
   Net income/(loss)                                                    $ 17,130     $ 12,697     $ (9,531)    $ 29,553   $ 24,542
   Dividends on common and preferred stock                                (6,328)      (5,503)      (8,993)      (4,914)    (4,390)
                                                                        --------     --------     --------     --------   -------- 
   Net proceeds/(deficit)                                                 10,802        7,194      (18,524)      24,639     20,152
   Allocation (to)/from earned surplus                                    (4,662)      (3,661)      18,524      (16,964)    (2,856)
                                                                        --------     --------     --------     --------   --------  
   Net proceeds available to members                                    $  6,140     $  3,533     $      0     $  7,675   $ 17,296
                                                                        ========     ========     ========     ========   ======== 
Allocation of net proceeds available to members: 
   Payable to members currently (25% of qualified proceeds available to
     members in fiscal 1998 and 1997 and 20% in fiscal 1995 and 1994)   $  1,535     $    883     $      0     $  1,475   $  3,109
Allocated to members but retained by the Cooperative:
   Qualified retains                                                       4,605        2,650            0        5,900     12,437
   Non-qualified retains                                                       0            0            0          300      1,750
                                                                        --------     --------     --------     --------   --------
   Net proceeds available to members                                    $  6,140     $  3,533     $      0     $  7,675   $ 17,296
                                                                        ========     ========     ========     ========   ========
   CMV*                                                                 $ 58,530     $ 51,445     $ 44,701     $ 55,855   $ 59,216 
                                                                        ========     ========     ========     ========   ========

   Net proceeds allocated to members as a percent of CMV                   10.51%        6.87%      (10.00)%      13.74%     29.21%
Net proceeds available to members as a percent of CMV:
   Qualified                                                               10.51%        6.87%        0.00%       13.20%     26.25%
   Non-qualified                                                            0.00         0.00         0.00         0.54%      2.96%
                                                                        --------     --------     --------     --------   --------
       Total net proceeds allocated to members as a percent of CMV         10.51%        6.87%        0.00%       13.74%     29.21%
                                                                        ========     ========     ========     ========   ========
Balance Sheet Data:
   Investment in direct financing leases                                $      0     $      0     $      0     $      0   $141,322
   Common stock                                                         $  9,129     $  8,944     $  9,185     $  9,395   $ 10,284
   Redeemable Preferred                                                 $    270 $        315     $    334     $      0   $      0
   Shareholders' and members' capitalization and redeemable stock       $141,369     $132,663     $126,700     $145,228   $123,765
   Total long-term debt and senior subordinated notes (excludes
      current portion)                                                  $229,937     $229,829     $327,683     $343,665   $127,134
   Debt to equity ratio**                                                  1.7:1        1.8:1        2.7:1        2.4:1      1.2:1
   Total assets                                                         $566,708     $546,677     $637,297     $689,739   $296,051
Capital Stock Data
   Cash dividends paid per share:
     Common                                                             $    .25     $   0.00     $    .25        .2750   $    .25
     Non-Cumulative Preferred                                           $   1.50     $   1.50     $   1.50     $   1.69   $    .57
     Class A Cumulative Preferred                                       $   1.72     $   1.72     $   1.29     $      0   $      0
     Class B Cumulative Preferred                                       $   1.00     $   1.00     $   1.00     $      0   $      0
   Average common stock investment per member                           $ 14,399     $ 14,333     $ 14,419     $ 15,032   $ 14,546

Number of Members:                                                           634          624          637          625        707
<FN>
*    Payment to the members for CMV was limited to 90 percent of  deliveries  in
     fiscal  1996.

**   For  purposes  of  this   calculation,   debt  includes  both  current  and
     non-current debt, and equity includes common stock and redeemable preferred
     stock.
</FN>
</TABLE>
<PAGE>
                                                           

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

The purpose of this discussion is to outline the significant reasons for changes
in the  Consolidated  Statement of Operations  and Net Proceeds from fiscal 1996
through fiscal 1998.

Pro-Fac   processes  and  markets  crops  grown  by  its  members   through  its
wholly-owned subsidiary, Agrilink.

Agrilink has three primary business units:  Curtice Burns Foods ("CBF"),  Nalley
Fine Foods,  and its Snack Foods  Group.  Each  business  unit offers  different
products and is managed separately.  The majority of each of the business unit's
net sales is  within  the  United  States.  In  addition,  currently  all of the
Company's operating facilities are within the United States.

The CBF business unit produces  products in several food  categories,  including
fruit fillings and toppings;  aseptically-produced  products;  canned and frozen
fruits,  vegetables,  and popcorn. The Nalley business unit produces canned meat
products (such as chilies and stews),  pickles, salad dressings,  peanut butter,
salsa, and syrup. The Company's snack foods business unit consists of the Snyder
of Berlin,  Husman Snack Foods, and Tim's Cascade Potato Chip  businesses.  This
business unit produces and markets potato chips and other salty-snack items.

The  following  tables  illustrate  the  Cooperative's  results of operations by
business unit for the fiscal years ended June 27, 1998,  June 28, 1997, and June
29, 1996,  and the  Cooperative's  total assets by business at June 27, 1998 and
June 28, 1997.

<TABLE>
Net Sales
(Dollars in Millions)
<CAPTION>
                                                                              Fiscal Years Ended
                                                      6/27/98                       6/28/97                       6/29/96
                                                              % of                          % of                           % of
                                                 $            Total            $            Total            $             Total
                                               -----          -----          -----          -----          -----           -----

<S>                                            <C>             <C>           <C>             <C>           <C>              <C> 
CBF                                            469.0           65.2          440.2           60.2          431.2            58.4
Nalley Fine Foods                              182.1           25.3          182.4           25.0          189.2            25.6
Snack Foods Group                               68.6            9.5           67.3            9.2           63.7             8.6
                                               -----          -----          -----          -------        ------          -----
     Subtotal ongoing operations               719.7          100.0          689.9           94.4          684.1            92.6
Businesses sold or to be sold1                   0.0            0.0           40.9            5.6           55.0             7.4
                                               -----          -----          -----          -----          ------          ----- 
     Total                                     719.7          100.0          730.8          100.0          739.1           100.0
                                               =====          =====          =====          =====          =====           =====

<FN>
1  Includes  the sales of Finger  Lakes  Packaging,  the  portion  of the canned
   vegetable  business sold,  Nalley Canada Ltd., and Nalley US Chips and Snacks
   business. See NOTE 3 to the "Notes to Consolidated Financial Statements."
</FN>
</TABLE>

<PAGE>

<TABLE>
Operating Income1
<CAPTION>
(Dollars in Millions)
                                                                                      Fiscal   Years Ended
                                                                  6/27/98                    6/28/97                 6/29/96
                                                                         % of                      % of                     % of
                                                               $         Total          $          Total           $        Total
                                                             ----        -----        ------       -----         ----       -----

<S>                                                          <C>          <C>          <C>          <C>          <C>        <C>  
CBF                                                          47.1         84.5         40.5         80.8         26.5       136.6
Nalley Fine Foods                                            10.4         18.7         10.8         21.6         (2.9)      (14.9)
Snack Foods Group                                             6.9         12.4          5.9         11.8          4.1        21.1
Corporate overhead                                           (8.7)       (15.6)       (10.3)       (20.6)        (1.6)       (8.3)
                                                             ----        -----        -----        -----         ----       -----  
   Subtotal ongoing operations                               55.7        100.0         46.9         93.6         26.1       134.5
Businesses sold or to be sold and other non-recurring2        0.0          0.0          3.2          6.4         (6.7)      (34.5)
                                                             ----        -----        -----        -----         ----       -----
     Total                                                   55.7        100.0         50.1        100.0         19.4       100.0
                                                             ====        =====        =====        =====         ====       =====

<FN>
1    Excludes cumulative effect of an accounting change in fiscal 1997. See NOTE
     1 to the "Notes to Consolidated Financial Statements."

2    In fiscal 1997, such amount includes the operating earnings and gain on the
     sale  of  Finger  Lakes  Packaging,  operating  activities  of  the  canned
     vegetable  business,  final settlement of an insurance claim, and a loss on
     the  disposal  of  property  held for sale.  In fiscal  1996,  such  amount
     includes restructuring  initiatives and operating activities of both Finger
     Lakes Packaging and the canned vegetable business. See NOTE 3 to the "Notes
     to Consolidated Financial Statements."
</FN>
</TABLE>

<PAGE>
<TABLE>
EBITDA1,2
(Dollars in Millions)
<CAPTION>
                                                                                     Fiscal Years Ended
                                                                  6/27/98                   6/28/97                 6/29/96
                                                                         % of                      % of                    % of
                                                              $          Total          $          Total          $        Total
                                                             ----        -----        -----        -----         ----      -----

<S>                                                          <C>          <C>          <C>          <C>          <C>       <C>  
CBF                                                          61.0         78.9         57.1         74.4         44.4      101.6
Nalley Fine Foods                                            16.0         20.7         16.2         21.1          2.3        5.3
Snack Foods Group                                             8.8         11.4          7.6          9.9          6.0       13.7
Corporate                                                    (8.5)       (11.0)       (10.1)       (13.1)        (6.9)     (15.8)
                                                             ----        -----        -----        -----         ----      -----
   Subtotal ongoing operations                               77.3        100.0         70.8         92.3         45.8      104.8
Businesses sold and other non recurring3                      0.0          0.0          5.9          7.7         (2.1)      (4.8)
                                                             ----        -----        -----        -----         ----      -----
   Total                                                     77.3        100.0         76.7        100.0         43.7      100.0
                                                             ====        =====        =====        =====         ====      =====
<FN>
1    Earnings before interest, taxes, depreciation,  and amortization ("EBITDA")
     begins with the pretax income/(loss) before dividends and allocation of net
     proceeds,  and adds to such  amount  interest  expense,  depreciation,  and
     amortization  of goodwill and other  intangibles.

     In  conjunction  with the  acquisition  of Agrilink by Pro-Fac in 1994, net
     assets were adjusted to fair market value and additional debt was incurred.
     Accordingly,  depreciation  and  interest  expense have  increased,  making
     year-to-year  comparisons of operating  income and net income  difficult to
     analyze. Therefore, management believes EBITDA is a measurement that allows
     the  operations  of the  business to be compared  in a  consistent  manner.
     
     EBITDA does not represent information prepared in accordance with generally
     accepted accounting principles, nor is such information considered superior
     to information  presented in accordance with generally accepted  accounting
     principles.

2    Excludes  cumulative  effect  of an  accounting  change.  See NOTE 1 to the
     "Notes to Consolidated Financial Statements."

3    In fiscal 1997, such amount includes the operating earnings and gain on the
     sale  of  Finger  Lakes  Packaging,  operating  activities  of  the  canned
     vegetable  business,  final settlement of an insurance claim, and a loss on
     the  disposal  of  property  held for sale.

     In  fiscal  1996,  such  amount  includes  restructuring   initiatives  and
     operating  activities  of  both  Finger  Lakes  Packaging  and  the  canned
     vegetable  business.

     See NOTE 3 to the "Notes to Consolidated Financial Statements."
</FN>
</TABLE>

<TABLE>
 Total Assets
<CAPTION>
(Dollars in Millions)

                               6/27/98                 6/28/97
                                      % of                    % of
                           $          Total         $         Total
                         -----        -----       -----       -----

<S>                      <C>           <C>        <C>          <C> 
CBF                      362.2         63.9       329.0        60.6
Nalley Fine Foods        137.4         24.3       144.4        26.6
Snack Foods Group         28.0          4.9        26.7         4.9
Corporate                 38.8          6.9        42.5         7.9
                         ------       -----       -----       ----- 
    Total                566.4        100.0       542.6       100.0
                         =====        =====       =====       =====
</TABLE>

                     CHANGES FROM FISCAL 1997 TO FISCAL 1998

Net income for fiscal 1998 of  $17.1million  represented  a $4.4 million or 34.6
percent increase over the prior year's net income of $12.7 million. Total EBITDA
before  cumulative  effect of an accounting change was $77.3 million as compared
to $76.9 million in the prior year.  Excluding the impact of businesses sold and
other non-recurring activities,  EBITDA increased $6.5 million or 9.2 percent to
$77.3 million,  while operating income increased $8.8 million or 18.8 percent to
$55.7 million from the prior year $46.9 million.  These  improvements  reflected
the benefits from numerous initiatives including: (1) increase in volume and new
<PAGE>
customers  in many  of the  Cooperative's  product  lines;  (2)  the  continuing
benefits  from  structural  changes made within the  organization  including the
consolidation  of  operations  and  facilities;  and (3) a decrease  in interest
expense due to initiatives undertaken in the prior year to reduce debt and focus
on strategic product lines.

Net Sales:  Total net sales for the year decreased  $11.1 million or 1.5 percent
to $719.7 in fiscal year 1998 from $730.8 million in fiscal year 1997. Excluding
the net sales of  businesses  sold by the  Cooperative,  net sales  increased by
$29.8  million or 4.3 percent to $719.7  million in fiscal year 1998 from $689.9
million in fiscal year 1997.

The increase in net sales for ongoing  operations  came  primarily  from the CBF
business unit which  accounted for an increase of $28.8  million.  This increase
was attributable to changes in volume and new customers. In addition, prior year
net sales include $13.8 million in sauerkraut sales, which are now accounted for
by the  joint  venture  created  in  fiscal  1998.  See  NOTE 3,  "Acquisitions,
Disposals,  and Restructuring - Formation of New Sauerkraut  Company." Excluding
the  impact of  sauerkraut  sales  from the prior  year,  net sales  within  the
vegetable  category  increased  $20.2 million.  Net sales for the fruit category
increased by $3.0 million to $119.7  million in fiscal 1998 due to  improvements
in both pricing and product mix.

Net sales for aseptic  products  increased by $24.4  million to $97.9 million in
fiscal 1998 as a result of new business. It is anticipated that these operations
will be sold to Dean Foods Company  ("Dean")  during the first quarter of fiscal
1999.

Net sales for Nalley  remained  relatively  flat with the prior year as gains in
the pickle and canned  categories  were offset by  reductions  in dressings  and
peanut butter.  Within the pickle category,  net sales for fiscal 1998 increased
$3.0  million  as a result  of  increased  volume  in the  foodservice  channel.
Competitive pressures on volume and price resulted in a $3.0 million decrease in
net sales for dressings.  In addition,  peanut butter experienced a $0.6 million
decrease in net sales.

Net sales for the Snack Foods Group  increased by $1.3 million or 1.9 percent to
$68.6  million in fiscal 1998 as a result of new business in the  Northwest  and
product line extensions, including kettle chips within Snyder of Berlin.

Gross  Profit:  Gross  profit of $195.6  million in fiscal 1998  increased  $3.9
million or 2.0 percent from $191.7 million in fiscal 1997.  Excluding the impact
of businesses  sold in fiscal 1997,  gross profit  increased $8.1 million.  This
increase  is  attributable  to  improved  margins  in many of the  Cooperative's
product lines.

The  increase in gross  profit at the CBF business  unit was $5.0  million.  The
fruit category  showed  improvements  of $5.5 million  resulting from changes in
pricing  and  product  mix.  The  vegetable  category  showed a decline  of $0.9
million. However,  excluding the impact of the canned vegetable business sold in
1997, margin within the vegetable category improved $1.5 million.  This increase
is  disproportionate  to the increase in net sales described above primarily due
to pricing  within the  industry.  As  highlighted  under  "Short- and Long-Term
Trends," the vegetable portion of the Cooperative's  business can be impacted by
the  national  market.  During the third and  fourth  quarters  of fiscal  1998,
pricing was negatively impacted by an oversupply situation.

Overall,  gross margin at Nalley  decreased $0.5 million.  While  production and
purchasing  efficiencies  yielded  benefits,  such amounts were offset by volume
declines within the dressing category due to competitive pressures.

Increases  in net  sales  within  the  Snack  Foods  Group  resulted  in  margin
improvements of $0.7 million.

Selling,  Administrative,  and General Expenses:  Selling,  administrative,  and
general  expenses have  decreased  $3.5 million as compared with the prior year.
This  decrease is primarily due to: (1)  reductions in selling  expenses of $1.4
million;  (2) reductions in incentive costs of $1.2 million;  and (3) the impact
of a favorably  settled  outstanding  tax claim with the state of Washington for
$1.4 million.

Income from Great Lakes Kraut Company:  This amount represents earnings received
from the investment in Great Lakes Kraut Company, a joint venture formed between
Agrilink and Flanagan Brothers,  Inc. See NOTE 3 - "Other matters - Formation of
New  Sauerkraut  Company" to the  consolidated  financial  statements of Pro-Fac
included elsewhere herein.

Interest  Expense:  Interest  expense  decreased $5.7 million or 15.6 percent to
$30.8 million in fiscal 1998 from $36.5 million in fiscal 1997. This improvement
is primarily the result of  management's  focus on debt reduction  during fiscal
year 1997.  Specific  actions  taken by  management  included the sale of Finger
Lakes Packaging, the sale of the canned vegetable business, and the sale of the

<PAGE>


Georgia distribution center. The reduction in debt accounted for $4.2 million of
the  reduction  in interest  expense  while  changes in rate  accounted  for the
remaining $1.5 million reduction.

Provision  for Taxes:  The provision  for taxes  increased  $2.3 million or 41.8
percent to $7.8 million in fiscal 1998 from $5.5  million in fiscal  1997.  This
increase was a result of a $11.4  million  increase in earnings  before tax. The
Pro-Fac  effective tax rate in fiscal 1998 was 31.4 percent which is impacted by
the net proceeds distributed to members and the non-deductibility of goodwill. A
further  discussion  of tax  matters  is  included  at NOTE 6 to the  "Notes  to
Consolidated  Financial Statements" to the consolidated  financial statements of
Pro-Fac included elsewhere herein.

                     CHANGES FROM FISCAL 1996 TO FISCAL 1997

Net income for fiscal 1997 of $12.7 million represented a $22.2 million increase
over the prior  year's loss of $9.5  million.  Total  EBITDA  before  cumulative
effect of an  accounting  change was $76.9  million  for the year ended June 28,
1997 as compared to $48.9 million in the prior year. EBITDA for ongoing business
reached  $71.0  million as  compared to the prior  year's  $51.0  million.  This
significant   improvement  reflected  the  benefits  from  numerous  initiatives
including:  (1) a reduction in debt by $97.9 million which included the sales of
Finger Lakes Packaging,  the canned vegetable business, the Georgia Distribution
facility,  idle  manufacturing  facilities,  and  efforts to  improve  cash flow
through better management of working capital  requirements (see NOTES 3 and 5 to
the "Notes to Consolidated  Financial  Statements");  (2) the  implementation of
structural  changes within the organization,  including the consolidation of the
operations  of Brooks  Foods and  Southern  Frozen  Foods into CBF;  and (3) the
consolidation  of support  services  such as human  resources  and  agricultural
services.  The reduction in interest  expense as a result of the debt  reduction
initiatives  improved  net  income by $5.5  million  and  consolidation  efforts
accounted  for  approximately  $2.0  million of the $6.5  million  reduction  in
selling, administrative, and general expenses.

Structural  changes  within the business  units  included a review of the Nalley
operations and the  consolidation  of several other  operations.  EBITDA for the
Nalley  business  unit was $16.2  million  for the year ended  June 28,  1997 as
compared  to $2.3  million  in the prior  year.  These  results  were  driven by
organizational changes and the absence of the significant start-up costs for the
new salad dressing line which were incurred throughout fiscal 1996.

Net Sales:  Total net sales  decreased  by $8.3 million or 1.1 percent to $730.8
million in fiscal 1997 from $739.1 million in fiscal 1996.  Excluding businesses
sold,  net sales  increased  $5.8  million or 0.8  percent to $689.9  million in
fiscal 1997 from $684.1 million in fiscal 1996.

Net sales at CBF  increased  $9.0  million or 2.1  percent to $440.2  million in
fiscal  1997 from  $431.2  million  in fiscal  1996.  This  increase  was due to
improvements in pricing and increased sales from new customers.

Net sales at Nalley  decreased by $6.8 million or 3.6 percent to $182.4  million
in fiscal 1997 from $189.2  million in fiscal  1996.  While the canned  category
showed  increases of $1.5  million,  such gains were offset by reductions in all
other  categories of $8.3 million.  Such  reductions  resulted from  competitive
pressures on volume and price.

Net sales at the Snack  Foods  Group  increased  $3.6  million or 5.7 percent to
$67.3  million  in fiscal  1997 from  $63.7  million  in  fiscal  1996.  Of this
increase,  $0.9 million was  attributable  to the  acquisition of Matthews Candy
Company during the fourth quarter of fiscal 1996. The $2.7 million increase from
the existing  remaining  business was due to the addition of new  customers  and
product  line  extensions.  Management  believes  the  acquisition  of Matthew's
broadened its line of products and, therefore, enhanced its earnings capability.
However, due to the competitive nature of the snack food industry, management is
unable to assess  whether  such  increases  within  the Snack  Foods  Group will
continue to be realized.

Gross  Profit:  Gross profit of $191.7  million in fiscal 1997  increased  $15.5
million or 8.8 percent  from $176.2  million in fiscal  1996.  This  increase is
attributable to improved margins in all of the business units.

The increase in gross profit was benefited by improved/increased  pricing at the
CBF  business  unit.  As  highlighted  under "Short and  Long-Term  Trends," the
vegetable and fruit portions of the Cooperative's  business can be positively or
negatively  impacted by the  national  crop  yields.  The status of the national
supply  situation   controls  pricing.   During  fiscal  1997,  crop  yields  of
commodities in markets in which the Cooperative  operates were below that of the
prior year and,  therefore,  pricing  levels within the  commodities  markets in
which the Cooperative competes were increased. The increase in pricing favorably
impacted gross profit by $9.5 million.

<PAGE>
                                                                 
Nalley, which in the prior year experienced extremely high start-up costs on its
new salad dressing line, has managed through those issues and has  significantly
improved  margins.   Operating  improvements  made  at  Nalley,   primarily  the
elimination  of start-up  costs on the new salad  dressing  line,  reductions in
manufacturing  variances,  and reductions in promotional expenses improved gross
profit by $4.0 million.

Increased  sales from the Snack Foods  Group also  improved  profitability.  The
increase in sales within the Snack Foods Group  contributed an increase to gross
profit of $1.5 million.

Selling,  Administrative,  and General Expenses:  Selling,  administrative,  and
general  expenses have  decreased  $6.5 million as compared with the prior year.
This decrease is net of the inclusion of expenses  (approximately  $5.6 million)
relating  to the  Company's  incentive  program.  Payments  under the  incentive
programs in fiscal 1997 are attributable to the significantly improved earnings.
The net decrease is  attributable  to a $5.8 million  decrease in selling  ($1.7
million),  advertising  ($1.0  million),  and trade  promotions  expenses  ($3.1
million).  These impacts were primarily  noted at Nalley's.  Reductions in other
administrative   expenses   accounted  for  $10.5  million  and  were  primarily
attributable  to benefits from the  restructuring  initiative that began late in
fiscal 1996. These initiatives  included the consolidation of the administrative
functions at CBF and the sale of Finger Lakes Packaging.  In addition, in fiscal
1996,  selling,  administrative,  and  general  expenses  were  offset by a $4.4
million  income  adjustment  related to a reduction in the amount of CMV paid to
the Cooperative members.

Gain on Sale of  Finger  Lakes  Packaging:  On  October  9,  1996,  the  Company
completed the sale of Finger Lakes Packaging to Silgan  Containers  Corporation,
an indirect,  wholly-owned subsidiary of Silgan Holdings, Inc., headquartered in
Stamford,  Connecticut.  A gain of approximately  $3.6 million was recognized on
this disposal.  The Company  received  proceeds of  approximately  $30.0 million
which were  applied to Bank debt.  The  transaction  also  included a  long-term
supply agreement.

Interest  Expense:  Interest  expense  decreased $5.5 million or 13.1 percent to
$36.5 million in fiscal 1997 from $42.0 million in fiscal 1996. This improvement
resulted from both the inventory  reduction  and  cash-flow-management  programs
initiated in fiscal 1996. In addition, debt was reduced by the proceeds from the
sale of  Finger  Lakes  Packaging,  the  canned  vegetable  business,  and  idle
facilities.

Provision for Taxes:  The provision  for taxes  increased  $18.6 million to $5.5
million  in fiscal  1997  from a $13.1  million  benefit  in  fiscal  1996.  The
Cooperative's  effective  tax rate in  fiscal  1997 was 40.6  percent  which was
impacted by the net proceeds distributed to members and the non-deductibility of
goodwill. The Cooperative's tax benefit in fiscal 1996 was favorably impacted by
tax benefits resulting from the prior year's exempt status. A further discussion
of tax matters is included at NOTE 6 to the "Notes to the Consolidated Financial
Statements."

Cumulative Effect of a Change in Accounting: Effective June 30, 1996, accounting
procedures were changed to include in prepaid expenses and other current assets,
manufacturing  spare parts previously  charged  directly to expense.  Management
believes  this change is  preferable  because it  provides a better  matching of
costs with related revenues when evaluating  interim financial  statements.  The
favorable  cumulative effect of the change (net of income taxes of $1.1 million)
was $4.6 million.  Pro forma amounts for the cumulative effect of the accounting
change  on  prior  periods  are not  determinable  due to the  lack of  physical
inventory  counts  required to establish  quantities  at the  respective  dates.
Management does not believe that the difference in accounting  methodologies for
spare  parts  had  any  material  impact  on the  Company's  historic  financial
statements.

                         LIQUIDITY AND CAPITAL RESOURCES

The following  discussion  highlights the major  variances in the  "Consolidated
Statement  of Changes in Cash  Flows"  included  in the  consolidated  financial
statements of Pro-Fac,  included  elsewhere herein,  for fiscal 1998 compared to
fiscal 1997.

Net cash provided by operating activities decreased in fiscal 1998 primarily due
to an increase in inventory of  approximately  $25.7  million.  This increase is
primarily  due to:  (1) an  increase  of $6.0  million in  inventory  to support
additional business regarding the Sam's national club stores as described below;
(2) an increase of $2.0 million of inventory  associated with the acquisition of
DelAgra;  and (3) the  impact  of the crop and  yields  resulting  from the 1997
growing  season.  Such crop size and  yields  resulted  in an  increased  supply
throughout the industry.  Accordingly,  sales volume was negatively  impacted in
the second half of the year.  Management  has  formulated a plan to reduce these
levels during the first half of fiscal 1999.  See further  discussion at "Short-
and Long-Term Trends."

<PAGE>
                                                                
In addition, during October of 1997, the Cooperative became the sole supplier of
frozen  vegetables  for the Sam's  national club stores.  The executed  contract
extends for a two-year  period and  required  an $11.0  million  prepayment  for
volume discounts.  Due to the time frame required for the incumbent  supplier to
exit these operations and for the Company to implement full  distribution,  this
contract did not significantly impact fiscal 1998 earnings.  However, management
anticipates  this  arrangement  will have a  favorable  impact  on  fiscal  1999
earnings; although, there can be no assurance it will do so.

An offsetting  increase in cash provided by operating  activities  resulted from
the  changes in  accounts  payable  and  accrued  expenses  due to the timing of
liquidation.

Net cash  provided by investing  activities  decreased  significantly  in fiscal
1998,  primarily  due to the sales in fiscal 1997 of Finger Lakes  Packaging,  a
portion of the canned vegetable business,  the Georgia  distribution center, and
several idle facilities.  In fiscal 1998 the only significant disposal consisted
of the sale of the distribution  center in Coloma,  Michigan.  All proceeds from
asset sales were applied to Bank debt in accordance with the terms of the Credit
Agreement.  In addition, in fiscal 1998,  acquisitions  accounted for the use of
$7.4 million of investing  cash flow.  These  proceeds were utilized to purchase
DelAgra  Corporation of Bridgeville,  Delaware and C&O  Distributing  Company of
Canton,  Ohio. The purchase of property,  plant, and equipment in both years was
for general operating purposes.

Financing  activities used $3.8 million of cash in fiscal 1998 compared to using
$104.2 million in cash for fiscal 1997.  Cash used in fiscal 1997 included $97.9
million of debt  repayment  which resulted from the cash provided by the sale of
certain assets during the year.

Borrowings:  Under the Cooperative's Credit Agreement with the Bank, Agrilink is
able to  borrow up to $82.0  million  for  working  capital  purposes  under the
Seasonal  Facility,  subject to a borrowing  base  limitation,  and obtain up to
$18.0 million in aggregate face amount of letters of credit pursuant to a Letter
of Credit  Facility.  The  borrowing  base is  defined  as the lesser of (i) the
available  line and (ii) the sum of 60 percent of eligible  accounts  receivable
plus 50 percent of eligible inventory.

The Cooperative  believes that the cash flow generated by its operations and the
amounts  available under the Seasonal  Facility should be sufficient to fund its
working capital needs,  fund its capital  expenditures  and service its debt for
the foreseeable future.

As of June 27, 1998, (i) cash borrowings outstanding under the Seasonal Facility
were zero and (ii) additional  availability under the Seasonal  Facility,  after
taking into account the amount of the  borrowing  base,  was $82.0  million.  In
addition to its seasonal  financing,  as of June 27, 1998, the  Cooperative  had
$39.1 million available for long-term borrowings under the Term Loan Facility.

The Credit  Agreement  and  Indenture  requires  that Pro-Fac and Agrilink  meet
certain  financial  tests and ratios and comply with certain other  restrictions
and  limitations.  As of June 27, 1998,  Pro-Fac and Agrilink are in  compliance
with all such covenants, restrictions and limitations.

To complete the Dean Foods acquisition, the Cooperative will incur a significant
amount of new borrowings.  Management  anticipates  that the acquisition will be
financed  through  a  combination  of bank  and  subordinated  debt.  Management
believes the combined  activities of the two  businesses  will provide  adequate
cash flow to service debt.

Capital  Expenditures:  The Company  anticipates  that capital  expenditures for
fiscal years 1999 and 2000,  including  capital  expenditures  relating to DFVC,
will be  approximately  $25.0 million per annum.  The Company believes that cash
flow from operations and borrowings  under bank facilities will be sufficient to
meet its liquidity requirements for the foreseeable future.

Short- and  Long-Term  Trends:  Throughout  fiscal 1998 and 1997 the Company has
focused on the Company's core  businesses and growth  opportunities.  A complete
description of the acquisition and disposal activities  completed is outlined at
NOTE 3 to the "Notes to Consolidated Financial Statements."

In  addition,  on July 27,  1998,  the Company  announced  that it had reached a
definitive  agreement  with  Dean  Foods  Company  ("Dean")  of  Franklin  Park,
Illinois,  to acquire Dean's vegetable  operations which includes the nationally
known Birds Eye brand and Dean's  Freshlike  and VegAll  brands.  The Dean Foods
Vegetable  Company  ("DFVC")  reported  revenues of $620.6 million and operating
earnings of $42.4  million for fiscal  1998.  DFVC employs  approximately  2,000
full-time employees in 13 plants,  located in California,  Minnesota,  New York,
Texas, and Wisconsin. The acquisition is expected to close in September 1998 and
will be accounted for as a purchase.

<PAGE>
The vegetable and fruit  portions of the  business,  which  includes CBF, can be
positively  or  negatively  affected by weather  conditions  nationally  and the
resulting impact on crop yields.  Favorable weather  conditions can produce high
crop yields and an  oversupply  situation.  This  results in  depressed  selling
prices and reduced  profitability  on the  inventory  produced  from that year's
crops.  Excessive  rain or drought  conditions can produce low crop yields and a
shortage  situation.  This  typically  results  in  higher  selling  prices  and
increased  profitability.  While the  national  supply  situation  controls  the
pricing,  the supply can differ regionally because of variations in weather. The
crop and  yields  resulting  from the 1997  growing  season has  resulted  in an
increased supply throughout the industry. Accordingly,  pricing and sales volume
have been negatively impacted in the third and fourth quarters of fiscal 1998.

New Credit Facility: In connection with the acquisition of DFVC, the Company has
received a commitment  letter from a bank to provide a new credit  facility (the
"New  Credit  Facility"),  which is  expected  to  consist  of a $200.0  million
revolving credit facility (the "Revolving Credit Facility") and a $500.0 million
term loan facility (the "Term Loan  Facility").  Such  commitment,  however,  is
subject to a number of conditions, including the execution and delivery of a New
Credit Facility agreement satisfactory to the lender.

The Term Loan  Facility  is  expected  to be  comprised  of a term A facility of
$150.0  million (the "Term Loan A"), which will have a maturity of five years, a
term B facility of $175.0 million (the Term Loan B"), which will have a maturity
of six years, and a term C facility of $175.0 million (the "Term Loan C"), which
will have a maturity of seven years.  The Revolving  Credit Facility will have a
maturity of five years.

The New Credit  Facility will bear  interest,  at the Company's  option,  at the
Administrative  Agent's  alternate  base  rate  or the  reserve-adjusted  London
Interbank Offered Rate ("LIBOR") plus, in each case,  applicable margins of: (i)
in the case of alternate  base rate loans,  (x) 1.00  percent for the  Revolving
Credit  Facility and Term Loan A, (y) 1.75 percent for Term Loan B, and (z) 2.00
percent for Term Loan C; and (ii) in the case of LIBOR  loans,  (x) 2.25 percent
for Revolving Credit Facility and Term Loan A, (y) 2.75 percent for Term Loan B,
and (z) 3.00  percent  for Term  Loan C. In  addition,  the  Company  will pay a
commitment  fee  calculated  at a rate of 0.50  percent  per  annum on the daily
average unused commitment under the Revolving Credit Facility.

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

Other  Matters:  Restructuring:  During the fourth  quarter of fiscal 1996,  the
Company initiated a corporate-wide  restructuring  program.  Approximately  $4.0
million of the restructuring  charge comprised  employee  termination  benefits.
There were no noncash  write-offs  included  in the  fiscal  1996  restructuring
charge. The cost of the strategic  consulting  activities was liquidated through
payment in fiscal 1996. The $4.0 million  reserve for employee  terminations  is
being  liquidated  in accordance  with  severance  agreements  reached with such
employees.  During fiscal 1997,  approximately  $2.0 million of this reserve was
liquidated. During 1998, all remaining material amounts were liquidated.

Year 2000 and Information Services Reorganization: A full inventory and analysis
of business  applications  and related  software was  performed  and the Company
determined that it will be required to modify or replace certain portions of its
software  so that  its  computer  systems  will be Year  2000  compliant.  These
modifications  and  replacements  are  being  and  will  continue  to be made in
conjunction with the Company's overall information systems initiatives. No major
delay in these initiatives is anticipated.

In  addition,  the Company is  contacting  non-IT  vendors to ensure that any of
their products that are currently in use can adequately  deal with the change in
century. Areas being addressed include full reviews of manufacturing  equipment,
telephone  and voice  mail  systems,  security  systems,  and other  office/site
support  systems.  Based upon preliminary  information,  the costs of addressing
potential  problems  are not expected to have a material  adverse  impact on the
Company's  financial  position,  results of operations,  or cash flows in future
periods.  Accordingly, the cost of the project is being funded through operating
cash flows.

The Company has initiated formal  communications with significant  suppliers and
customers to determine  the extent to which the Company is  vulnerable  to those
third parties' failure to remediate their own Year 2000 issues.  However,  there
can be no guarantee  that the systems of other  companies on which the Company's
systems rely will be timely  converted,  or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems,  would
not have material adverse effect on the Company.  Accordingly, the Company plans
to devote the necessary resources to resolve all significant Year 2000 issues in
a timely manner.

<PAGE>
The Company  expects to complete the Year 2000 project  during the fall of 1999.
Based on the progress made to date (which  includes  compliant  systems in place
and in  production),  the  Company  does not believe  any  material  exposure to
significant  business  interruption  exists.  In the event some of the remaining
elements of the Company's Year 2000 compliance  project are delayed,  procedures
have been addressed to ensure alternative workaround initiatives are completed.

On June 19,  1997,  Systems & Computer  Technology  Corporation  ("SCT") and the
Company announced a major outsourcing  services and software agreement effective
June 30, 1997. The ten-year  agreement,  valued at approximately $50 million, is
for SCT's OnSite  outsourcing  services,  ADAGE ERP software and  implementation
services and assistance in solving the Year 2000 issue.

Product Recall:  In February 1997, the Company issued a nationwide recall of all
"Tropic Isle" brand fresh frozen  coconut  produced in Costa Rica because it has
the potential to be contaminated with Listeria monocytogenes,  an organism which
can cause serious and sometimes  fatal  infections in small  children,  frail or
elderly people,  and others with weakened  immune  systems.  The total estimated
cost of the product  recall was $0.5 million.  This amount was  recognized as an
expense in fiscal 1997. The Company  received  closure of this matter by the FDA
on March 11,  1998.  Should  any  material  costs  associated  with this  recall
develop, it is anticipated that such amounts will be covered under the Company's
insurance policies.

Favorable Tax Ruling and  Developments:  In August of 1993, the Internal Revenue
Service issued a  determination  letter which concluded that the Cooperative was
exempt  from  federal  income tax to the extent  provided  by Section 521 of the
Internal  Revenue Code,  "Exemption of Farmers'  Cooperative from Tax." Unlike a
nonexempt  cooperative,  a  tax-exempt  cooperative  is  entitled to deduct cash
dividends it pays on its capital  stock in  computing  its taxable  income.  The
exempt  status was  retroactive  to fiscal year 1986. In  conjunction  with this
ruling,  the Cooperative  filed for tax refunds for fiscal years 1986 to 1992 in
the amount of approximately  $8.8 million and interest payments of approximately
$5.2  million.  A  refund  amount  of $10.1  million  for tax and  interest  was
reflected in the financial statements of the Cooperative as of June 24, 1995. In
addition,  a refund  amount  of $3.9  million  for tax and  interest  have  been
reflected in the financial  statements of the  Cooperative  as of June 29, 1996.
The refund and  interest for the fiscal years 1986 to 1991 was received in March
of 1996.  The refund and  interest  for fiscal year 1992 was received in June of
1997.

As a result of the Acquisition, the Cooperative's exempt status has ceased.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
    ITEM                                                                                                                     Page

<S>                                                                                                                           <C>  
Pro-Fac Cooperative, Inc. and Consolidated Subsidiary:
   Management's Responsibility for Financial Statements....................................................................   24
   Report of Independent Accountants.......................................................................................   25
   Consolidated Financial Statements:
     Consolidated Statement of Operations and Net Proceeds for the years ended June 27, 1998, June 28, 1997,
       and June 29, 1996...................................................................................................   26
     Consolidated Balance Sheet for the years ended June 27, 1998 and June 28, 1997........................................   27
     Consolidated Statement of Cash Flows for the years ended June 27, 1998, June 28, 1997 and June 29, 1996...............   28
     Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock
       for the years ended June 27, 1998, June 28, 1997, and June 29, 1996.................................................   30
     Notes to Consolidated Financial Statements............................................................................   31
     Selected Quarterly Financial Data.....................................................................................   45
</TABLE>

<PAGE>













              MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS




Management is  responsible  for the  preparation  and integrity of the financial
statements  and related notes which begins on the page  following the "Report of
Independent Accountants." These statements have been prepared in accordance with
generally accepted accounting principles.

The Company's  accounting  systems include internal controls designed to provide
reasonable  assurance of the reliability of its financial records and the proper
safeguarding  and use of its assets.  Such  controls are  monitored  through the
internal and external audit programs.

The  financial  statements  have been  audited  by  PricewaterhouseCoopers  LLP,
independent  accountants,  who were responsible for conducting their examination
in accordance with generally accepted auditing standards. Their resulting report
is on the subsequent page.

The  Board  of  Directors  exercises  its  responsibility  for  these  financial
statements.  The independent  accountants  and internal  auditors of the Company
have full and free access to the Board.  The Board  periodically  meets with the
independent  accountants and the internal auditors,  without management present,
to discuss accounting, auditing and financial reporting matters.



/s/ Dennis M. Mullen                             /s/ Earl L. Powers
    Dennis M. Mullen                                Earl L. Powers
    President and                                   Vice President Finance and
    Chief Executive Officer                         Chief Financial Officer
    AGRILINK FOODS, INC.                            AGRILINK FOODS, INC.

                                                    Vice President Finance and
                                                    Assistant Treasurer
                                                    PRO-FAC COOPERATIVE, INC.



/s/ Stephen R. Wright
    Stephen R. Wright
    Executive Vice President Agriculture
    AGRILINK FOODS,. INC.

    General Manager PRO-FAC COOPERATIVE, INC.
    July 31, 1998


<PAGE>














                        Report of Independent Accountants


To the Shareholders and
Board of Directors of
Pro-Fac Cooperative, Inc.


In our opinion,  the consolidated  financial  statements  listed under Item 8 of
this Form 10-K present fairly, in all material respects,  the financial position
of Pro-Fac  Cooperative,  Inc. and its  subsidiary at June 27, 1998 and June 28,
1997,  and the results of their  operations and their cash flows for each of the
three fiscal years ended June 27, 1998, in conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Cooperative'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.

As discussed in NOTE 1 to the financial statements,  the Cooperative changed its
method of accounting for spare parts in 1997.

Our audits of the  consolidated  financial  statements also included an audit of
the financial  statement schedule listed in the accompanying index and appearing
under  Item14  of this Form  10-K.  In our  opinion,  this  financial  statement
schedule  presents fairly, in all material  respects,  the information set forth
therein for the fiscal  years ended June 27, 1998,  June 28, 1997,  and June 29,
1996  when  read  in  conjunction  with  the  related   consolidated   financial
statements.




PRICEWATERHOUSECOOPERS LLP


/s/ PricewaterhouseCoopers LLP
    Rochester, New York
    July 31, 1998



<PAGE>


                              FINANCIAL STATEMENTS


Pro-Fac Cooperative, Inc. and Consolidated Subsidiary - Agrilink Foods, Inc.

<TABLE>
Consolidated Statement of Operations and Net Proceeds
(Dollars in Thousands)
<CAPTION>

                                                                                               Fiscal Years Ended
                                                                                   June 27,         June 28,          June 29,
                                                                                     1998             1997              1996

<S>                                                                               <C>               <C>               <C>     
Net sales                                                                         $719,665          $730,823          $739,094
Cost of sales                                                                     (524,082)         (539,081)         (562,926)
                                                                                  --------          --------          --------
Gross profit                                                                       195,583           191,742           176,168
Selling, administrative, and general expenses                                     (141,739)         (145,214)         (151,671)
Income from Great Lakes Kraut Company                                                1,893                 0                 0
Gain on sale of Finger Lakes Packaging                                                   0             3,565                 0
Restructuring charge                                                                     0                 0            (5,871)
Interest income                                                                          0                 0               770
                                                                                  --------          --------          --------
Operating income                                                                    55,737            50,093            19,396
Interest expense                                                                   (30,767)          (36,473)          (41,998)
                                                                                  --------          --------          --------
Pretax income/(loss) before dividends and allocation of net proceeds                24,970            13,620           (22,602)
Tax (provision)/benefit                                                             (7,840)           (5,529)           13,071
                                                                                  --------          --------          --------
Income/(loss) before cumulative effect of an accounting change, dividends,
   and allocation of net proceeds                                                   17,130             8,091            (9,531)
Cumulative effect of an accounting change                                                0             4,606                 0
                                                                                  --------          --------          --------
Net income/(loss)                                                                 $ 17,130          $ 12,697          $ (9,531)
                                                                                  ========          ========          ========

Allocation of Net Proceeds:
   Net income/(loss)                                                              $ 17,130          $ 12,697          $ (9,531)
   Dividends on common and preferred stock                                          (6,328)           (5,503)           (8,993)
                                                                                  --------          --------          --------
   Net proceeds/(deficit)                                                           10,802             7,194           (18,524)
   Allocation (to)/from earned surplus                                              (4,662)           (3,661)           18,524
                                                                                  --------          --------          --------
   Net proceeds available to members                                              $  6,140          $  3,533          $      0
                                                                                  ========          ========          ========

Allocation of net proceeds available to members:
   Payable to members currently (25% of qualified proceeds
     available to members in fiscal 1998 and 1997, respectively)                  $  1,535          $    883          $      0

   Allocated to members but retained by the Cooperative:
     Qualified retains                                                               4,605             2,650                 0
                                                                                  --------          --------          --------
     Net proceeds available to members                                            $  6,140          $  3,533          $      0
                                                                                  ========          ========          ========

<FN>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiary - Agrilink Foods, Inc.
Consolidated Balance Sheet
(Dollars in Thousands)<CAPTION>
                                                      ASSETS
                                                                                                       June 27, 1998   June 28, 1997
<S>                                                           <C>               <C>                      <C>             <C>  
Current assets:
   Cash and cash equivalents                                                                             $  5,049        $  2,838
   Accounts receivable, trade, less allowances for bad debts of $774 and $970, respectively                55,046          48,661
   Accounts receivable, other                                                                               3,575           2,795
   Current deferred tax assets                                                                              4,849          12,312
   Inventories -
     Finished goods                                                                                       111,153          87,904
     Raw Materials and supplies                                                                            30,433          27,001
                                                                                                         --------        --------  
       Total inventories                                                                                  141,586         114,905
                                                                                                         --------        --------
   Current investment in Bank                                                                               1,994             946
   Prepaid manufacturing expense                                                                            8,404           8,265
   Prepaid expenses and other current assets                                                               12,989           6,323
                                                                                                         --------        --------
       Total current assets                                                                               233,492         197,045
Investment in Bank                                                                                         22,377          24,321
Investment in Great Lakes Kraut Company                                                                     6,584               0
Property, plant, and equipment, net                                                                       194,615         217,923
Assets held for sale at net realizable value                                                                2,662           3,259
Goodwill and other intangible assets, less accumulated amortization of
  $13,634 and $10,053, respectively                                                                        94,744          96,429
Other assets                                                                                               12,234           7,700
                                                                                                         --------        --------
       Total assets                                                                                      $566,708        $546,677
                                                                                                         ========        ========
                            LIABILITIES AND SHAREHOLDERS' AND MEMBERS' CAPITALIZATION

Current liabilities:
   Current portion of obligations under capital leases                                                   $    256        $    558
   Current portion of long-term debt                                                                        8,071           8,075
   Accounts payable                                                                                        70,158          49,256
   Income taxes payable                                                                                     4,046           5,672
   Accrued interest                                                                                         8,559           8,663
   Accrued employee compensation                                                                            8,598          11,063
   Other accrued expenses                                                                                  19,065          21,956
   Dividends payable                                                                                            0              61
   Amounts due members                                                                                     20,636          15,791
                                                                                                         --------        --------
       Total current liabilities                                                                          139,389         121,095
Obligations under capital leases                                                                              503             817
Long-term debt                                                                                             69,937          69,829
Senior subordinated notes                                                                                 160,000         160,000
Deferred income tax liabilities                                                                            32,457          39,591
Other non-current liabilities                                                                              23,053          22,682
                                                                                                         --------        --------
       Total liabilities                                                                                  425,339         414,014
                                                                                                         --------        --------
Commitments and contingencies
Class B cumulative  redeemable preferred stock,  liquidation  preference $10 per
   share, authorized 500,000 shares; issued and outstanding 27,043
   and 31,435, respectively                                                                                   270             315
Common stock, par value $5, authorized - 5,000,000 shares

                                                              June 27, 1998    June 28, 1997
                                                              -------------    -------------
   Shares issued                                               1,825,863        1,788,815
   Shares subscribed                                             160,629           54,557
                                                               ---------        --------- 
       Total subscribed and issued                             1,986,492        1,843,372
   Less subscriptions receivable in installments                (160,629)         (54,557)
                                                               ---------        ---------
      Total issued and outstanding                             1,825,863        1,788,815                   9,129           8,944
                                                               =========        =========
Shareholders' and members' capitalization:
   Retained earnings allocated to members                                                                  29,765          31,920
   Non-qualified allocation to members                                                                      2,660           2,960
   Minimum pension liability adjustment                                                                      (608)              0
   Non-cumulative Preferred Stock, par value $25, authorized - 5,000,000
     shares; issued and outstanding - 45,001 and 53,797, respectively                                       1,125           1,345
   Class A Cumulative Preferred Stock, liquidation preference $25 per share;
     authorized 49,500,000 shares; issued and outstanding 3,503,199
     and 3,215,709, respectively                                                                           87,580          80,393
   Earned surplus                                                                                          11,448           6,786
                                                                                                         --------        --------
       Total shareholders' and members' capitalization                                                    131,970         123,404
                                                                                                         --------        --------
       Total liabilities and capitalization                                                              $566,708        $546,677
                                                                                                         ========        ========
<FN>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative Inc. and Consolidated Subsidiary - Agrilink Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
                                                                                             Fiscal Years Ended
                                                                          June 27, 1998          June 28, 1997        June 29, 1996
<S>                                                                         <C>                    <C>                  <C>      
Cash Flows from Operating Activities:
   Net income/(loss)                                                        $ 17,130               $ 12,697             $ (9,531)
   Amount payable to members currently                                        (1,535)                  (883)                   0
   Adjustments to reconcile net income/(loss) to net cash provided by
     operating activities:
       Restructuring and net (gain)/loss from disposs                              0                 (3,565)               5,871
       Cumulative effect of an accounting change                                   0                 (4,606)                   0
       Amortization of goodwill and other intangibles                          3,581                  4,092                3,422
       Amortization of debt issue costs                                          800                    800                  800
       Depreciation                                                           18,009                 22,680               26,081
       Provision/(benefit) for deferred taxes                                    752                  4,557               (8,212)
       Provision for losses on accounts receivable                                 0                    445                  528
       Equity in undistributed earnings of the Bank                             (715)                (1,143)              (1,532)
       Change in assets and liabilities:
         Accounts receivable                                                  (6,762)                (3,983)              13,482
         Inventories                                                         (25,654)                (1,636)              33,347
         Income taxes payable/(refundable)                                    (1,626)                 2,272               12,395
         Accounts payable and accrued expenses                                15,613                   (922)             (15,027)
         Amounts due to members                                                4,845                  7,033               (5,935)
         Other assets and liabilities                                        (11,360)                   530               (1,385)
                                                                            --------               --------             --------
Net cash provided by operating activities                                     13,078                 38,368               54,304
                                                                            --------               --------             --------
Cash Flows from Investing Activities:
   Purchase of property, plant, and equipment                                (14,056)               (13,691)             (19,453)
   Proceeds from disposals                                                    12,794                 68,716                4,408
   Proceeds from sales of idle facilities                                          0                  4,465                  597
   Proceeds from Investment in Bank                                            1,611                    315                    0
   Cash paid for acquisition                                                  (7,423)                     0               (5,785)
                                                                            --------               --------             --------
Net cash provided by/(used in) investing activities                           (7,074)                59,805              (20,233)
                                                                            --------               --------             --------
Cash Flows from Financing Activities:
   Proceeds from issuance of long-term debt                                   11,180                      0                5,400
   Payments on long-term debt                                                 (8,076)               (97,854)             (25,056)
   Payments on capital leases                                                   (616)                  (503)                (825)
   Issuance of stock, net of repurchases                                         140                   (260)                 124
   Cash paid in lieu of fractional shares                                         (9)                     0                   (6)
   Cash portion of non-qualified conversion                                      (84)                   (88)                (122)
   Cash dividends paid                                                        (6,328)                (5,503)              (8,865)
                                                                            --------               --------             --------
Net cash used in financing activities                                         (3,793)              (104,208)             (29,350)
                                                                            --------               --------             --------
Net change in cash and cash equivalents                                        2,211                 (6,035)               4,721
Cash and cash equivalents at beginning of period                               2,838                  8,873                4,152
                                                                            --------               --------             --------
Cash and cash equivalents at end of period                                  $  5,049               $  2,838             $  8,873
                                                                            ========               ========             ========

Supplemental Disclosure of Cash Flow Information:
   Cash paid during the year for :
     Interest (net of amount capitalized)                                   $ 30,319               $ 36,907             $ 41,508
                                                                            ========               ========             ========
     Income taxes, net                                                      $  8,714               $ (1,300)            $ (9,206)
                                                                            ========               ========             ========

     Acquisition of DelAgra
       Accounts receivable                                                  $    403               $      0             $      0
       Inventories                                                             3,212                      0                    0
       Prepaid expenses and other current assets                                  81                      0                    0
       Property, plant, and equipment                                          1,842                      0                    0
       Goodwill                                                                1,508                      0                    0
       Other accrued expenses                                                   (433)                     0                    0
                                                                            --------               --------             --------
                                                                            $  6,613               $      0             $      0
                                                                            ========               ========             ========

     Acquisition of C&O Distributing Company:
       Property, plant, and equipment                                       $     54               $      0             $      0
       Goodwill                                                                  756                      0                    0
                                                                            --------               --------             --------
                                                                            $    810               $      0             $      0
                                                                            ========               ========             ========
     Investment in Great Lakes Kraut Company
       Inventories                                                          $  2,175               $      0             $      0
       Prepaid expenses and other current assets                                 409                      0                    0
       Property, plant, and equipment                                          6,966                      0                    0
       Other accrued expenses                                                    (62)                     0                    0
                                                                            --------               --------             --------
                                                                            $  9,488               $      0             $      0
                                                                            ========               ========             ========
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiary - Agrilink Foods, Inc.
Consolidated Statement of Cash Flows (Continued)
(Dollars in Thousands)
<CAPTION>
                                                                                             Fiscal Years Ended
                                                                            Fiscal 1998           Fiscal 1997          Fiscal 1996
     <S>                                                                      <C>                    <C>                  <C>
     Acquisition of Packer Foods and Matthews Candy Co.:
       Accounts receivable                                                    $    0                 $    0               $1,282
       Inventories                                                                 0                      0                3,902
       Prepaid expenses and other current assets                                   0                      0                  270
       Property, plant and equipment                                               0                      0                6,044
       Goodwill                                                                    0                      0                  493
       Deferred tax asset                                                          0                      0                  264
       Accounts payable                                                            0                      0               (4,954)
       Other accrued expenses                                                      0                      0                 (418)
       Other non-current liabilities                                               0                      0               (1,098)
                                                                              ------                 ------               ------
       Cash paid for acquisition                                              $    0                 $    0               $5,785
                                                                              ======                 ======               ======

Supplemental Schedule of Non-Cash Investing and Financing Activities:
     Conversion of retains to preferred stock                                 $6,967                 $3,275               $2,379
                                                                              ======                 ======               ======
     Net proceeds allocated to members but retained by the Cooperative        $4,605                 $2,650               $    0
                                                                              ======                 ======               ======
     Capital lease obligations incurred                                       $    0                 $  206               $  113
                                                                              ======                 ======               ======
     Notes from Nalley Canada Ltd. forgiven in acquisition                    $    0                 $4,986               $    0
                                                                              ======                 ======               ======
<FN>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</FN>
</TABLE>
<PAGE>


<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiary - Agrilink Foods, Inc.
Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock
(Dollars in Thousands)
<CAPTION>

                                                                                             Fiscal  Years Ended
                                                                                 June 27,         June 28,        June 29,
                                                                                   1998             1997            1996

<S>                                                                             <C>              <C>             <C>     
Retained earnings allocated to members:
Qualified retains:
   Balance at beginning of period                                               $ 31,920         $ 32,318        $ 34,250
   Net proceeds allocated to members                                               4,605            2,650               0
   Converted to preferred stock                                                   (6,751)          (3,048)         (1,926)
   Cash paid in lieu of fractional shares                                             (9)               0              (6)
                                                                                --------         --------        --------  
   Balance at end of period                                                       29,765           31,920          32,318
                                                                                --------         --------        --------  

Non-qualified retains:
   Balance at beginning of period                                                  2,960            3,275           3,851
   Distribution of 1992, 1991, and 1990 non-qualified retains:
     Cash paid                                                                       (84)             (88)           (122)
     Converted to preferred stock                                                   (216)            (227)           (454)
                                                                                --------         --------        --------  
   Balance at end of period                                                        2,660            2,960           3,275
                                                                                --------         --------        --------  
Total retains allocated to members at end of period                               32,425           34,880          35,593
                                                                                --------         --------        -------- 

Non-cumulative Preferred Stock:
   Balance at beginning of period                                                  1,345            2,645          76,083
   Conversion to cumulative preferred stock                                         (220)          (1,300)        (73,438)
                                                                                --------         ---------       --------  
   Balance at end of period                                                        1,125            1,345           2,645
                                                                                --------         ---------       --------

Cumulative preferred stock:
   Balance at beginning of period                                                 80,393           75,818               0
   Converted from Non-cumulative Preferred Stock                                     220            1,300          73,438
   Converted from non-qualified retains                                              216              227             454
   Converted from qualified retains                                                6,751            3,048           1,926
                                                                                --------         --------        -------- 
   Balance at end of period                                                       87,580           80,393          75,818
                                                                                --------         --------        -------- 

Earned surplus (unallocated and apportioned):
   Balance at beginning of period                                                  6,786            3,125          21,649
   Allocation to/(from) earned surplus                                             4,662            3,661         (18,524)
   Minimum pension liability adjustment                                             (608)               0               0
                                                                                --------         --------        --------  
   Balance at end of period                                                       10,840            6,786           3,125
                                                                                --------         --------        --------  
Total shareholders' and members' capitalization                                 $131,970         $123,404        $117,181
                                                                                ========         ========        ======== 

Redeemable stock:
Class B cumulative preferred stock:
   Balance at beginning of period                                               $    315         $    334        $      0
   Issued/(repurchased), net                                                         (45)             (19)            334
                                                                                --------         --------        -------- 
   Balance at end of period                                                     $    270         $    315        $    334
                                                                                ========         ========        ========

Common stock:
   Balance at beginning of period                                               $  8,944         $  9,185        $  9,395
   (Repurchased)/issued, net                                                         185             (241)           (210)
                                                                                --------         --------        --------  
   Balance at end of period                                                     $  9,129         $  8,944        $  9,185
                                                                                ========         ========        ========  

<FN>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</FN>
</TABLE>


<PAGE>


                                                     
  PRO-FAC COOPERATIVE, INC. AND CONSOLIDATED SUBSIDIARY - AGRILINK FOODS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF ACCOUNTING POLICIES

Pro-Fac  Cooperative,  Inc.  ("Pro-Fac" or the "Cooperative") is an agricultural
cooperative  which  processes and markets crops grown by its members through its
wholly-owned subsidiary Agrilink Foods, Inc. ("Agrilink" or the "Company").

Agrilink is a producer and marketer of processed food products, including canned
and frozen fruits and vegetables, canned desserts and condiments, fruit fillings
and toppings, canned chilies and stews, salad dressings, pickles, peanut butter,
and snack foods. The vegetable and fruit product lines account for approximately
49 percent of sales.  The Company's  products are primarily  distributed  in the
United States.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance  with  generally  accepted  accounting  principles,   which  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from these
estimates.

Fiscal  Year:  The Fiscal  year of Pro-Fac  ends on the last  Saturday  in June.
Fiscal 1998 and 1997 each comprised 52 weeks and fiscal 1996 comprised 53 weeks.

Consolidation: The consolidated financial statements include the Cooperative and
its  wholly-owned  subsidiary,   Agrilink,  after  elimination  of  intercompany
transactions and balances. Investments in affiliates, owned more than 20 percent
but not in  excess of 50  percent,  are  recorded  under  the  Equity  Method of
accounting.

Change in Accounting  Principle:  Effective June 30, 1996, accounting procedures
were  changed  to  include  in  prepaid   expenses  and  other  current  assets,
manufacturing  spare parts previously  charged  directly to expense.  Management
believes  this change is  preferable  because it  provides a better  matching of
costs with related revenues when evaluating  interim financial  statements.  The
favorable  cumulative effect of the change (net of income taxes of $1.1 million)
was $4.6 million.  Pro forma amounts for the cumulative effect of the accounting
change  on  prior  periods  are not  determinable  due to the  lack of  physical
inventory  counts  required to establish  quantities  at the  respective  dates.
Management does not believe that the difference in accounting  methodologies for
spare parts had any material impact on the  Cooperative's  historical  financial
statements.

Cash  and  Cash  Equivalents:  Cash  and  cash  equivalents  include  short-term
investments  with  maturities  of  three  months  or  less.  There  were no such
short-term investments at June 27, 1998 or June 28, 1997.

Inventories:  Inventories  are  stated  at the  lower of cost or  market  on the
first-in, first-out ("FIFO") method. Reserves recorded at June 27, 1998 and June
28, 1997 were $391,000 and $362,000, respectively.

Investment  in CoBank ("The  Bank"):  The  Company's  investment  in the Bank is
required as a condition of borrowing. These securities are not physically issued
by the Bank,  but the  Company  is  notified  as to their  monetary  value.  The
investment  is carried  at cost plus the  Company's  share of the  undistributed
earnings  of the  Bank  (that  portion  of  patronage  refunds  not  distributed
currently in cash).

Earnings on the Cooperative's  investment in the Bank in fiscal year 1998, 1997,
and 1996 amounted to $1,023,000, $1,633,000, and $2,188,000, respectively.

Manufacturing  Overhead:  Allocation of manufacturing overhead to finished goods
produced is on the basis of a production period; thus at the end of each period,
manufacturing  costs  incurred  by  seasonal  plants,  subsequent  to the end of
previous pack operations,  are deferred and included in the accompanying balance
sheet under the caption " Prepaid manufacturing expense." Such costs are applied
to finished goods during the next production period and recognized as an element
of costs of goods sold.

Property, Plant, and Equipment and Related Lease Arrangements:  Property, plant,
and equipment  are  depreciated  over the  estimated  useful lives of the assets
using the straight-line method, half-year convention, over 4 to 40 years.

Assets  held  for sale are  separately  classified  on the  balance  sheet.  The
recorded value represents an estimate of net realizable value.

<PAGE>

Lease arrangements are capitalized when such leases convey  substantially all of
the risks and benefits  incidental  to ownership.  Capital  leases are amortized
over either the lease term or the life of the  related  assets,  depending  upon
available purchase options and lease renewal features.

Other Assets:  Other assets are primarily  comprised of debt issuance costs. The
debt  issuance  costs  are  amortized  over the term of the  debt.  Amortization
expense incurred in fiscal 1998, 1997, and 1996 was $800,000.

Income Taxes:  Income taxes are provided on  non-patronage  income for financial
reporting purposes.  Deferred income taxes resulting from temporary  differences
between  financial  reporting  and tax reporting as well as from the issuance of
non-qualified retains are appropriately classified in the balance sheet.

Pension:  The  Company  and its  subsidiaries  have  several  pension  plans and
participate  in various  union  pension  plans  which on a combined  basis cover
substantially  all employees.  Charges to income with respect to plans sponsored
by the Company and its subsidiaries are based upon actuarially determined costs.
Pension  liabilities are funded by periodic payments to the various pension plan
trusts.

Goodwill and Other Intangibles: Goodwill and other intangible assets include the
cost in excess of the fair value of net  tangible  assets  acquired  in purchase
transactions and acquired  non-competition  agreements and trademarks.  Goodwill
and  other  intangible  assets,  stated  net of  accumulated  amortization,  are
amortized on a straight-line basis over 5 to 35 years. The Company  periodically
assesses whether there has been a permanent impairment in the value of goodwill.
This is accomplished by determining  whether the estimated,  undiscounted future
cash flows from operating activities exceed the carrying value of goodwill as of
the  assessment  date.  Should  aggregate  future  cash  flows be less  than the
carrying  value,  a writedown  would be  required,  measured  by the  difference
between the discounted future cash flows and the carrying value of goodwill.

Commodities  Options  Contracts:  In  connection  with the  purchase  of certain
commodities for anticipated manufacturing requirements, the Company occasionally
enters into  options  contracts  as deemed  appropriate  to reduce the effect of
price  fluctuations.  These  options  contracts are accounted for as hedges and,
accordingly,  gains and losses are deferred and  recognized  in cost of sales as
part of the product cost.  These activities are not significant to the Company's
operations as a whole.

Casualty  Insurance:  The  Company  is  insured  for  workers  compensation  and
automobile  liability  through a  primarily  self-insured  program.  The Company
accrues for the estimated losses from both asserted and unasserted  claims.  The
estimate  of  the  liability  for  unasserted  claims  arising  from  unreported
incidents is based on an analysis of  historical  claims  data.  The accrual for
casualty  insurance at June 27, 1998 and June 28, 1997 was $3.3 million and $2.9
million, respectively.

Earnings Per Share Data Omitted: Earnings per share amounts are not presented as
earnings  are not  distributed  to members in  proportion  to their common stock
holdings.  Earnings  (representing those earnings derived from patronage-sourced
business)  are  distributed  to members  in  proportion  to the dollar  value of
deliveries under Pro-Fac  contracts rather than based on the number of shares of
common stock held.

Environmental  Expenditures:  Environmental expenditures that pertain to current
operations   are  expensed  or   capitalized   consistent   with  the  Company's
capitalization  policy.  Expenditures  that  result from the  remediation  of an
existing  condition  caused by past operations that do not contribute to current
or  future  revenues  are  expensed.  Liabilities  are  recorded  when  remedial
activities are probable, and the cost can be reasonably estimated.

Advertising:  Production  costs of commercials  and  programming  are charged to
operations in the year first aired. The cost of other advertising  promotion and
marketing  programs  are  charged  in the  year  incurred.  Advertising  expense
incurred in fiscal 1998, 1997, and 1996 amounted to $9,878,000,  $8,736,000, and
$9,831,000, respectively.

Disclosures Abut Fair Value of Financial Instruments:  The following methods and
assumptions   were  used  by  the  Cooperative  in  estimating  the  fair  value
disclosures for financial instruments:

         Cash,  Accounts   Receivable,   Accounts  Payable,  and  Other  Accrued
         Expenses:  The carrying amount  approximates  fair value because of the
         short maturity of these instruments.


<PAGE>

         Long-Term  Investments:  The carrying value of the Company's investment
         in CoBank  was $24.4  million at June 27,  1998.  As there is no market
         price for this investment,  a reasonable  estimate of fair value is not
         possible.

         Long-Term  Debt:  The fair  value of the  Company's  long-term  debt is
         estimated  based on the  quoted  market  prices for the same or similar
         issues or on the current  rates  offered to the Company for debt of the
         same remaining maturities.

NOTE 2. AGREEMENTS WITH AGRILINK

Effective November 3, 1994, Pro-Fac acquired Agrilink.

In connection with the Acquisition, Pro-Fac sold $160.0 million of 12.25 percent
Senior  Subordinated  Notes (the  "Notes")  due 2005 and  entered  into a credit
agreement  (the "Credit  Agreement")  with the Bank,  which  provided for a term
loan, a term loan  facility,  a seasonal loan facility,  and a  letter-of-credit
facility.  All  obligations  under the Notes and the Credit  Agreement have been
guaranteed by Pro-Fac.

The contractual  relationship  between Pro-Fac and the Company is defined in the
Pro-Fac  Marketing  and  Facilitation  Agreement  (the  "Agreement").  Under the
Agreement,  the Company pays Pro-Fac the commercial market value ("CMV") for all
crops supplied by Pro-Fac.  CMV is defined as the weighted average price paid by
other commercial processors for similar crops sold under preseason contracts and
in the open  market  in the  same or  competing  market  area.  Although  CMV is
intended  to be no more than the fair  market  value of the crops  purchased  by
Agrilink,  it may be more or less than the price  Agrilink would pay in the open
market in the absence of the Agreement.

Under the Agreement, Agrilink is required to have on its Board of Directors some
persons who are neither members of nor affiliated  with Pro-Fac  ("Disinterested
Directors"),  the  number of  Disinterested  Directors  must at least  equal the
number of Directors who are members of Pro-Fac.  The volume and type of crops to
be purchased by Agrilink  under the  Agreement  are  determined  pursuant to its
annual  profit  plan,   which  requires  the  approval  of  a  majority  of  the
Disinterested  Directors  of  Agrilink.  In  addition,  in any year in which the
Company has earnings on products  which were  processed  from crops  supplied by
Pro-Fac  ("Pro-Fac  Products"),  the Company pays to Pro-Fac up to 90 percent of
such  earnings,  but in no case  more than 50  percent  of all  pretax  earnings
(before dividing with Pro-Fac) of the Company. In years in which the Company has
losses on Pro-Fac  Products,  the Company reduces the CMV it would otherwise pay
to Pro-Fac by up to 90  percent of such  losses,  but in no case by more than 50
percent of all pretax  losses  (before  dividing  with  Pro-Fac) of the Company.
Additional  patronage  income  is paid  to  Pro-Fac  for  services  provided  to
Agrilink,  including the provision of a long-term, stable crop supply, favorable
payment terms for crops and the sharing of risks in losses of certain operations
of the business.  For fiscal years ended 1998,  1997, and 1996,  such additional
patronage  income/(loss)  amounted to $12.5 million,  $10.3 million,  and $(9.0)
million,  respectively.  Under the Indentures  related to the Notes,  Pro-Fac is
required to reinvest at least 70 percent of the additional  patronage  income in
Agrilink.

The  capital  contribution  of Pro-Fac to the Company at  acquisition  primarily
included  the  cancellation  of  indebtedness  and  capital  lease  obligations.
Subsequent to the acquisition date, Pro-Fac invested an additional $29.9 million
in the Company (including reinvested Additional Patronage Income).

NOTE 3. ACQUISITIONS, DISPOSALS, AND RESTRUCTURING

Fiscal 1998 -

Nutrition Medical: Effective May 1, 1998, the Company acquired the private label
adult nutrition formula business from Nutrition Medical,  Inc. Nutrition Medical
will be paid royalty payments for two years.

Michigan Distribution Center: Effective March 31, 1998, the Company entered into
a multiyear  logistics agreement under which GATX Logistics will provide freight
management,  packaging and labeling  services,  and distribution  support to and
from production facilities owned by the Company in and around Coloma,  Michigan.
The  agreement  included  the  sale  of the  Company's  labeling  equipment  and
distribution  center.  The Company  received  proceeds of $12.6  million for the
equipment  and  facility  which  were  applied to  outstanding  bank  loans.  No
significant gain or loss occurred as a result of this transaction.

DelAgra Corp.:  Effective  March 30, 1998, the Company  acquired the majority of
assets and the business of DelAgra Corp. of Bridgeville, Delaware. DelAgra Corp.
is a producer of private label frozen vegetables.  The acquisition was accounted
for as a purchase.  The purchase price was approximately $6.9 million.  Goodwill
<PAGE>
of  approximately  $0.6  million and $0.9  million for a covenant not to compete
were  received in  conjunction  with this  transaction  These  amounts are being
amortized over 30 and 5 years, respectively.

C&O  Distributing  Company.:  Effective March 9, 1998, the Company  acquired the
majority of assets and the business of C&O Distributing Company of Canton, Ohio.
C&O  distributes  snack  products  for  Snyder of Berlin,  one of the  Company's
businesses  included  within its snack foods unit. The acquisition was accounted
for  as  a  purchase.   The  purchase  price  was  approximately  $0.8  million.
Intangibles of approximately $0.8 million were recorded in conjunction with this
transaction and are being amortized over 30 years.

Formation of New  Sauerkraut  Company:  Effective  July 1, 1997, the Company and
Flanagan Brothers,  Inc. of Bear Creek,  Wisconsin  contributed all their assets
involved in sauerkraut  production to form a new  sauerkraut  company.  This new
company,  Great Lakes Kraut  Company,  operates as a New York limited  liability
company with ownership and earnings  divided  equally between the two companies.
The joint  venture  is  accounted  for using the  Equity  Method of  accounting.
Summarized financial information of Great Lakes Kraut Company is as follows:

<TABLE>
Condensed Statement of Earnings
<CAPTION>
(Dollars in Thousands)

                                  1998

<S>                              <C>    
Net sales                        $27,620
Gross profit                     $ 7,439
Operating income                 $ 4,411
Net income                       $ 3,786
</TABLE>

<TABLE>
Condensed Balance Sheet
(Dollars in Thousands)
<CAPTION>

<S>                              <C>    
Current assets                   $10,648
Noncurrent assets                $18,884
Current liabilities              $ 6,463
Noncurrent liabilities           $ 6,261
</TABLE>

Fiscal 1997 -

Georgia Frozen  Distribution  Center: On June 27, 1997,  Americold  acquired the
Company's frozen foods distribution  center in Montezuma,  Georgia. In addition,
the two  companies  entered  into a long-term  logistics  agreement  under which
Americold will manage its facility and all frozen food transportation operations
of  Agrilink  in  Georgia  and  New  York.  The  Company  received  proceeds  of
approximately  $9.1 million  which were applied to  outstanding  Bank loans.  No
significant gain or loss occurred as a result of this transaction.

Information  Services  Reorganization:  On June 19,  1997,  Systems  &  Computer
Technology  Corporation  ("SCT") and the Company  announced  they signed a major
outsourcing  services  and  software  agreement  effective  June 30,  1997.  The
ten-year  agreement,  valued at approximately $50 million,  is for SCT's, OnSite
outsourcing services and ADAGE ERP software and implementation services.

Sale of New York  Canned  Vegetable  Businesses:  On May 6, 1997,  Seneca  Foods
Corporation  ("Seneca")  acquired the Agrilink  Leicester,  New York  production
facility and the LeRoy, New York  distribution  center,  as well as the Blue Boy
brand.

Seneca and the  Company  have also  forged a  long-term  strategic  alliance  to
combine their  agricultural  departments  into one organization to be managed by
Agrilink.  The objective is to maximize sourcing  efficiencies of New York State
vegetable  requirements  for both  companies.  This  agreement  initially  has a
minimum ten-year term.

The Company received proceeds of approximately  $29.4 million which were applied
to outstanding  Bank loans. No significant  gain or loss occurred as a result of
this transaction.


<PAGE>
Brooks Foods: On April 30, 1997,  Hoopeston  Foods acquired  certain assets from
the Brooks Foods operating  facility.  The purchase price of approximately  $2.1
million was paid with  $400,000 in cash and a $1.7 million  ten-year  note.  The
proceeds were applied to outstanding  Bank loans.  No  significant  gain or loss
occurred as a result of this transaction. In addition, the two companies entered
into a copack and  warehouse  agreement  under  which  Hoopeston  will  produce,
package, and warehouse certain products.

Nalley Canada Ltd.: On June 26, 1995,  Agrilink sold Nalley Canada Ltd., located
in Vancouver,  British Columbia, to a management group. The operations were sold
for  approximately  $8.0  million.  Approximately,  $4.0 million was received in
cash. The remainder of the proceeds were received  through a series of long-term
notes with maturities between 1998 and 2005. The notes beared interest at a rate
of 12 1/4 percent.

In April 1997, the Company acquired  certain  businesses from Nalley Canada Ltd.
The acquired  operations  include a $12.0 million  consumer  products  business,
which markets  throughout the western Provinces of Canada. The purchase price of
approximately $5.0 million was paid through the forgiveness of various long-term
receivables (including interest earned) issued to the Company in connection with
its sale of the stock of Nalley Canada Ltd. in 1995.

Finger Lakes  Packaging:  On October 9, 1996, the Company  completed the sale of
Finger Lakes Packaging,  Inc.  ("Finger Lakes  Packaging"),  a subsidiary of the
Company to Silgan Containers Corporation,  an indirect,  wholly-owned subsidiary
of Silgan  Holdings,  Inc.,  headquartered in Stamford,  Connecticut.  A gain of
approximately  $3.6  million was  recognized  on this  transaction.  The Company
received proceeds of approximately  $30.0 million.  Proceeds from this sale were
applied to outstanding  Bank loans.  The  transaction  also included a long-term
supply agreement between Silgan and Agrilink.

Fiscal 1996 -

Packer Foods:  On July 21, 1995, the Company  acquired Packer Foods, a privately
owned,  Michigan-based  food  processor.  The  total  cost  of  acquisition  was
approximately $5.4 million in notes plus interest at 10 percent to be paid until
the notes  mature in the year  2000.  The  transaction  was  accounted  for as a
purchase.  For the year ended  December 31, 1994,  Packer had net sales of $13.0
million,  operating income of $300,000, and income before extraordinary items of
$100,000. Packer Foods has been merged into the Company's CBF operations.

Matthews Candy Co.: In the fourth  quarter of fiscal 1996, the Company  acquired
Matthews Candy Co., a privately owned  Washington-based  snack food distributor.
The total cost of the acquisition was approximately $0.4 million and was paid in
cash.  Matthews Candy Co. has been merged into the Tim's Cascade Chips operation
of the Company's Snack Foods Group.

Fiscal 1996 Restructuring  Charge: During the fourth quarter of fiscal 1996, the
Company began  implementation  of a corporate-wide  restructuring  program.  The
overall  objectives of the plan were to reduce expenses,  improve  productivity,
and streamline  operations.  Efforts focused on the  consolidation of operations
and the  elimination  of  approximately  900  positions.  The total  fiscal 1996
restructuring   charge  amounted  to  $5.9  million.   This  amount  included  a
fourth-quarter   charge  of  approximately  $4.0  million  which  was  primarily
comprised of employee termination  benefits,  and approximately $1.9 million for
strategic  consulting  incurred  throughout  the year.  Reductions  in personnel
included both operational and administrative positions.

<PAGE>
NOTE 4. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS

The  following  is a summary  of  property,  plant  and  equipment  and  related
obligations at June 27, 1998 and June 28, 1997:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                   June 27, 1998                                  June 28, 1997
                                         Owned        Leased                          Owned           Leased
                                         Assets       Assets          Total          Assets          Assets         Total

<S>                                    <C>            <C>           <C>             <C>              <C>          <C>     
Land                                   $  5,772       $    0        $  5,772        $  5,755         $    0       $  5,755
Land improvements                         3,949            0           3,949           2,117              0          2,117
Buildings                                71,342          395          71,737          80,739            645         81,384
Machinery and equipment                 163,177          990         164,167         167,155          2,397        169,552
Construction in progress                 14,421            0          14,421          13,053              0         13,053
                                       --------       ------        --------        --------         ------       --------
                                        258,661        1,385         260,046         268,819          3,042        271,861
Less accumulated depreciation           (64,678)        (753)        (65,431)        (52,194)        (1,744)       (53,938)
                                       --------       ------        --------        --------         ------       --------
Net                                    $193,983       $  632        $194,615        $216,625         $1,298       $217,923
                                       ========       ======        ========        ========         ======       ========
Obligations under capital leases1                     $  759                                         $1,375
Less current portion                                    (256)                                          (558)
                                                      ------                                         ------
Long-term portion                                     $  503                                         $  817
                                                      ======                                         ======

<FN>
1  Represents the present value of net minimum lease payments  calculated at the
   Company's  incremental  borrowing rate at the inception of the leases,  which
   ranged from 6.3 to 9.8 percent.
</FN>
</TABLE>

Interest capitalized in conjunction with construction  amounted to approximately
$248,000 and $342,000 in fiscal 1998 and 1997, respectively.

The following is a schedule of future minimum lease  payments  together with the
present value of the minimum lease payments related to capitalized  leases, both
as of June 27, 1998.

<TABLE>
(Dollars in Thousands)
<CAPTION>

Fiscal Year Ending Last                       Capital          Operating      Total Future
  Saturday In June                            Leases            Leases         Commitment

       <S>                                    <C>               <C>             <C>    
       1999                                   $  356            $ 5,418         $ 5,774
       2000                                      224              3,582           3,806
       2001                                      145              1,977           2,122
       2002                                       78              1,012           1,090
       2003                                       56                204             260
   Later years                                   144                 40             184
                                              ------            -------         -------
Net minimum lease payments                     1,003            $12,233         $13,236
                                                                =======         =======
Less amount representing interest               (244)
                                              ------
Present value of minimum lease payments       $  759
                                              ======
</TABLE>

Total rent expense related to operating leases (including lease  arrangements of
less than one year which are not  included in the  previous  table)  amounted to
$12,250,000, $11,204,000, and $10,927,000 for fiscal years 1998, 1997, and 1996,
respectively (including the current portion).

NOTE 5. DEBT

Bank Facility:  The Bank Facility  includes Term Loan,  Seasonal,  and Letter of
Credit  facilities.  The outstanding  borrowings  under the Term Loan were $72.4
million at June 27, 1998. The Seasonal Facility  provides seasonal  financing of
up to $82.0 million. The Letter of Credit Facility provides $18.0 million.

<PAGE>
          Terms:  The Bank has  extended to a portion of the Term Loan  Facility
          for a limited  period of time certain  fixed rates that were in effect
          with respect to  indebtedness  repaid to the Bank on November 3, 1994.
          The weighted-average  rate of interest applicable to the Term Loan was
          7.4 percent per annum for fiscal 1998.

          Borrowings  under the Seasonal  Facility are payable at the expiration
          of that portion of the facility,  which is December 1998;  except that
          for 15  consecutive  calendar  days during each year,  the  borrowings
          under the Seasonal Facility must be zero.

          Guarantees and Security:  All obligations  under the Bank Facility are
          guaranteed  by Pro-Fac  and  certain  subsidiaries  of  Agrilink  (the
          "Subsidiary  Guarantors").  The Company's  obligations  under the Bank
          Facility and  Pro-Fac's  and the  Subsidiary  Guarantors'  obligations
          under their respective  guaranties are secured by all of the assets of
          the Company and each guarantor, respectively.

          Certain Covenants:  The Pro-Fac Bank Guarantee requires Pro-Fac,  on a
          consolidated  basis,  to  maintain  specified  levels  with  regard to
          working capital,  tangible net worth, fixed charges, the incurrence of
          additional   debt,   and   limitations   on  dividends,   investments,
          acquisitions,  and asset sales.  The Company is in compliance with all
          covenants,  restrictions  and  requirements  under  the  terms  of the
          borrowing agreement.

          Commitment Fees: The Bank assesses  commitment fees of 0.35 percent on
          the seasonal  line and 0.25 percent on the unused  portion of the Term
          Loan.

          Seasonal and Letter of Credit  Facilities:  Short-term  borrowings for
          the three years ended June 27, 1998 were as follows:

<TABLE>
          (Dollars in Thousands)
<CAPTION>

                                                                Fiscal    Fiscal    Fiscal
                                                                 1998      1997      1996

          <S>                                                   <C>       <C>       <C>    
          Balance at end of period                              $     0   $     0   $     0
          Rate at fiscal year end                                  0.0%       0.0%      0.0%
          Maximum outstanding during the period                 $66,000   $65,000   $94,000
          Average amount outstanding during the period          $51,300   $34,300   $53,700
          Weighted average interest rate during the period         7.0%       7.3%     7.4%
</TABLE>

          The Letter of Credit Facility  provides for the issuance of letters of
          credit through December 1998.  Management  anticipates timely renewals
          of both the Seasonal and the Letter of Credit facilities.

          Fair Value:  Based on an estimated  borrowing rate at fiscal  year-end
          1998  of 7.2  percent  for  long-term  debt  with  similar  terms  and
          maturities, the fair value of the Company's long-term debt outstanding
          under the Bank  Facility was  approximately  $72.5 million at June 27,
          1998.

          Based on an  estimated  borrowing  rate at fiscal year end 1997 of 8.7
          percent for long-term debt with similar terms and maturities, the fair
          value of the  Company's  long-term  debt  outstanding  under  the Bank
          Facility was approximately $71.8 million at June 28, 1997.

The Senior  Subordinated  Notes  ("Notes"):  The Notes are limited in  aggregate
principal amount to $160.0 million and will mature on February 1, 2005. Interest
on the Notes  accrues  at the rate of 12.25  percent  per  annum and is  payable
semi-annually in arrears on February 1 and August 1.

          Guarantees  and  Security:   The  Notes  represent  general  unsecured
          obligations  of the  Company,  subordinated  in  right of  payment  to
          certain other debt obligations of the Company (including the Company's
          obligations under the Credit Agreement).

<PAGE>
          Certain  Covenants:  The Notes  also  limit the  amount  and timing of
          dividends and other payments ("Restricted  Payments") from the Company
          to  Pro-Fac  or to  holders  of  other  Agrilink  debt or  equity.  No
          dividends  or  other  Restricted  Payments  may be made if there is an
          existing  event of  default  under  the Notes or if  Agrilink's  Fixed
          Charge  Coverage Ratio (as defined in the  Indenture,  a ratio of cash
          flow to interest) for the preceding four quarters is not at least 1.75
          to 1.00.  The amount of all  dividends and other  Restricted  Payments
          subsequent to the date of the Indenture is subject to an overall limit
          that is based on the Company's net income and the amount of additional
          equity invested in the Company.

          Fair  Value:  Based  on an  estimated  borrowing  rate at 1998  fiscal
          year-end  of 11.2  percent  for  borrowings  with  similar  terms  and
          maturities, the fair value of the Notes was $171.4 million at June 27,
          1998.

          Based on an estimated  borrowing  rate at 1997 fiscal year end of 11.1
          percent for  borrowings  with similar terms and  maturities,  the fair
          value of the Notes was $174.7 million at June 28, 1997.

Other Debt:  Other debt of $5.6 million carries rates up to 10.0 percent at June
27, 1998.

Maturities:  Total long-term debt maturities during each of the next five fiscal
years are as follows:  1999,  $8.1 million;  2000,  $10.6 million;  2001,  $18.6
million;  2002, $13.1 million;  and 2003, $13.1 million.  Provisions of the Term
Loan require annual payments in the years through 2000 on October 1 of each year
in an amount equal to the "annual cash sweep"  (equivalent to  approximately  80
percent of net income  adjusted  for certain  cash and  non-cash  items) for the
preceding  fiscal  year.  As of June 27,  1998,  the Company had  satisfied  its
obligation  under this provision.  Provisions of the Term Loan also require that
cash proceeds from the sale of businesses be applied to the Term Loan.

NOTE 6. TAXES ON INCOME

Taxes on income before  cumulative  effect of an accounting  change  include the
following:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                             Fiscal           Fiscal           Fiscal
                              1998             1997             1996
<S>                         <C>              <C>             <C>      
Federal -
  Current                   $6,214           $  658          $ (4,884)
  Deferred                   1,201            4,409            (7,349)
                            ------           -------         -------- 
                             7,415            5,067           (12,233)
State and foreign -
  Current                      874              314                25
  Deferred                    (449)             148              (863)
                            ------           ------          --------
                               425              462              (838)
                            ------           ------          --------
                            $7,840           $5,529          $(13,071)
                            ======           ======          ========
</TABLE>

<PAGE>

A reconciliation  of the consolidated  effective tax rate to the amount computed
by applying the federal  income tax rate to income  before taxes and  cumulative
effect of an accounting change, is as follows:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                                June 27,          June 28,        June 29,
                                                                  1998              1997            1996

<S>                                                             <C>               <C>             <C>
 Income tax provision/(benefit) at 35% in 1998,
   34% in 1997 and 1996                                         $8,740            $4,631          $ (7,697)
 State income taxes, net of federal income tax effect              571               484              (834)
 Allocation to members                                          (2,149)             (230)                0
 Goodwill amortization                                             961             1,041               784
 Dividend received deduction                                      (305)             (472)             (521)
 Other (net)                                                        22                75               (95)
                                                                ------            ------          --------
 Subtotal                                                        7,840             5,529            (8,363)
 Tax benefits resulting from prior years' exempt status              0                 0            (4,708)
                                                                ------            ------          --------
   Total                                                        $7,840            $5,529          $(13,071)
                                                                ======            ======          =========

 Effective Tax Rate                                               31.4%             40.6%            (57.7)%
                                                                ======            ======          ======== 
</TABLE>

The consolidated deferred tax  (liabilities)/assets  consist of the following at
June 27, 1998 and June 28, 1997:

                                               Fiscal          Fiscal
                                                1998            1997

<TABLE>
<S>                                          <C>              <C>      
Liabilities:
  Depreciation                               $(44,611)        $(49,357)
  Non-compete agreements                         (333)            (462)
  Other receivables                                (4)            (538)
  Prepaid manufacturing                        (3,270)          (3,215)
  Accounts receivable                            (197)               0
  Other                                             0             (215)
                                             --------         --------
                                              (48,415)         (53,787)
                                             --------         --------
Assets:
  Non-qualified retains                           904            1,006
  Inventory                                     2,089            2,322
  Accounts receivable                               0              377
  Capital and operating loss carryforwards      6,573           10,159
  Accrued employee benefits                     3,594            3,431
  Insurance accruals                            1,987            2,058
  Pension/OPEB accruals                         6,928            7,128
  Restructuring reserves                          321            1,332
  Promotional Reserves                          1,648            1,592
  Other                                         2,313            3,315
                                             --------         --------
                                               26,357           32,720
                                             --------         --------
  Net deferred liabilities                    (22,058)         (21,067)
  Valuation allowance                          (5,550)          (6,212)
                                             --------         --------
                                             $(27,608)        $(27,279)
                                             ========         ========
</TABLE>

During fiscal year 1998, the Company utilized $9.2 million of net operating loss
carryforwards ($3.2 million of tax).  Additionally,  approximately $11.0 million
of net operating loss carryforwards  ($3.9 million of tax) were transferred from
Pro-Fac.  The  benefits  for these net  operating  losses had been  recorded  in
previous years.

During  fiscal  year 1997,  however,  the Company  disposed of its Finger  Lakes
Packaging   subsidiary,   its  New  York  canned  vegetable  operation,   and  a
distribution  center in Georgia.  During fiscal year 1998, a distribution center
<PAGE>

in Michigan was also  disposed of. As a result of these  disposals,  the Company
utilized  $26.8  million  of its  capital  loss  carryforward.  As  the  related
valuation  allowance was established in conjunction  with the acquisition of the
Company by Pro-Fac,  the recognition of this capital loss  carryforward  reduced
goodwill.   During  fiscal  year  1996,  the  Company  sold  the  stock  of  its
wholly-owned subsidiary Curtice Burns Meat Snacks, Inc. Substantially all of the
assets of this  subsidiary  were  previously  sold.  This  sale and other  sales
resulted in a capital loss of $40.4  million  ($15.7  million of tax). As of the
date of sale, a full valuation  allowance had been recorded  against the capital
loss carryforward as it was more likely than not that a tax benefit would not be
realized.  As of June 27, 1998,  the Company has $13.6 million of a capital loss
carryforward  available.  The capital loss carryforward expires in 2001, and any
future recognition of this capital loss carryforward will also reduce goodwill.

In January  1995,  the Boards of  Directors  of Agrilink  and  Pro-Fac  approved
appropriate  amendments  to the Bylaws of the  Agrilink  to allow the Company to
qualify as a  cooperative  under  Subchapter T of the Internal  Revenue Code. In
August 1995,  Agrilink and Pro-Fac received a favorable ruling from the Internal
Revenue Service approving the change in tax treatment effective for fiscal 1996.
This ruling also  confirmed that the change in Agrilink tax status would have no
affect on Pro-Fac's ongoing treatment as a cooperative under Subchapter T of the
Internal Revenue Code of 1986.

In August of 1993, the Internal  Revenue Service issued a  determination  letter
which  concluded that the  Cooperative was exempt from federal income tax to the
extent  provided by Section 521 of the  Internal  Revenue  Code,  "Exemption  of
Farmers'  Cooperative  from Tax." Unlike a nonexempt  cooperative,  a tax-exempt
cooperative is entitled to deduct cash dividends it pays on its capital stock in
computing its taxable  income.  The exempt status was retroactive to fiscal year
1986. In conjunction with this ruling, the Cooperative had filed for tax refunds
for fiscal  years 1986 to 1992 in the amount of  approximately  $8.8 million and
interest payments of approximately $5.2 million. Accordingly, a refund amount of
$10.1  million  for  tax and  interest  have  been  reflected  in the  financial
statements of the  Cooperative as of June 24, 1995. In addition,  refund amounts
of $3.9  million  for tax and  interest  have been  reflected  in the  financial
statement of the Cooperative as of June 29, 1996. These refunds and interest for
the fiscal  years 1986 to 1991 were  received  in March of 1996.  The refund and
interest for fiscal year 1992 was received in June of 1997.

As results of the acquisition of Agrilink Foods,  the  Cooperative's  tax exempt
status has ceased.

NOTE 7. PENSIONS, PROFIT SHARING, AND OTHER EMPLOYEE BENEFITS

Pensions:  The Company  has  primarily  noncontributory  defined  benefit  plans
covering  most  employees.  The benefits for these plans are based  primarily on
years of service and  employees'  pay near  retirement.  The  Company's  funding
policy  is  consistent  with  the  funding   requirements  of  Federal  law  and
regulations.  Plan assets consist principally of common stocks,  corporate bonds
and US government obligations.

The Company also  participates in several union  sponsored  pension plans. It is
not  possible to  determine  the  Company's  relative  share of the  accumulated
benefit obligations or net assets for these plans.


<PAGE>
Pension cost for fiscal years ended 1998,  1997, and 1996 includes the following
components:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                                                      Pension Benefits
                                                                        Fiscal 1998      Fiscal 1997       Fiscal 1996
<S>                                                                     <C>               <C>               <C>      
Change in benefit obligation
   Benefit obligation at beginning of period                            $ 86,775         $  87,674         $  80,752
   Service cost                                                            2,796             2,915             3,162
   Interest cost                                                           6,776             6,637             6,703
   Plan participants' contributions                                          168               279               213
   Amendments                                                                 74                 0              (265)
   Actuarial loss/(gain)                                                  14,193            (2,171)            2,786
   Benefits paid                                                          (8,295)           (8,559)           (5,677)
                                                                        --------         ---------         ---------
     Benefit obligation at end of period                                 102,487            86,775            87,674
                                                                        --------         ---------         ---------
Change in plan assets
   Fair value of assets at beginning of period                            88,979            89,716            74,897
   Actual return on Plan assets                                           25,129             4,884            19,430
   Employer contribution                                                     257             2,659               853
   Plan participants' contributions                                          168               279               213
   Benefits paid                                                          (8,295)           (8,559)           (5,677)
                                                                        --------         ---------         ---------
     Fair value of assets at end of period                               106,238            88,979            89,716
                                                                        --------         ---------         ---------
Plan funded status                                                         3,751             2,204             2,042
   Unrecognized prior service cost                                          (147)             (243)             (265)
   Unrecognized net transition asset or obligation                             0                 0                 0
   Unrecognized actuarial loss/(gain)                                    (17,057)          (15,421)          (18,115)
   Union plans                                                              (106)             (122)             (293)
                                                                        --------         ---------         ---------
     (Accrued benefit liability) prior to additional minimum liability   (13,559)          (13,582)          (16,631)
Amounts recognized in the statement of financial position consist of:
   Prepaid benefit cost (accrued benefit liability)                      (14,167)          (13,997)          (16,835)
   Accumulated other comprehensive income                                    608               415               204
                                                                        --------         ---------         ---------
     Net amount recognized                                              $(13,559)        $ (13,582)        $ (16,631)
                                                                        ========         =========         ========= 

Weighted-average assumptions
   Discount rate                                                             7.0%             8.0%              7.75%
   Expected return on plan assets                                           10.0%            10.0%              10.0%
   Rate of compensation increase                                             4.5%             4.5%               4.5%
</TABLE>
<TABLE>

                                                                                     Pension Benefits
                                                                       Fiscal 1998      Fiscal 1997       Fiscal 1996
<S>                                                                     <C>              <C>               <C>    
Components of net periodic benefit cost
   Service cost                                                         $  2,796         $  2,915          $   3,162
   Interest cost                                                           6,776            6,637              6,703
   Expected return on plan assets                                         (8,708)          (8,947)            (7,307)
   Amortization of prior service cost                                        (22)             (22)                 0
   Amortization of (gain)/loss                                              (593)            (802)               (64)
   Union costs                                                                88               70                205
                                                                        --------          -------          ---------
   Net periodic benefit cost                                            $    337          $  (149)         $   2,699
                                                                        ========          =======          =========
</TABLE>


<PAGE>

The projected benefit obligation,  accumulated benefit obligation and fair value
of plan  assets for the two  non-qualified  retirement  plans  with  accumulated
benefit obligations in excess of plan assets were:

<TABLE>
                                     Supplemental Executive Retirement Plan            Excess Benefit Retirement Plan
                                    Fiscal 1998    Fiscal 1997    Fiscal 1996     Fiscal 1998    Fiscal 1997   Fiscal 1996

<S>                                   <C>             <C>            <C>             <C>             <C>            <C> 
Projected benefit obligation          $1,939          $1,843         $1,913          $850            $652           $453
Accumulated benefit obligation         1,939           1,843          1,913           651             575            315
Plan assets                                0               0              0             0               0              0
</TABLE>

Postretirement Benefits Other Than Pensions: Generally, other than pensions, the
Company does not pay retirees' benefit costs.  Isolated  exceptions exist, which
have evolved from union negotiations,  early retirement  incentives and existing
retiree commitments from acquired companies.

The  Company has not  prefunded  any of its  retiree  medical or life  insurance
liabilities. Consequently there are no plan assets held in a trust, and there is
no expected  long-term rate of return assumption for purposes of determining the
annual expense.

The plan's funded status was as follows:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                                                         Other Benefits
                                                                           Fiscal 1998     Fiscal 1997     Fiscal 1996
<S>                                                                         <C>              <C>             <C>    
Change in benefit obligation
   Benefit obligation at beginning of period                                $ 2,604          $ 2,695         $ 2,743
   Service cost                                                                   6                8              23
   Interest cost                                                                198              199             222
   Actuarial loss/(gain)                                                        322               49            (168)
   Benefits paid                                                               (372)            (347)           (125)
                                                                            -------          -------         -------
     Benefit obligation at end of period                                      2,758            2,604           2,695
                                                                            -------          -------         -------
Change in plan assets
   Fair value of assets at beginning of period                                    0                0               0
   Employer contribution                                                        372              347             125
   Benefits paid                                                               (372)            (347)           (125)
                                                                            -------          -------         --------
     Fair value of assets at end of period                                        0                0               0
                                                                            -------          -------         --------
Plan funded status                                                           (2,758)          (2,604)         (2,695)
   Unrecognized actuarial gain                                                  (46)            (378)           (443)
                                                                            -------          --------        ---------
     Accrued benefit liability prior to additional minimum liability         (2,804)          (2,982)         (3,138)
Amounts recognized in the statement of financial position consist of:
   Accrued benefit liability                                                 (2,804)          (2,982)         (3,138)
                                                                            -------          -------         --------
     Net amount recognized                                                  $(2,804)         $(2,982)        $(3,138)
                                                                            =======          =======         ======= 

Weighted-average assumptions
   Discount rate                                                                7.0%             8.0%           7.75%
   Expected return on plan assets                                               N/A              N/A             N/A
   Rate of compensation increase                                                N/A              N/A             N/A
</TABLE>
<TABLE>  
                                                                                      Other Benefits
                                                                          Fiscal 1998     Fiscal 1997      Fiscal 1996


<S>                                                                         <C>             <C>             <C> 
Components of net periodic benefit cost
   Service cost                                                             $     6          $     8         $    23
   Interest cost                                                                198              199             222
   Amortization of (gain)/loss                                                  (10)             (15)              0
                                                                            --------         --------        -------
   Net periodic benefit cost                                                $    194         $    192        $   245
                                                                            ========         ========        =======
</TABLE>

<PAGE>
For measurement  purposes, a 9.5 percent rate of increase in the per capita cost
covered  health care benefits was assumed for fiscal 1998.  The rate was assumed
to  decrease  gradually  to 5.0  percent  for  2007  and  remain  at that  level
thereafter.

The Company sponsors benefit plans that provide  postretirement medical and life
insurance benefits for certain current and former employees.  For the most part,
current employees are not eligible for the postretirement  medical coverage.  As
such,  the assumed health care trend rates have an  insignificant  effect on the
amounts  reported for the  postretirement  benefits plan.  One-percentage  point
change in the assumed health care trend rates would have the following effect:
<TABLE>

                                                           1-Percentage       1-Percentage
                                                          Point Increase     Point Decrease

<S>                                                          <C>               <C>       
Effect on total of service and interest cost components      $  7,361          $  (7,435)
Effect on postretirement benefit obligation                  $113,206          $(108,742)
</TABLE>

Profit  Sharing/401(k):  Under the prior  Deferred  Profit  Sharing Plan and the
Non-Qualified  Profit Sharing Plan, the Company allocated to all salaried exempt
employees a percentage  of its earnings in excess of 5.0 percent of the combined
long-term debt and equity (as defined) of Pro-Fac and the Company.

Under the Retirement  Savings and Incentive Plan ("RSIP"),  the Company makes an
incentive contribution to the Plan if certain pre-established earnings goals are
achieved.  The maximum incentive contribution is 3 percent of base salary earned
during the fiscal year. In addition,  the Company  contributes  401(k)  matching
contributions  to the Plan for the  benefit  of  employees  who elect to defer a
portion of their salary into the plan.  During  fiscal  1998,  1997 and 1996 the
Company allocated $475,000, $500,000 and $400,000,  respectively, in the form of
matching contributions and $400,000, $400,000 and $211,000, respectively, in the
form of incentive contributions for the benefit of its employees.

Long-Term  Incentive Plan: On June 24, 1996, the Company  introduced a long-term
incentive  program,  the  Agrilink  Foods  Equity  Value  Plan,  which  provides
performance  units to a select  group of  management.  The  future  value of the
performance  units is determined by the  Company's  performance  on earnings and
debt repayment.  The performance units vest 25 percent each year after the first
anniversary of the grant,  becoming 100 percent vested on the fourth anniversary
of grant.  One-third of the appreciated  value of units in excess of the initial
grant price is paid as cash  compensation  over the subsequent  three years. The
final value of the performance units is determined on the fourth  anniversary of
grant.  The total units  granted  were  278,357 at $21.88 per unit in June 1998,
176,278  at $25.04  per unit,  and 7,996 at $13.38  per unit in June  1997,  and
248,511  at  $13.38  per unit in June  1996.  Units  forfeited  during  the year
included   27,251  at  $13.38  and  19,978  at  $25.04.   During   fiscal  1997,
approximately $1.5 million was allocated to this plan.

The value of the grants from the Agrilink  Foods Equity Value Plan will be based
on the Company's future earnings and debt repayment.

Employee  Stock  Purchase  Plan:  During  fiscal 1996 the Company  introduced an
Employee Stock Purchase Plan which affords employees the opportunity to purchase
semi-annually,  in cash or via payroll  deduction,  shares of Class B Cumulative
Pro-Fac Preferred Stock to a maximum value of 5 percent of salary.  The purchase
price of such shares is par value, $10 per share.  During fiscal 1998, 1997, and
1996, 27,043,  31,435 and 33,364 shares,  respectively,  were held by employees,
and 580 shares were subscribed to as of June 27, 1998.

NOTE 8. COMMON STOCK AND CAPITALIZATION

Common  Stock:  The  common  stock  purchased  by members is related to the crop
delivery of each member.  Regardless  of the number of shares held,  each member
has one vote.  As of June 27, 1998,  there were 634 holders of the common stock.
Common  stock may be  transferred  to another  grower only with  approval of the
Pro-Fac Board of Directors.  If a member ceases to be a producer of agricultural
products which he markets through the Cooperative,  then he must sell his common
stock to another  grower  acceptable  to the  Cooperative.  If no such grower is
available to purchase the stock, then the member must provide one year's advance
written  notice of his intent to  withdraw,  after  which the  Cooperative  must
purchase his common stock at par value.  There is no established  public trading
market for the common stock of the Cooperative.

In fiscal 1998 and fiscal 1996, dividends on common stock were paid at a rate of
5.0 percent. No dividends on common stock were paid in fiscal 1997.

<PAGE>

At June 27, 1998 and June 28, 1997, there were outstanding subscriptions, at par
value, for 160,629 and 54,557 shares of common stock, respectively. These shares
are issued as subscription payments are received.

Preferred Stock: Except for the Class B Cumulative Preferred Stock all preferred
stock  originated  from the  conversion  at par value of retains.  This stock is
non-voting,  except  that the  holders of  preferred  and common  stock would be
entitled to vote as separate  classes on certain  matters  which would affect or
subordinate the rights of the class.

At the Cooperative's  annual meeting in January 1995,  shareholders  approved an
amendment to the  certification  of  incorporation  to authorize the creation of
five additional classes of preferred stock.

On August 23, 1995, the Cooperative  commenced an offer to exchange one share of
its Class A Cumulative  Preferred Stock  (liquidation  preference $25 per share)
for each of its existing Non-cumulative  Preferred Stock (liquidation preference
$25 per share). Pro-Fac's Class A Cumulative Preferred Stock is listed under the
symbol  PFACP on the  National  Market  System of the  National  Association  of
Securities Dealers Automated  Quotation System ("NASDAQ").  As of June 27, 1998,
the number of Class A Cumulative Preferred Stock record holders was 1,841.

Subsequent to June 27, 1998, the  Cooperative  declared a cash dividend of $1.50
per  share on the  Non-cumulative  Preferred  Stock  and  $.43 per  share on the
cumulative preferred stock. These dividends amounted to $1.6 million.

In June 1995, the Board  approved,  pursuant to its authority  under the Charter
Amendment the creation of a new series of preferred  stock, to be designated the
"Class  B,  Series 1, 10  percent  cumulative  preferred  stock"  (the  "Class B
Stock").  These shares will be issued to  employees  of Agrilink  pursuant to an
Employee  Stock  Purchase  Plan.  At least once a year Pro-Fac plans to offer to
repurchase at least 5 percent of the outstanding shares of Class B Stock.

The dividend rates for the preferred stock are as follows:

Non-cumulative  preferred      $1.50 per share paid annually at the discretion
                               of the Board.

Class A Cumulative Preferred   $1.72 per share  annually, paid in four quarterly
                               installments of $.43 per share.

Class B Cumulative Preferred   $1.00 per share paid annually.

Because dividends on the Non-cumulative Preferred Stock are payable annually and
dividends on the Cumulative Preferred Stock are paid quarterly,  the exchange of
Non-cumulative  Preferred  Stock for Cumulative  Preferred  Stock on October 10,
1995  resulted  in the  payment of 1-3/4  years of  dividends  to the holders of
exchanged shares in fiscal 1996.

Retained Earnings Allocated to Members ("Retains"): Retains arise from patronage
income and are allocated to the accounts of members within 8.5 months of the end
of each fiscal year.

         Qualified  Retains:  Qualified  retains  are  freely  transferable  and
         normally  mature  into  preferred  stock in  December of the fifth year
         after allocation. Qualified retains are taxable income to the member in
         the year the allocation is made.

         Non-Qualified  Retains:  Non-qualified  retains  may  not  be  sold  or
         purchased.  The present intention of the Board of Directors is that the
         non-qualified  retains  allocation  be redeemed  in five years  through
         partial  payment  in  cash  and  issuance  of  preferred   stock.   The
         non-qualified  retains will not be taxable to the member until the year
         of redemption. Non-qualified retains may be subject to later adjustment
         if such is deemed necessary by the Board of Directors because of events
         which may occur after the retains were allocated.

         Beginning  with the retains  issued in 1995, the maturity of all future
         retains  will result in the  issuance of Class A  Cumulative  Preferred
         Stock.

Earned  Surplus  (Unallocated  and  Apportioned):  Earned  surplus  consists  of
accumulated   income  after  distribution  of  earnings  allocated  to  members,
dividends and after state and federal income taxes. Earned surplus is reinvested
in the business in the same fashion as retains.


<PAGE>

NOTE 9. SUBSEQUENT EVENTS AND OTHER MATTERS

Dean Foods Vegetable  Company:  On July 27, 1998, the Company  announced that it
had reached a definitive  agreement with Dean Foods Company ("Dean") of Franklin
Park,  Illinois,  to acquire  Dean's  vegetable  operations  which  include  the
nationally  known Birds Eye brand and Dean's  Freshlike and VegAll  brands.  The
Dean Foods Vegetable  Company ("DFVC")  reported net sales of $620.6 million and
operating earnings of $42.4 million.  DFVC employs approximately 2,000 full-time
employees in 13 plants, located in California,  Minnesota,  New York, Texas, and
Wisconsin.  The  acquisition  is expected to close in September 1998 and will be
accounted for as a purchase.

Seyfert Foods,  Inc.: On May 6, 1998, the Company and Heath Investment  Capital,
Inc.,  announced that they were unable to reach a definitive agreement regarding
the Company's effort to acquire the assets of Seyfert Foods,  Inc. of Ft. Wayne,
Indiana.

J.A. Hopay Distributing Co, Inc.:  Effective July 21, 1998, the Company acquired
J.A. Hopay Distributing Co., Inc. of Pittsburgh, Pennsylvania. Hopay distributes
snack  products for Snyder of Berlin.  The  acquisition  was  accounted for as a
purchase. The purchase price was approximately $3.1 million.

Legal Matters:  The Company is party to various litigation and claims arising in
the ordinary  course of business.  Management  and legal counsel for the Company
are of the opinion that none of these legal actions will have a material  effect
on the financial position of the Company.

Commitments:  The Company's  Curtice Burns Foods business unit has guaranteed an
approximate  $1.4  million  loan for the City of  Montezuma to renovate a sewage
treatment plant operated in Montezuma on behalf of the City.

                            PRO-FAC COOPERATIVE, INC.
                      QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial  information for the fiscal year ended June 27, 1998 appears
in the following table. All quarters reflect 13-week periods.

In the opinion of management,  all adjustments necessary for a fair presentation
of the unaudited quarterly data have been made.

<TABLE>
(Dollars in Thousands Except Per Share)
<CAPTION>

                                                                          Quarters
Fiscal 1998                                      1                 2                3                 4           Total Year

<S>                                          <C>               <C>              <C>               <C>              <C>     
Net sales                                    $176,397          $202,672         $163,150          $177,446         $719,665
Gross profit                                 $ 45,649          $ 62,580         $ 44,912          $ 42,442         $195,583
Income before taxes                          $  5,121          $ 14,107         $  3,465          $  2,277         $ 24,970
Net income                                   $  3,299          $ 10,426         $  2,174          $  1,231         $ 17,130
Cash dividends declared per share on
   Class A Cumulative Preferred Stock        $    .43          $    .43         $    .43          $    .42         $   1.72
Market price per share (NASDAQ)
     High                                    $ 19.000          $ 20.000         $ 21.000          $ 20.000         $ 21.000
     Low                                     $ 17.625          $ 17.250         $ 18.375          $ 19.000         $ 17.250
</TABLE>

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

Not applicable.


<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND OFFICERS

                       MANAGEMENT AND DIRECTORS OF PRO-FAC

                          Date
   Name                of Birth            Positions

Bruce R. Fox             1947     President and Director
Steven D. Koinzan        1948     Treasurer and Director
Tom R. Croner            1942     Secretary and Director
Earl L. Powers           1944     Vice President Finance and Assistant Treasurer
Stephen R. Wright        1947     Assistant Treasurer and General Manager
Dale W. Burmeister       1940     Director
Robert V. Call, Jr.      1926     Director
Glen Lee Chase           1937     Director
Kenneth M. Dahlstedt     1954     Director
Robert DeBadts           1957     Director
Kenneth A. Mattingly     1948     Director
Allan W. Overhiser       1960     Director
Paul E. Roe              1939     Director
Darell Sarff             1949     Director

Bruce R.  Fox has  been a  Director  of  Pro-Fac  since  1974.  For  information
regarding Mr. Fox, see "Management and Directors of Agrilink."

Steven D.  Koinzan has been a Director of Pro-Fac  since 1983.  For  information
regarding Mr. Koinzan, see "Management and Directors of Agrilink."

Tom R. Croner has been a Director of Pro-Fac  since 1985 and a member of Pro-Fac
since 1973.  He was elected  Secretary on March 27, 1995.  Mr. Croner is a dairy
and potato farmer (T-Rich Inc.; Berlin, Pennsylvania).

Earl L.  Powers has been Vice  President  Finance  and  Assistant  Treasurer  of
Pro-Fac since 1997. For  information  regarding Mr. Powers,  see "Management and
Directors of Agrilink."

Stephen R. Wright has been General  Manager of Pro-Fac since March 1995,  having
previously  served  as  Assistant  General  Manager  since  November  1994.  For
information regarding Mr. Wright, see "Management and Directors of Agrilink."

Dale W.  Burmeister  has been a Director  of Pro-Fac  since 1992 and a member of
Pro-Fac since 1974. Mr.  Burmeister is a fruit and vegetable  grower  (Lakeshore
Farms, Inc.; Shelby, Michigan).

Robert V. Call, Jr. has been a Director of Pro-Fac since 1962.  For  information
regarding Mr. Call, see "Management and Directors of Agrilink."

Glen Lee Chase has been a Director of Pro-Fac since 1989 and a member of Pro-Fac
since 1984. Mr. Chase is a peanut,  poultry,  grain and vegetable  farmer (Chase
Farms Inc.; Oglethorpe, Georgia).

Kenneth M.  Dahlstedt was elected a Director of Pro-Fac in February 1998 and has
been a member of Pro-Fac since 1983.

Robert  DeBadts was elected a Director of Pro-Fac in January 1997 and has been a
member of Pro-Fac since 1978.  Mr.  DeBadts is a fruit grower (Lake Breeze Fruit
Farms, Inc.; Sodus, New York).


<PAGE>

Kenneth A.  Mattingly  has been a Director of Pro-Fac since 1993 and a member of
Pro-Fac  since 1978.  Mr.  Mattingly is a vegetable  and grain farmer (M-B Farms
Inc.; LeRoy, New York).

Allan W.  Overhiser has been a Director of Pro-Fac since March 1994 and a member
of Pro-Fac since 1984. Mr. Overhiser is a fruit farmer (A.W. Overhiser Orchards;
South Haven, Michigan).

Paul E. Roe has been a Director  of  Pro-Fac  since 1986 and a member of Pro-Fac
since 1961. Mr. Roe is a vegetable,  grain and dry bean farmer (Roe Acres, Inc.;
Bellona, New York).

Darell  Sarff was elected a Director of Pro-Fac in February  1997 and has been a
member of Pro-Fac since 1988.  Mr. Sarff is a grain and vegetable  farmer (Sarff
Farms; Chandlerville, Illinois).

Term of Office:  Directors of Pro-Fac are elected for three-year terms. Officers
of Pro-Fac are elected for one-year terms.

                      MANAGEMENT AND DIRECTORS OF AGRILINK

Management  and  Directors:  Effective  upon  consummation  of the  Acquisition,
Pro-Fac  established  a management  structure  for the Company,  providing for a
Board of Directors consisting of one management director,  Pro-Fac Directors and
Disinterested  Directors. The number of Pro-Fac Directors is equal to the number
of Disinterested Directors. The Chairman of the Board is a Pro-Fac Director. The
management and directors are listed below.  The Company may in the future expand
the Board of  Directors,  but  Pro-Fac  has  undertaken  to cause the Company to
maintain a Board on which the number of  Pro-Fac  Directors  does not exceed the
number of Disinterested  Directors.  Both the Credit Agreement and the Indenture
provide  that  there  will be a  Change  of  Control  if,  for a  period  of 120
consecutive  days,  the  number  of  Disinterested  Directors  on the  Board  of
Directors of the Company is less than the greater of (i) two and (ii) the number
of directors of the Company who are Pro-Fac Directors.

Set forth below is certain  information  concerning the individuals who serve as
directors and officers of the Company.

<TABLE>
                                Year of
      Name                       Birth                              Positions

<S>                              <C>          <C>                                                            
Dennis M. Mullen(1)              1953         President and Chief Executive Officer and Director

William D. Rice                  1934         Senior Vice President Strategic Development and Secretary

Earl L. Powers                   1944         Vice President and Chief Financial Officer

Stephen R. Wright                1947         Executive Vice President Agriculture

Robert V. Call, Jr.(2)           1926         Director and Chairman of the Board

Bruce R. Fox(2)                  1947         Director

Cornelius D. Harrington, Jr.(3)  1927         Director

Steven D. Koinzan(2)             1948         Director

Walter F. Payne(3)               1936         Director

Frank M. Stotz(3)                1930         Director

<FN>
(1) Management Director.

(2) Pro-Fac Director.

(3) Disinterested Director.
</FN>
</TABLE>


Dennis M.  Mullen  has been the  President  and Chief  Executive  Officer  since
January  1997 and a  Director  of the  Company  since  May  1996.  He was  Chief
Operating  Officer from May 1996 to January 1997 and  Executive  Vice  President
since  January 1996. He had been  President and Chief  Executive  Officer of CBF
from March 1993 to May 1996.  He was Senior Vice  President  and  Business  Unit
Manager  Foodservice of CBF from 1991 to 1993, and Senior Vice  President-Custom
Pack Sales for Nalley from 1990 to 1991.  Prior to employment  with the Company,
he was President and Chief Executive Officer of Globe Products Company.

<PAGE>

William D. Rice has been  Senior  Vice  President  Strategic  Development  since
February 1997 and  Secretary of the Company  since 1989. He was Chief  Financial
Officer from 1969 to February 1997. He was Treasurer of the Company from 1975 to
1996.  He was Vice  President-Finance  of the Company from 1969 to 1991.  He was
Assistant  Treasurer of Pro-Fac  from 1970 to February  1997  (Management  Chief
Financial Officer for Pro-Fac).

Earl L.  Powers  has been Vice  President  and  Chief  Financial  Officer  since
February 1997. He was Vice President and Corporate Controller from March 1993 to
February 1997, and Vice President  Finance and Management  Information  Systems,
CBF  Division  of the  Company  from 1991 to March  1993.  Prior to joining  the
Company,  he was Controller of various Pillsbury Company divisions 1987-1990 and
various other executive management positions at the Pillsbury Company 1976-1987.

Stephen R. Wright has been Executive  Vice President  since November 6, 1996. He
was Senior Vice President Procurement of the Company from November 1994 and Vice
President --  Procurement  for the Company from 1990 to November,  1994,  having
served as Director of Commodities  and  Administration  Services for the Company
from 1988 to 1990. He became General Manager of Pro-Fac in March 1995.

Robert V. Call,  Jr. has been a Director of the Company since the  completion of
the  Acquisition.  Mr. Call had been a Director of the Predecessor  entity since
1986 until  completion  of the  Acquisition  (at which time he resigned  and was
reappointed).  He has been a Director of Pro-Fac since 1962. He was President of
Pro-Fac from 1986 to March 27,  1995,  having  served as Treasurer  from 1973 to
1984. He has been a member of Pro-Fac  since 1961. He is a vegetable,  fruit and
grain farmer (My-T Acres, Inc., Batavia, NY).

Bruce R. Fox has been a Director  of the  Company  since the  completion  of the
Acquisition.  He has been a Director of Pro-Fac  since 1974. He was Treasurer of
Pro-Fac from 1984 until March 27, 1995,  when he was elected  President.  He has
been a member of Pro-Fac  since 1974.  Mr. Fox is a fruit and  vegetable  grower
(N.J. Fox & Sons, Inc., Shelby, MI).

Cornelius D. Harrington,  prior to his retirement,  was President of the Bank of
New  England-West  in  Springfield,  MA or a  predecessor  to  the  Bank  of New
England-West  from 1978 to December 1990. He was Chief Executive  Officer of the
Bank of New  England-West  from 1984 to December 1990.  Until 1987, he served as
Chairman of the Board of Directors of BayState  Medical  Center in  Springfield,
MA. He has been a Director of the Farm Credit Bank of Springfield  since January
1994.

Steven D. Koinzan has been a Director of the Company since the completion of the
Acquisition.  He has been a Director of Pro-Fac  since 1983. He was Secretary of
Pro-Fac from March 1993 until March 27, 1995, when he was elected Treasurer.  He
has been a member of Pro-Fac since 1979.  Mr.  Koinzan is a popcorn,  field corn
and soybean farmer (Koinzan Farms; Norden, Nebraska).

Walter F.  Payne has been a  Director  of the  Company  since  January  1996 and
President  and Chief  Executive  Officer of Blue Diamond  Growers since 1992. He
held  various  positions at Blue Diamond  Growers  between 1973 and 1992.  He is
currently on the Board of Directors  of the Almond Board of  California  and the
International Nut Council,  a board alternate for the National Council of Farmer
Cooperatives,  and a member of the Board of Trustees for the Graduate  Institute
of Cooperative Leadership.

Frank M. Stotz has been a Director of the Company  since the  completion  of the
Acquisition.  Mr.  Stotz  retired  in 1994  from his  position  as  Senior  Vice
President - Finance of Bausch & Lomb Incorporated.  Before joining Bausch & Lomb
in that  capacity in 1991,  Mr.  Stotz was a partner with Price  Waterhouse.  He
joined Price  Waterhouse in Chicago in 1954, was admitted to partnership in 1966
and retired from the firm in 1991 to join Bausch & Lomb.  From 1980 to 1991,  he
was partner in charge of the  Rochester  office of Price  Waterhouse.  Mr. Stotz
serves on the  Boards of  Trustees  of St.  John  Fisher  College,  The  Genesee
Hospital, The Rochester Center for Governmental Research and The Automobile Club
of  Rochester.  He is also a member  of the  Bishop's  Council  of the  Catholic
Diocese of Rochester.

Term of Office:  All  directors of the Company will hold office from the date of
election  until  the next  annual  meeting  of the  shareholder  or until  their
successors are duly elected and qualified. Each executive officer of the Company
will hold  office from the date of election  until his  successor  is elected or
appointed.

There are no family  relationships  between any Director,  executive officer, or
any person  nominated or chosen by the Company to become a Director or executive
officer.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following tables show the cash  compensation and certain other components of
the  compensation  of the chief  executive  officer  and three other most highly
compensated executive officers of the Company,  earned during fiscal years ended
June 27,  1998,  June 28,  1997,  and June 29,  1996  (collectively,  the "Named
Executive Officers").

<TABLE>
Executive Compensation
Summary Compensation Table
<CAPTION>


                                                                                                        RSIP/
                                                                                                       Matching
                                                                                                     Contributions
                                                                                  Annual               Deferred
                                                                              Compensation1             Profit
Name and Principal Position                                     Year      Salary         Bonus2        Sharing

<S>                                                             <C>      <C>            <C>             <C>   
Dennis M. Mullen -                                              1998     $432,256       $216,000        $7,783
   President and Chief Executive Officer and Director           1997     $349,181       $210,000        $8,013
                                                                1996     $216,107       $      0        $1,465

William D. Rice -                                               1998     $273,342       $100,000        $5,019
   Senior Vice President Strategic Development and Secretary    1997     $259,422       $107,000        $5,990
                                                                1996     $249,642       $      0        $1,656

Earl L. Powers                                                  1998     $239,327       $140,000        $7,106
   Vice President Finance and Chief Financial Officer           1997     $187,179       $107,000        $4,492
                                                                1996     $157,990       $      0        $1,642

Stephen R. Wright                                               1998     $200,154       $100,000        $5,446
   Executive Vice President Agriculture                         1997     $180,043       $ 80,000        $4,321
                                                                1996     $156,789       $      0        $1,627

<FN>
1    No Named Executive Officer has received personal benefits during the period
     in excess of the lesser of $50,000 or 10 percent of annual salary.

2    Pursuant to the Management  Incentive  Plan of the Company (the  "Incentive
     Plan"),  additional  compensation is paid if justified by the activities of
     the officers and employees  eligible  under the  Incentive  Plan and by the
     earnings of the Company and of Pro-Fac Cooperative, Inc. ("Pro-Fac").
</FN>
</TABLE>

<TABLE>
Long-Term Incentive Plan - Awards in Last Fiscal Year

                                                                         EstimatedFuture Payouts
                           (b)                      (c)             Under Non-Stock Price Based Plans
                     Number of Shares       Performance or Other        (d)                (e)
      (a)             Units or Other      Period Until Maturation    Threshold            Target
      Name           Rights Granted (1)         or Payout             ($ or #)            ($ or #)(2)

<S>                      <C>                     <C>                       <C>               <C>
Dennis M. Mullen         68,723                  6/24/2002                 $0                $0
William D. Rice          34,078                  6/24/2002                 $0                $0
Earl L. Powers           29,961                  6/24/2002                 $0                $0
Stephen R. Wright        21,022                  6/24/2002                 $0                $0

<FN>
(1)  On June 24, 1998, the Company issued  performance  units under the Agrilink
     Foods Equity Value Plan ("EVP") to a select group of management. The future
     value of the performance  units is determined by the Company's  performance
     on earnings and debt repayment.  The performance units vest 25 percent each
     year after the first anniversary of the grant,  becoming 100 percent vested
     on the fourth  anniversary of grant.  One-third of the appreciated value of
     units in excess of the  initial  grant  price is paid as cash  compensation
     over the subsequent  three years.  The final value of the 1998  performance
     units is determined on the fourth anniversary of grant.
</FN>
</TABLE>

<PAGE>
(2)  The value of the June 24, 1998 grants from the Agrilink  Foods Equity Value
     Plan will be based on the Company's future earnings and debt repayment. The
     beginning  value of these  performance  units was set at a level  requiring
     improved earnings and debt-repayment performance.  The target payouts shown
     above  are  based on the  value of the  performance  units at  fiscal  1998
     earnings  and debt  levels and would yield no payout from the plan at those
     levels. If future  performance  equals fiscal 1998 performance,  no payouts
     will be made from the plan  relative  to the  options  granted  on June 24,
     1998.

Retirement  Plans: The Company's  Master Salaried  Retirement Plan (the "Pension
Plan") provides  defined  retirement  benefits for its officers and all salaried
and clerical  personnel.  The  compensation  upon which the pension benefits are
determined  is  included  in the  salary  columns of the  "Summary  Compensation
Table."

For retirement  before age 65, the annual  benefits are reduced by an amount for
each year prior to age 65 at which such retirement  occurs so that if retirement
occurs at age 55, the benefits are 70 percent of those payable at age 65.

The  approximate  number  of years of Plan  participation  under  the  Company's
Pension  Plan as of June 27,  1998,  of the  Executive  Officers  listed  in the
Summary Compensation Table are as follows: Dennis M. Mullen-8, William D.
Rice-26, Earl L. Powers-6, and Stephen R. Wright-24.

On January 28, 1992, the Company adopted an Excess Benefit Retirement Plan which
serves to provide  employees  with the same  retirement  benefit they would have
received from the Company's  Master  Salaried  Retirement  Plan under the career
average base pay formula, but for changes required under the 1986 Tax Reform Act
and the compensation limitation under Section 401(a)(17) of the Internal Revenue
Code,  which was  $150,000 on January 1, 1994,  having been  revised in the 1992
Omnibus Budget Reform Act.

The following table shows the estimated  pension  benefits  payable to a covered
participant,  at age 65,  at the  specified  final  average  pay,  and  years of
credited service levels under the Company's Master Salaried  Retirement Plan and
the Excess Benefit Retirement Plan.

<TABLE>
                               Pension Plan Table

                               Years of Plan Participation
   Final      ------------------------------------------------------------
Average Pay      15           20           25           30           35 
-----------   -------      --------     --------     --------     -------- 

<S>           <C>          <C>          <C>          <C>          <C>     
 $125,000     $21,943      $ 28,741     $ 35,424     $ 42,278     $ 49,280
  150,000      27,193        35,741       44,174       52,778       61,530
  175,000      32,443        42,741       52,924       63,278       73,780
  200,000      37,693        49,741       61,674       73,778       86,030
  225,000      42,943        56,741       70,424       84,278       98,280
  250,000      48,193        63,741       79,174       94,778      110,530
  275,000      53,443        70,741       87,924      105,278      122,780
  300,000      58,693        77,741       96,674      115,778      135,030
  325,000      63,943        84,741      105,424      126,278      147,280
  350,000      69,193        91,741      114,174      136,778      159,530
  375,000      74,443        98,741      122,924      147,278      171,780
  400,000      79,693       105,741      131,674      157,778      184,030

</TABLE>
Termination Protection Provisions: The Company has adopted a Salary Continuation
Agreement for Mr. Mullen,  whereby, two years of salary and benefit continuation
will be provided if Mr. Mullen's  employment is  involuntarily  terminated on or
before  December  31, 1998,  for reasons  other than for "cause" as such term is
defined in the Agreement.

Directors  Compensation:   In  fiscal  1998,  non-employee  directors  who  were
designated by Pro-Fac  received an annual stipend of $6,000 per year,  plus $200
per day for  attending  Board  or  Committee  meetings.  The  Pro-Fac  President
receives an annual stipend of $12,000 per year,  plus $400 per day for attending
Board or  Committee  meetings.  In fiscal  1998,  all other  outside  directors,
Messrs.  Harrington,  Payne,  and Stotz  received  an annual  rate of $18,000 in
addition to $600 per day. The  Chairman of the Board  receives a fixed amount in
lieu of the standard attendance fees and annual stipend.  The Company accrued an
annual stipend of $24,700 for Mr. Call as Chairman of the Board.


<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth certain  information,  as of July 15, 1998, with
respect to (i) each  person  known by Pro-Fac to own  beneficially  5 percent or
more of any class of Pro-Fac's voting  securities,  (ii) each director and Named
Executive  Officer of Pro-Fac and (iii) all directors and officers of Pro-Fac as
a group.
<TABLE>

                                                                            Amount and Nature of        Percent of 
          Name                               Title of Class                Beneficial Ownership(a)       Class(b)

<S>                                     <C>                                       <C>                     <C>   
Cherry Central Cooperative, Inc.        Common                                    345,912                 18.95%
   PO Box 988                           Class A Cumulative Preferred               75,382                  2.15%
   Traverse City, MI 49685

Michigan Blueberry Growers Assoc.       Common                                    116,400                  6.38%
   PO Drawer B                          Class A Cumulative Preferred               16,028                  0.46%
   Grand Junction, MI 49056

Dale E. Burmeister                      Common                                      7,606(c)               0.42%
                                        Class A Cumulative Preferred                  774(c)               0.02%
                                        Class A Cumulative Preferred                9,439                  0.27%

Robert V. Call, Jr.                     Common                                     35,460(d)               1.94%
                                        Class A Cumulative Preferred               24,712(d)               0.71%
                                        Class A Cumulative Preferred               14,194(e)               0.41%
                                        Class A Cumulative Preferred                5,361(f)               0.15%
                                        Class A Cumulative Preferred                1,506                  0.04%

Glen Lee Chase                          Common                                      9,472(g)               0.52%
                                        Class A Cumulative Preferred                6,044(g)               0.17%

Tom R. Croner                           Common                                      6,276(h)               0.34%
                                        Class A Cumulative Preferred               10,977(i)               0.31%

Kenneth M. Dahlstedt                    Common                                      6,262                  0.34%
                                        Class A Cumulative Preferred                1,000(l)               0.03%
                                        Class A Cumulative Preferred                   41                  0.01%

Robert DeBadts                          Common                                     11,873(j)               0.65%
                                        Class A Cumulative Preferred                7,754(j)               0.22%
                                        Class A Cumulative Preferred                  100(k)               0.00%

Bruce R. Fox                            Common                                     21,757(m)               1.19%
                                        Class A Cumulative Preferred               10,004(m)               0.29%
                                        Class A Cumulative Preferred                5,608(n)               0.16%
                                        Class A Cumulative Preferred                1,085                  0.03%
                                        Class A Cumulative Preferred                  820                  0.02%

Steven D. Koinzan                       Common                                      8,280                  0.45%
                                        Class A Cumulative Preferred                3,152                  0.09%

Kenneth A. Mattingly                    Common                                      6,997(o)               0.38%
                                        Class A Cumulative Preferred                5,099(o)               0.15%

Dennis M. Mullen                        None                                            0                  0.00%

</TABLE>


<PAGE>
<TABLE>
                                                                            Amount and Nature of        Percent of 
          Name                               Title of Class                Beneficial Ownership(a)       Class(b)
 
<S>                                     <C>                                        <C>                    <C>  
Allan W. Overhiser                      Common                                      2,448(p)              0.13%
                                        Class A Cumulative Preferred                1,660(p)              0.05%

Earl L. Powers                          None                                            0                 0.00%

William D. Rice                         None                                            0                 0.00%

Paul E. Roe                             Common                                     15,465(q)              0.85%
                                        Class A Cumulative Preferred                2,246(q)              0.06%

Darell Sarff                            Common                                      1,740                 0.10%
                                        Class A Cumulative Preferred                  495                 0.01%

Stephen R. Wright                       Class A Cumulative Preferred                1,140                 0.03%

All directors and officers as a group   Common                                    133,636                 7.32%
                                        Class A Cumulative Preferred              113,211                 3.23%

<FN>
(a)  Certain of the directors named above may have the  opportunity,  along with
     the  other  members  producing  a  specific  crop,  to  acquire  beneficial
     ownership  of  additional  shares of the common  stock of Pro-Fac  within a
     period of  approximately  60 days  commencing  February  1, 1996 if Pro-Fac
     determines  that a permanent  change is  required in the total  quantity of
     that particular crop.

(b)  In the above table,  each director who has direct  beneficial  ownership of
     common or  preferred  shares by  reason of being the  record  owner of such
     shares has sole voting and  investment  power with  respect to such shares,
     while  each  director  who has  direct  beneficial  ownership  of common or
     preferred  shares as a result of owning such  shares as a joint  tenant has
     shared voting and investment power regarding such shares. Each director who
     has indirect  beneficial  ownership of common or preferred shares resulting
     from  his  status  as a  shareholder  or a  partner  of  a  corporation  or
     partnership  which is the record  owner of such  shares has sole voting and
     investment power if he controls such corporation or partnership. If he does
     not control  such  corporation  or  partnership,  he has shared  voting and
     investment power. Pro-Fac does not believe that the percentage ownership of
     any such corporation or partnership by a director is material, since in the
     aggregate  no director  beneficially  owns in excess of 5 percent of either
     the common or preferred shares of Pro-Fac.

(c)   Record ownership by Lakeshore Farms, Inc.

(d)   Record ownership by My-T Acres, Inc.

(e)   Record ownership by My-T Acres, Inc. Employee Profit Sharing Plan

(f)   Record ownership by Call Farms, Inc.

(g)   Record ownership by Chase Farms, Inc.

(h)   Record ownership by Richard Croner & Son

(i)   Record ownership by T-Rich, Inc.

(j)   Record ownership by Lake Breeze Farm, Inc.

(k)   Record ownership jointly with spouse

(l)   Record ownership by Ag-Pro, Inc.

(m)   Record ownership by N.J. Fox & Sons, Inc.

(n)   Record ownership by K. Fox

(o)   Record ownership by M-B Farms, Inc.

(p)   Record ownership by A.W. Overhiser Orchards

(q)   Record ownership by Roe Acres, Inc.
</FN>
</TABLE>


<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance:

Stephen  R.  Wright  filed a late Form 4  reporting  a single  transaction.  The
January  1998  Form 4  report  for Mr.  Wright  was  later  amended  to  include
information  regarding  a single  transaction.  The March 1998 Form 4 report for
Darell Sarff was filed on the time, but was later amended to include information
regarding a single  transaction.  The January 1997 Form 4 report for Paul E. Roe
was filed on time but was later  amended to include  information  regarding  two
transactions. Kenneth M. Dahlstedt filed a late Form 3.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management believes all such transactions were on terms no less favorable to the
Cooperative than could have been reached with unaffiliated third parties.

Borrowings by Pro-Fac:  The Indenture (as amended) governing the Notes permitted
the Company to make demand  loans to Pro-Fac  for  working  capital  purposes in
amounts not to exceed $20.0 million at any time, each such loan to bear interest
at a rate  equal  to the  rate in  effect  on the date of such  loan  under  the
Seasonal  Facility.  The loan  balance is  required  to be reduced to zero for a
period of not less than 45 consecutive days in each fiscal year.  Except for the
foregoing  provision  and except for  Pro-Fac's  guarantee  of the Notes and the
Credit  Agreement,  as long as Pro-Fac has the right to borrow under the Pro-Fac
Marketing and Facilitation  Agreement,  the Notes do not permit Pro-Fac to incur
any other indebtedness.

Equity Ownership in CoBank: As part of its historical lending  arrangements with
the Bank, which is a cooperative,  Pro-Fac made investments in the Bank. Pro-Fac
made these  investments  through (i) a capital  purchase  obligation  equal to a
percentage, set annually based on the Bank's capital needs, of its interest paid
to the Bank and (ii) a patronage  rebate on interest paid by Pro-Fac to the Bank
based on the Bank's  earnings,  which is paid in cash and capital  certificates.
The  investments in the Bank represent a percentage of the previous  five-years'
average  borrowings  from the  Bank.  As of June 27,  1998,  the  amount  of the
Company's investment in the Bank was approximately $24.4 million.

Purchase of Crops From  Pro-Fac:  Each of the members of Pro-Fac  sells crops to
Pro-Fac  pursuant  to a general  marketing  agreement  between  such  member and
Pro-Fac,  which  crops in turn are sold to the  Company  pursuant to the Pro-Fac
Marketing  and  Facilitation  Agreement.   During  fiscal  1998,  the  following
directors   and  executive   officers  of  Pro-Fac   directly  or  through  sole
proprietorships or corporations,  sold crops to Pro-Fac and provided harvesting,
trucking  and waste  removal  services to Agrilink for the  following  aggregate
amounts:

<TABLE>
                                                                               GROSS PURCHASES
                                                  RELATIONSHIP                  IN FISCAL 1998
            NAME                                   TO PRO-FAC               (Dollars in Thousands)

<S>                                            <C>                                  <C>   
Dale E. Burmeister..........................   Director                             $  311
Robert V. Call, Jr..........................   Director                             $3,605
Glen Lee Chase..............................   Director                             $  181
Tom R. Croner...............................   Director and Secretary               $  159
Kenneth M. Dahlstedt(1).....................   Director                             $  236
Robert DeBadts..............................   Director                             $  396
Albert P. Fazio(2)..........................   Director and Vice President          $   93
Bruce R. Fox................................   Director and President               $1,010
Steven D. Koinzan...........................   Director and Treasurer               $  505
Kenneth A. Mattingly........................   Director                             $1,153
Allan W. Overhiser..........................   Director                             $   71
Paul E. Roe.................................   Director                             $  928
Darell Sarff................................   Director                             $  196

<FN>
(1)  Mr.  Dahlstedt  was elected to the Board of Directors of Pro-Fac  effective
     February 18, 1998.

(2)  Mr.  Fazio  retired  from the Board of Directors of Pro-Fac on February 18,
     1998.
</FN>
</TABLE>

<PAGE>

                   DIRECTORS AND OFFICERS LIABILITY INSURANCE

As authorized  by New York law and in accordance  with the policy of that state,
the Cooperative has obtained  insurance from Chubb Group Insurance  insuring the
Cooperative  against any obligation it incurs as a result of its indemnification
of its officers and  directors,  and insuring  such  officers and  directors for
liability  against which they may not be  indemnified by the  Cooperative.  This
insurance  has a term  expiring  on  August  15,  1999,  at an  annual  cost  of
approximately  $80,000.  As of this date, no sums have been paid to any officers
or directors of the Cooperative under this indemnification insurance contract.



<PAGE>

                                     PART IV

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

     (a) (1)    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEX TO FINANCIAL STATEMENTS

The following appears in ITEM 8 of this report:

<TABLE>
     ITEM                                                                                                                    Page

<S>                                                                                                                           <C>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiary:
   Management's Responsibility for Financial Statements....................................................................   24
   Report of Independent Accountants.......................................................................................   25
   Consolidated Financial Statements for the years ended June 27, 1998, June 28,
     1997, and June 29, 1996:
     Consolidated Statement of Operations and Net Proceeds for the years ended June 27, 1998, June 28, 1997,
       and June 29, 1996...................................................................................................   26
     Consolidated Balance Sheet for the years ended June 27, 1998 and June 28, 1997........................................   27
     Consolidated Statement of Cash Flows for the years ended June 27, 1998, June 28, 1997 and June 29, 1996...............   28
     Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock
       for the years ended June 27, 1998, June 28, 1997, and June 29, 1996.................................................   30
       Notes to Consolidated Financial Statements..........................................................................   31
       Selected Quarterly Financial Data...................................................................................   45
</TABLE>

         (2) The following additional financial data are set forth herein:


                  SCHEDULE II:  Valuation and Qualifying Accounts
<TABLE>
                                                                         SCHEDULE II

Pro-Fac Cooperative, Inc.
<CAPTION>
Valuation and Qualifying Accounts

                                      Fiscal 1998      Fiscal 1997      Fiscal 1996
                                      -----------      -----------      -----------


<S>                                   <C>              <C>              <C>        
Allowance for doubtful accounts
  Balance at beginning of period      $   970,000      $   836,000      $   673,000
  Additions charged to expense             17,000          446,000          537,000
  Deductions                             (213,000)        (312,000)        (374,000)
                                      -----------      -----------      -----------
  Balance at end of period            $   774,000      $   970,000      $   836,000
                                      ===========      ===========      ===========

Inventory reserve*
  Balance at beginning of period      $  362,000       $   485,000      $   144,000
  Net change                              29,000          (123,000)         341,000
                                      ----------       -----------      -----------
  Balance at end of period            $  391,000       $   362,000      $   485,000
                                      ==========       ===========      ===========

Tax valuation allowance**
  Balance at beginning of period      $6,212,000       $17,983,000      $ 7,366,000
  Net change                            (662,000)      (11,771,000)      10,617,000
                                      ----------       -----------      -----------
  Balance at end of period            $5,550,000       $ 6,212,000      $17,983,000
                                      ==========       ===========      ===========

<FN>
*    Difference between FIFO cost and market applicable to inventories.


**   See  further  discussion  regarding  tax matters at NOTE 6 to the "Notes to
     Consolidated Financial Statements."
</FN>
</TABLE>


Schedules  other than those listed above are omitted because they are either not
applicable  or not  required,  or  the  required  information  is  shown  in the
financial statements or the notes thereto.


<PAGE>

         (3) The  following  exhibits are filed  herein or have been  previously
filed with the Securities and Exchange Commission:


     (b) Report on Form 8-K


                No  reports  on Form 8-K were  filed in the  fourth  quarter  of
fiscal 1998.

<TABLE>
     (c) EXHIBITS:

           Exhibit
           Number                     Description
           <S>          <C>                                                  
            3.3(7)      Certificate of Incorporation of Agrilink.

            3.4(3)      Bylaws of Agrilink.

            3.5(7)      Certificate of  Amendment of the Certificate of
                        Incorporation

           10.1(2)      Indenture,  dated  as  of  November  3,  1994  (the
                        "Indenture"),  among PFAC, Pro-Fac and IBJ Schroder
                        Bank  &  Trust  Company  ("IBJ"),  as  Trustee,  as
                        amended by First Supplemental  Indenture,  dated as
                        of   November  3,  1994,   each  with   respect  to
                        Agrilink12.25 percent Senior Subordinated Notes due
                        2005 (the "Notes").

           10.2(2)      Term Loan,  Term Loan  Facility and  Seasonal  Loan
                        Agreement,  dated as of  November  3,  1994,  among
                        Springfield  Bank for  Cooperatives  (the  "Bank"),
                        Agrilink and PFAC.

           10.3(2)      Parent  Guaranty, dated as of  November 3, 1994, by
                        Pro-Fac in favor of the Bank. 

           10.4(2)      Parent Security Agreement, dated as of November 3,
                        1994 between Pro-Fac and the Bank.

           10.5(2)      Mortgage,  Open End Mortgage,  Deed of Trust, Trust
                        Deed, Deed to Secure Debt, Purchase Money Mortgage,
                        Assignment,   Security   Agreement   and  Financing
                        Statement   dated  November 3, 1994 among FAC,
                        Agrilink and the Bank.

           10.6(2)      Marketing and Facilitation  Agreement,  dated as of
                        November 3, 1994, between Pro-Fac and Agrilink.

           10.7(2)      Management Incentive Plan, as amended.

           10.8(2)      Supplemental Executive Retirement Plan, as amended.

           10.10(2)     Master Salaried Retirement Plan, as amended.

           10.11(2)     Non-Qualified Profit Sharing Plan, as amended.

           10.12(2)     Excess Benefit Retirement Plan.

           10.13(6)     Salary Continuation Agreement - Dennis M. Mullen.

           10.14(1)     Modification  A of Term Loan,  Term Loan  Facility,
                        and Seasonal  Loan  Agreement,  dated as of January
                        26, 1995, between Agrilink and the Bank.

           10.15(1)     Second Amendment to Non-Qualified Profit Sharing 
                        Plan.

           10.16(3)     Modifications  B  -  D  of  Term  Loan,  Term  Loan
                        Facility,   and  Seasonal  Loan  Agreement  Between
                        Agrilink and the Bank.

           10.17(4)     Modifications  E  -  F  of  Term  Loan,  Term  Loan
                        Facility,   and  Seasonal  Loan  Agreement  Between
                        Agrilink and the Bank.

           10.18(4)     Equity Value Plan Adopted on June 24, 1996.

           10.19(4)     Seasonal Loan Agreement Between Pro-Fac and the
                        Bank Dated June 28, 1996.

           10.20(6)     Modifications  G  -  K  of  Term  Loan,  Term  Loan
                        Facility,   and  Seasonal  Loan  Agreement  Between
                        Agrilink and Bank.

           10.21(6)     OnSite Services Agreement with Systems & Computer 
                        Technology.
 </TABLE>
<PAGE>
<TABLE>
     (c) EXHIBITS (Continued):

             Exhibit
             Number                       Description

             <S>          <C>                                                        
             10.22(6)     Raw Product Supply Agreement with Seneca Foods
                          Corporation.            

             10.23(6)     Reciprocal Co-Pack Agreement with Seneca Foods
                          Corporation.

             10.24        Modification L of Term Loan, Term Loan Facility,
                          and Seasonal Loan Agreement  Between  Agrilink and
                          the Bank.

             10.25        Second Supplemental Indenture Dated November 10, 1997
             10.26        Amendment to Marketing and Facilitation Agreement
             18(5)        Accountant's Report Regarding Change in Accounting Method

             21.1(6)      List of Subsidiaries.

             23.1         Accountant's Consent Regarding the Agrilink Foods 
                          Employee Stock Purchase Plan

             27(6)        Financial Data Schedule.

<FN>
(1)  Incorporated by reference from Registration Statement No. 33-60273.

(2)  Incorporated  by reference from  Registration  Statement No.  33-56517,  as
     amended.

(3)  Incorporated by reference from the Registrant's  1995 Annual Report on Form
     10-K.

(4)  Incorporated by reference from the Registrant's  1996 Annual Report on Form
     10-K.

(5)  Incorporated  by reference  from the  Registrant's  First Quarter Report on
     Form 10-Q.

(6)  Incorporated  by reference  from  Registrant's  1997 Annual  Report on Form
     10-K.

(7)  Incorporated  by reference from  Registrant's  First Quarter Report on Form
     10-Q.
</FN>
</TABLE>

<PAGE>


                                   SIGNATURES


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



                                           PRO-FAC COOPERATIVE, INC.




Date:    August 24, 1998              BY:/s/       Stephen R. Wright
         ---------------                 -----------------------------------
                                                   STEPHEN R. WRIGHT
                                                    GENERAL MANAGER



Date:    August 24, 1998              BY:/s/       Earl L. Powers
         ---------------                 ------------------------------------
                                                   EARL L. POWERS
                                              VICE PRESIDENT FINANCE AND
                                                  ASSISTANT TREASURER
                                           (Principal Financial Officer and
                                             Principal Accounting Officer)


                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes and appoints Dennis M. Mullen and Earl L. Powers,  and each of them,
his  true  and  lawful   attorneys-in-fact   and  agents,  with  full  power  of
substitution  and  resubstitution,  for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments)  to this  Registration  Statement  and to file  the  same,  with all
exhibits  thereto,  and  other  documents  in  connection  therewith,  with  the
Securities and Exchange  Commission,  granting unto said  attorneys-in-fact  and
agents,  and each of them,  full power and  authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and  purposes as he might or could do in person,  hereby
ratifying and  confirming all that said  attorneys-in-fact  and agents or any of
them, or their or his substitute or substitutes,  may lawfully do or cause to be
done by virtue hereof.




<PAGE>


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

<TABLE>
       SIGNATURE                             TITLE                            DATE

<S>                                   <C>                                <C>     
/s/   Bruce R. Fox                     President and Director             August 19, 1998
     (BRUCE R. FOX)

/s/   Steven D. Koinzan               Treasurer and Director             August 19, 1998
     (STEVEN D. KOINZAN)

/s/   Tom R. Croner                   Secretary and Director             August 19, 1998
     (TOM R. CRONER)

/s/   Dale W. Burmeister              Director                           August 19, 1998
     (DALE W. BURMEISTER)

/s/   Robert V. Call, Jr.             Director                           August 19, 1998
     (ROBERT V. CALL, JR.)

/s/   Glen Lee Chasse                 Director                           August 19, 1998
     (GLEN LEE CHASE)

/s/   Kenneth M. Dahlstedt            Director                           August 19, 1998
     (KENNETH M. DAHLSTEDT)

/s/   Robert DeBadts                  Director                           August 19, 1998
     (ROBERT DEBADTS)

/s/   Kenneth A. Mattingly            Director                           August 19, 1998
     (KENNETH A. MATTINGLY)

/s/   Allan W. Overhiser              Director                           August 19, 1998
     (ALLAN W. OVERHISER)

/s/   Paul E. Roe                     Director                           August 19, 1998
     (PAUL E. ROE)

/s/   Darell Sarff                    Director                           August 19, 1998
     (DARELL SARFF)

/s/   Stephen R. Wright               Assistant Treasurer and            August 19, 1998   
     (STEPHEN R. WRIGHT)              General Manager
                                     (Principal Executive Officer)

/s/   Earl L. Powers                  Vice President Finance and         August 19, 1998
     (EARL L. POWERS)                 Assistant Treasurer
                                     (Principal Financial Officer and
                                       Principal Accounting Officer)
</TABLE>

SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

NO ANNUAL REPORT OR PROXY MATERIAL HAS BEEN SENT TO REGISTRANT'S SHAREHOLDER AND
NONE IS INTENDED TO BE SENT.