53

                                                                 1


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    Form 10-K

         (MarkOne) 
            [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 28, 1997

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

                       For the Transition Period from to
                 Registration Statement (Form S-1) No. 33-60273
                           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 8, 1997 Common  Stock:  $8,593,000  (based upon par value of shares
since there is no market for the Registrant's common stock)

             Number of common shares outstanding at August 8, 1997:
                             Common stock: 1,739,831


<PAGE>


                         FORM 10-K ANNUAL REPORT - 1997
                            PRO-FAC COOPERATIVE, INC.
                                TABLE OF CONTENTS

                                    PART I


<TABLE>                        
                                                                                                             PAGE 
ITEM  1. Description of Business
<S>                                                                                                           <C>
         General Development of Business.................................................................      3
         Relationship with Curtice Burns.................................................................      3
         Narrative Description of Business...............................................................      4
         Financial Information About Industry Segments...................................................      6
         Packaging and Distribution......................................................................      6
         Trademarks......................................................................................      6
         Raw Material Sources............................................................................      7
         Environmental Matters...........................................................................      7
         Seasonality of Business.........................................................................      8
         Practices Concerning Working Capital............................................................      8
         Significant Customers...........................................................................      8
         Backlog of Orders...............................................................................      8
         Business Subject to Government Contracts........................................................      8
         Competitive Conditions..........................................................................      8
         New Products and Research and Development.......................................................      9
         Employees.......................................................................................      9
         Cautionary Statement on Forward-Looking Statements..............................................      9

ITEM  2. Description of Properties.......................................................................     10

ITEM  3. Legal Proceedings...............................................................................     11

ITEM  4. Submission of Matters to a Vote of Security Holders.............................................     11

                                                 PART II

ITEM  5. Market for Registrant's Common Stock and Related Security Holder Matters........................     11.

ITEM  6. Selected Financial Data.........................................................................     12

ITEM  7. Management's Discussion and Analysis of Financial Condition and Results of Operations...........     13

ITEM  8. Financial Statements and Supplementary Data.....................................................     20

ITEM  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............     41

                                                 PART III

ITEM 10. Directors and Executive Officers of the Registrant..............................................     42

ITEM 11. Executive Compensation..........................................................................     47

ITEM 12. Security Ownership of Certain Beneficial Owners and Management..................................     49

ITEM 13. Certain Relationships and Related Transactions..................................................     51

                                                 PART IV

ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................     53
         Signatures......................................................................................     56
</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.

Curtice-Burns  Foods, Inc.  ("Curtice Burns" or the "Company") 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.
Pro-Fac and Curtice Burns were established  together in the early 1960s and have
had a  long-standing  contractual  relationship  under an  Integrated  Agreement
pursuant to which Pro-Fac provided crops and financing to Curtice Burns, Curtice
Burns  provided a market and  management to Pro-Fac,  and Pro-Fac  shared in the
profits of Curtice Burns (the "Integrated Agreement").

On November 3, 1994,  Pro-Fac  acquired Curtice Burns (the  "Acquisition"),  and
Curtice Burns became a  wholly-owned  subsidiary of Pro-Fac.  The purchase price
and fees and expenses  related to the Acquisition  were financed with borrowings
under a new credit agreement (the "New 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 New  Credit  Agreement  and the  Notes.  As a result  of the
indebtedness  incurred in  connection  with the  Acquisition,  Curtice Burns has
higher interest expenses than prior to the Acquisition.

                         RELATIONSHIP WITH CURTICE BURNS

Upon consummation of the Acquisition,  the Integrated  Agreement was terminated,
and  Pro-Fac  and  Curtice  Burns   entered  into  the  Pro-Fac   Marketing  and
Facilitation  Agreement  (the  "Pro-Fac  Marketing   Agreement").   The  Pro-Fac
Marketing Agreement  resembles the Integrated  Agreement in that it continues to
provide for Pro-Fac to supply crops and  additional  financing to Curtice Burns,
for Curtice Burns to provide a market and  management  services to Pro-Fac,  and
for  Pro-Fac  to  share  in the  profits  of  Curtice  Burns.  To  preserve  the
independence  of Curtice Burns,  the Pro-Fac  Marketing  Agreement also requires
that  certain of the  directors  of  Curtice  Burns 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 New Credit  Agreement and the Notes restrict the ability of Pro-Fac to amend
the Pro-Fac Marketing and Facilitation  Agreement.  The New Credit Agreement and
the Notes also restrict the amount of dividends  and other  payments that may be
made by the Company to Pro-Fac.

Purchase of Crops From Pro-Fac:  Under the Pro-Fac Marketing Agreement,  Curtice
Burns  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 both the Pro-Fac
Marketing  Agreement  and the  predecessor  agreement  to the Pro-Fac  Marketing
Agreement,  Curtice Burns paid Pro-Fac $51.4 million,  $44.7 million,  and $55.9
million as CMV for crops purchased from Pro-Fac in fiscal years 1997,  1996, and
1995,   respectively.   The  crops  purchased  by  Curtice  Burns  from  Pro-Fac
represented  approximately  71 percent,  72  percent,  and 73 percent of all raw
agricultural  crops  purchased by Curtice Burns in fiscal 1997,  1996, and 1995,
respectively.


<PAGE>



CMV is determined by a joint committee of the Boards of Directors of Pro-Fac and
Curtice Burns,  which is currently  comprised of the Chief Executive  Officer of
Curtice  Burns  and an equal  number  of  Pro-Fac  directors  and  Disinterested
Directors.   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 Curtice Burns,  it may be more or less than the price Curtice Burns
would pay in the open market in the absence of the Pro-Fac Marketing  Agreement.
The volume and type of crops to be purchased by Curtice  Burns under the Pro-Fac
Marketing  Agreement are  determined  pursuant to its annual profit plan,  which
requires the approval of a majority of the Disinterested Directors.

Patronage  Income of Pro-Fac:  In addition to CMV,  under the Pro-Fac  Marketing
Agreement,  Curtice Burns 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 Curtice Burns,  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.

Curtice  Burns paid  additional  patronage  income to  Pro-Fac of $10.3  million
(including  Pro-Fac's share of an accounting  change) and $9.6 million in fiscal
1997 and 1995,  respectively,  for those years.  In fiscal 1996,  Curtice  Burns
reduced the amount of CMV due to Pro-Fac by $9.0 million  based on an allocation
of a loss at Curtice Burns 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 Curtice  Burns.
Since the  Acquisition,  Pro-Fac is  required to reinvest at least 70 percent of
the additional patronage income in Curtice Burns.

               NARRATIVE DESCRIPTION OF BUSINESS OF CURTICE BURNS

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
1997,  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 A&P, Brunos, 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 Carvel, Church's,  Disney, Foodservice of America, KFC, MBM, McDonald's,
PYA, and Sysco.

Comstock Michigan Fruit ("CMF"),  Southern Frozen Foods and Brooks Foods: During
fiscal  1997,  these three  separate  divisions  were  consolidated  and are now
headquartered in Rochester, New York. The consolidated entity represents Curtice
Burns largest  business  unit.  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," "Silver
Floss,"  "Super  Pop,"  "Southern   Farms,"  "Thank  You,"  "Tropic  Isle,"  and
"Wilderness."  In fiscal 1997,  approximately  36 percent of net sales for these
businesses  represented  branded products,  approximately 25 percent represented
private   label   products   and    approximately    39   percent    represented
foodservice/industrial products.

This  business  unit is a major  supplier  of branded  and  private  label fruit
fillings to  retailers  and to  foodservice  institutions  such as  restaurants,
caterers,  bakeries and schools.  On July 21, 1995, the Company  acquired Packer
Foods,  Inc., and merged this pie filling operation into its existing  business.
(See  further  discussion  in  NOTE  3  of  "Notes  to  Consolidated   Financial
Statements.")



<PAGE>


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. The Company believes its
aseptic  production  is a  state-of-the-art  facility.  In 1997,  the  Company's
aseptically  processed  puddings and aseptically  processed cheese sauces held a
significant portion of the national foodservice market.

This business unit  processes  fruits and  vegetables  under Company  brands and
private labels.  Additional  products include  value-added  items such as canned
specialty fruits and frozen vegetable blends. Success in the fruit and vegetable
processing  business  is driven,  among other  things,  by an ability to control
costs.   This  objective  is  managed  through   capital   investments  and  the
modernization  of  processing  equipment,  modifications  to  product  mix,  and
refinement to advertising strategies.  In fiscal 1997, $9.6 million was invested
in capital improvements.

This Curtice Burns' business unit is also one of the nation's leading  suppliers
in the  production  and  sale of  frozen,  Southern-specialty  products  such as
black-eyed peas, okra,  Southern squash, and Southern specialty side dishes that
include summer squash casserole, Southern-style creamed corn, and Southern-style
black-eyed peas in a savory sauce.

Canned beans and tomato products are sold in several Midwestern states under the
Brooks label. The category  includes  value-added  items such as Chili Hot Beans
and stewed tomatoes.

Subsequent  to fiscal  1997,  the Company and  Flanagan  Brothers,  Inc. of Bear
Creek,  Wisconsin,  contributed  all of  their  assets  involved  in  sauerkraut
production into one new entity. This new entity, Great Lakes Kraut Company, will
operate as a New York limited  liability  company,  with ownership split between
the two parties.  This joint venture  includes the Silver Floss brand, the No. 1
selling  sauerkraut  brand in the US,  and  Krrrrisp  Kraut,  the No. 1  selling
refrigerated poly-bag brand in the country.

During  fiscal  1997,  Curtice  Burns 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,  glass beets, or frozen vegetable businesses.  This
transaction  also  included an agreement  requiring  Curtice Burns to handle all
vegetable sourcing for Seneca Foods at its New York plants.

On June 27, 1997,  URS Logistics,  Inc.  ("URS")  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 URS will manage this
facility  and all frozen  food  transportation  operations  of Curtice  Burns in
Georgia and New York.

Curtice  Burns Foods is renaming  this  combined  business and will announce the
name in the second quarter of fiscal 1998.

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

The Nalley products have been a vehicle for both  geographic  expansion and line
extension.  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  line  with  the  growing  trend  toward  private  label,   Nalley  has  been
aggressively  pursuing this growing business  segment.  Specifically,  Nalley is
executing  its store label  strategy on  specialty  products,  such as chili and
salsa,  salad  dressings  and canned  soups.  The private  label  customer  base
continues  to  expand  on a  national  basis  and  includes  Winn-Dixie  in  the
Southeast,  Wegmans in Upstate  New York,  Topco in the  Midwest,  and  Ralph's,
Safeway,  QFC,  Albertsons  and  Western  Family  on the West  Coast.  Specialty
businesses, such as International,  continue to grow in both branded and private
label products.

In April 1997, the Company acquired certain  businesses from Nalley Canada Ltd.,
a  privately  held,  independent  snack food  company and former  subsidiary  of
Curtice Burns. The acquired Canadian  operations  include a $12 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  1997,  two of  the  Curtice  Burns'  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:
<PAGE>

         Snyder of Berlin:  Snyder of Berlin,  located in Berlin,  Pennsylvania,
         produces and markets  several  varieties of potato chips in distinctive
         silver-colored  bags, as well as several  varieties of corn-based snack
         products  in  conventional  packaging,  primarily  under the "Snyder of
         Berlin"  brand.  Snyder  products are recognized for their unique taste
         and freshness among users in Mid-Atlantic states, which are some of the
         country's highest per capita snack consumption markets.

         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 proposition.

         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 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  as  well  as  in  Canada.  Branded  lines  of  the
CMF/Southern/Brooks  business  unit are sold  through  food  brokers  which sell
primarily to supermarket chains and various  institutional  feeders.  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.

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 via the Company's trucks or contract  haulers.  The
other divisions 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:


<PAGE>


<TABLE>
              Product                                Brand Name
<CAPTION>

<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                            Gracias, Thank You

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

Sauerkraut                          Silver Floss, Farman's

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

Syrup                               Lumberjack
</TABLE>

                              RAW MATERIAL SOURCES

In fiscal  1997,  the  Company  acquired  approximately  71  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  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 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.

Among the various programs for the protection of the environment which have been
adopted 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 to date received  permits for all  facilities  for which permits
are required, and each year submits applications for renewal permits for some of
the facilities.



<PAGE>


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 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 1997,  total capital  expenditures  of Pro-Fac and the Company were $13.7
million of which  approximately  $2.0 million was devoted to the construction of
environmental  facilities.  The Company estimates that the capital  expenditures
for  environmental   control  facilities,   principally  waste  water  treatment
facilities,  will be  approximately  $0.8  million  for the  1998  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 extended to the Company  under  agreements  with
CoBank, ACB. 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.

                              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 which  sales are made in an amount  which  equals 10  percent  or more of the
Company's  net sales.  The loss of even its  biggest  customer  would not have a
materially adverse effect on the Company.

                                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 ready  availability of a broad line of products,  product  quality,
price, and advertising and sales promotion.

In recent years, and  particularly  when various food items are in short supply,
the  constant  availability  of a full  line of food  items and the  ability  to
deliver the required  items  rapidly and  economically  have been among the most
important competitive factors in the markets in which the Company operates.  The
Company believes that it is competitive with national brands in this area since

<PAGE>


distribution  of many of its  regional  brands  and  custom-pack  food items are
limited to areas which can easily be served from its production and distribution
facilities.  In this way, the problems  inherent in attempting to supply markets
remote from its principal  areas of operation are  minimized,  and the marketing
area is commensurate with the production and storage facilities.

Quality of product  and  uniformity  of quality  are also  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 units 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  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 24 percent;
private label sales currently represent  approximately 20 percent;  and sales to
other manufacturers are approximately 4 percent of total sales.

An estimate of the number of competitors in the markets served by the Company is
very  difficult.  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,  Birdseye, 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.  While the major  brands are  dominant  in branded
products on a national  level,  the Company  believes  that it is a  significant
factor in many of the  marketing  areas  served  by one or more of its  regional
brands.

                    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 28, 1997, the Company had 3,363  full-time  employees,  of whom 2,599
were  engaged  in  production   and  the  balance  in   management,   sales  and
administration.  As of that date,  the Company also employed  approximately  321
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  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  SEC  in  its  rules,
regulations,  and releases.  The 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 12 to 18 and other statements
made in this Form 10-K and in other filings with the SEC.



<PAGE>


The Company cautions readers that any such forward-looking statements made by or
on behalf of the  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 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 Company's success in integrating operations and the
     availability of acquisition and alliance opportunities; and

     the 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 Curtice Burns
in its business are either owned by Curtice Burns or one of its  subsidiaries or
leased from third  parties.  All of the  properties  owned by Curtice  Burns 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.  Curtice Burns 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.

The  following  table  describes all  facilities  leased or owned by the Company
(other than the properties held for sale and certain public warehouses leased by
the Company from third  parties from time to time).  Except as otherwise  noted,
each facility set forth below is owned by the Company.

<TABLE>
                       FACILITIES UTILIZED BY THE COMPANY

<CAPTION>
   Type of Property (By Business Unit)                                                    Location                      Square Feet



 <S>                                                                                     <C>                               <C>    
 CMF/SOUTHERN FROZEN FOODS/BROOKS:
   Office building, manufacturing plant and warehouse                                   Benton Harbor, MI                 239,252
   Distribution center                                                                  Coloma, MI                        400,000
   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 facility1                                       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
   Cutting, curing and packaging plant                                                  Gorham, NY                         55,534
   Canning plant and warehouse; freezing plant                                          Oakfield, NY                      263,410
   Canning plant and warehouse                                                          Red Creek, NY                     153,076
   Cutting, curing and canning plant                                                    Shortsville, NY                   111,946
   Cutting and curing plant                                                             Waterport, NY                      21,626
   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
</TABLE>



<PAGE>
<TABLE>


                       FACILITIES UTILIZED BY THE COMPANY

  Type of Property (By Business Unit)                                                   Location                         Square Feet
<CAPTION>

NALLEY FINE FOODS:
   <S>                                                                                                                    <C>   
   Office building, warehouse and tank farm                                             Enumclaw, WA                       87,313
   Office building, manufacturing plant and warehouse                                   Tacoma, WA                        412,564
   Parking lot and yards1                                                               Tacoma, WA                        305,470
   Warehouses1                                                                          Tacoma, WA                        568,556
   Receiving and grading station1                                                       Cornelius, OR                      11,700
   Receiving and grading station1                                                       Mount Vernon, WA                  110,806
   Receiving and grading station1                                                       Aurora, OR                          6,800
   Office building - Fuller Building1                                                   Tacoma, WA                         60,000

SNACK FOODS GROUP:
   Office, plant and warehouse                                                          Berlin, PA                        190,225
   Administrative, plant, warehouse and distribution center - Tim's1                    Auburn, WA                         34,000
   Plant, warehouse, and distribution center - Matthews1                                Auburn, WA                         37,442
   Office, plant and warehouse                                                          Cincinnati, OH                    113,576
   Distribution Center                                                                  Elwood City, PA                     8,000
   Distribution Center                                                                  Monessen, PA                       10,000

CORPORATE HEADQUARTERS:

   Headquarters office1 (Includes office space for CMF/Southern Frozen Foods/Brooks
   as well as a Corporate Conference Center)                                            Rochester, NY                      62,500

<FN>
1Leased from third parties,  although certain related  equipment is owned by the
Company.
</FN>
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal  proceedings  other than routine  litigation
incidental  to the business to which either the Company or Pro-Fac is a party or
to which any of their  property is subject.  Further,  no such  proceedings  are
known to be contemplated by governmental authorities.

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

Not applicable.

                                     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  1997,  the  Cooperative  issued  51,991  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
<CAPTION>

<S>                                    <C>                   <C>       
 December 19, 1996                     44,191                $1,104,775
 April 11, 1997                         1,118                    27,950
 June 27, 1997                          6,682                   167,050
                                       ------                ----------
   Total                               51,991                $1,299,775
                                       ======                ==========
</TABLE>


<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA*
<TABLE>
Consolidated Operating Data:
(Dollars in Thousands, Except Capital Stock Data)
<CAPTION>
                                                                                           Five Year Summary
                                                                        1997         1996         1995         1994         1993
<S>                                                                   <C>          <C>          <C>          <C>          <C>     
Net sales                                                             $730,823     $739,094     $522,413     $ 58,237     $ 59,735
Cost of sales                                                          539,081      562,926      384,838       58,237       59,735
                                                                      --------     --------     --------     --------     --------
Gross profit                                                           191,742      176,168      137,575            0            0
Income from Curtice Burns prior to Acquisition                               0            0       11,239       34,229       (4,710)
Interest income                                                              0          770        4,402            0            0
Selling, administrative, and general (expenses)/income                (145,214)    (151,671)     (99,341)       1,056          965
Gain on sale of Finger Lakes Packaging                                   3,565            0            0            0            0
Restructuring charge                                                         0       (5,871)           0            0            0
Additional costs incurred as a result of fire                                0            0       (2,315)           0            0
                                                                      ----------   ---------    --------     --------     --------
Operating income/(loss)                                                 50,093       19,396       51,560       35,285       (3,745)
Interest expense                                                       (36,473)     (41,998)     (29,035)     (11,587)     (13,753)
                                                                      --------     --------     --------     --------     --------
Pretax income/(loss) before dividends, allocation of net proceeds,
   and cumulative effect of an accounting change                        13,620      (22,602)      22,525       23,698      (17,498)
Tax (provision)/benefit                                                 (5,529)      13,071        7,028          844            0
                                                                      --------     --------     --------     --------     -------- 
Income/(loss) before cumulative effect of an accounting change,
   dividends and allocation of net proceeds                              8,091       (9,531)      29,553       24,542      (17,498)
Cumulative effect of an accounting change                                4,606            0            0            0
                                                                      --------     --------     --------     --------   
Net income/(loss)                                                     $ 12,697     $ (9,531)    $ 29,553     $ 24,542     $(17,498)
                                                                      ========     ========     ========     ========     ========
Allocation of Net Proceeds:
   Net income/(loss)                                                  $ 12,697     $ (9,531)    $ 29,553     $ 24,542     $(17,498)
   Dividends on common and preferred stock                              (5,503)      (8,993)      (4,914)      (4,390)      (4,548)
                                                                      --------     --------     --------     --------     --------
   Net proceeds/(deficit)                                                7,194      (18,524)      24,639       20,152      (22,046)
   Allocation (to)/from earned surplus                                  (3,661)      18,524      (16,964)      (2,856)      27,917
                                                                      --------     --------     --------     --------     --------
   Net proceeds available to members                                  $  3,533     $      0     $  7,675     $ 17,296     $  5,871
                                                                      ========     ========     ========     ========     ========
Allocation of net proceeds available to members:
   Payable to members currently (25% of qualified proceeds available
   to members in fiscal 1997 and 20% in fiscal 1995, 1994, and 1993)  $    883     $      0     $  1,475     $  3,109     $  1,052
Allocated to members but retained by the Cooperative:
   Qualified retains                                                     2,650            0        5,900       12,437        4,209
   Non-qualified retains                                                     0            0          300        1,750          610
                                                                      --------     --------     --------      -------     --------
   Net proceeds available to members                                  $  3,533     $      0     $  7,675     $ 17,296     $  5,871
                                                                      ========     ========     ========     ========     ========
CMV**                                                                 $ 51,445     $ 44,701     $ 55,855     $ 59,216     $ 59,800
                                                                      ========     ========     ========     ========     ========
   Net proceeds allocated to members as a percent of CMV                  6.87%      (10.00)%      13.74%       29.21%        9.82%
Net proceeds available to members as a percent of CMV:
   Qualified                                                              6.87%        0.00%       13.20%       26.25%        8.80%
   Non-qualified                                                          0.00         0.00          .54%        2.96%        1.02%
                                                                      --------     --------     -----------  --------     --------
       Total net proceeds allocated to members as a percent of CMV        6.87%        0.00%       13.74%       29.21%        9.82%
                                                                      --------     --------     ----------   --------     --------
Balance Sheet Data:
   Investment in direct financing leases                              $      0     $      0     $      0     $141,322     $173,513
   Common stock                                                       $  8,944     $  9,185     $  9,395     $ 10,284     $ 13,455
   Redeemable Preferred                                               $    315     $    334     $      0     $      0     $      0
   Shareholders' and members' capitalization and redeemable stock     $132,663     $126,700     $145,228     $123,765     $109,904
   Total long-term debt and senior subordinated notes
    (excludes current portion)                                        $229,829     $327,683     $343,665     $127,134     $168,000
   Debt to equity ratio***                                               1.8:1        2.7:1        2.4:1        1.2:1        1.8:1
   Total assets                                                       $546,677     $637,297     $689,739     $296,051     $324,884
Capital Stock Data Cash dividends paid per share:
     Common                                                           $   0.00     $    .25   $    .2750     $    .25     $    .25
     Non-Cumulative Preferred                                         $   1.50     $   1.50   $   1.6875     $ 1.5625     $  .8125
     Class A Cumulative Preferred                                     $   1.72     $   1.29   $        0     $      0     $      0
     Class B Cumulative Preferred                                     $   1.00     $   1.00   $        0     $      0     $      0
   Average common stock investment per member                         $ 14,333     $ 14,419   $   15,032     $ 14,546     $ 18,662

Number of Members:                                                         624          637          625          707          721
<FN>
 *   Certain prior year amounts have been reclassified to conform to fiscal 1997
     presentation.

**   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 review is to highlight the more  significant  changes in the
major items of  Pro-Fac's  statement  of net  proceeds  from fiscal 1995 through
1997.

                         PRO-FAC'S RESULTS OF OPERATIONS

As a result of the Acquisition on November 3, 1994, the consolidated  results of
operations of Pro-Fac after that date include gross profit,  operating expenses,
and other  results of operations  of Curtice  Burns.  Prior to November 3, 1994,
Pro-Fac's results of operations included only amounts paid or payable by Curtice
Burns to Pro-Fac under the Integrated Agreement.

Changes From Fiscal 1996 to Fiscal 1997: The 1997 CMV of crops delivered  during
the 1996  production  season  increased to $51.4  million from $44.7  million in
fiscal  1996.  The 15.0  percent  increase  was the net result of a 4.0  percent
tonnage  decrease  offset by the  effect of price  and mix  variations  from the
commodities.  Payment to the members of CMV was 106.9 percent of deliveries. The
increased payment was attributed to the significantly  increased earnings of the
Company's wholly-owned  subsidiary,  Curtice Burns. The results of Curtice Burns
operations are discussed below.

For the year ended June 28, 1997,  the  increase/(decrease)  in net proceeds and
the  allocation  to members  compared to the prior year is  summarized  below in
millions of dollars.

<TABLE>
<S>                                                                         <C>   
Curtice Burns gross profit                                                  $ 15.6
Gain on sale of Finger Lakes Packaging                                         3.6
Restructuring                                                                  5.9
Interest income, other                                                        (0.8)
Decreased selling, general and administrative expenses                         6.4
Decreased interest expense                                                     5.5
                                                                            ------
Change in income before taxes, dividends, and allocations of net proceeds
  and cumulative effect of an accounting change                               36.2
Change in tax (provision)/benefit                                            (18.6)
Cumulative effect of an accounting change                                      4.6
                                                                            ------
Change in net income                                                        $ 22.2

                                                                            ======
</TABLE>
Changes From Fiscal 1995 to Fiscal 1996: The 1996 CMV of crops delivered  during
the 1995  production  season  decreased to $44.7  million from $55.9  million in
fiscal  1995.  This 20.0  percent  decrease was the net result of a 17.8 percent
tonnage  increase  offset by the  effect of price  and mix  variations  from the
commodities.  Payment  to the  members  for CMV was  limited  to 90  percent  of
deliveries,  or $40.2  million.  The 10 percent  reduction in the  obligation to
members of $4.5 million was recognized as a reduction in other selling,  general
and administrative expenses.

For the year ended June 29, 1996,  the  increase/(decrease)  in net proceeds and
the  allocation  to members  compared to the prior year is  summarized  below in
millions of dollars:

<TABLE>
<S>                                                                        <C>    
Curtice Burns gross profit                                                 $ 38.6
Restructuring                                                                (5.9)
Income received from Curtice Burns prior to Acquisition                     (11.2)
Interest income, other                                                       (3.6)
Cost relating to fire claim                                                   2.3
Increased selling, general and administrative expenses                      (52.3)
Increased interest expense                                                  (13.0)
                                                                           ------ 
Change in income before taxes, dividends, and allocations of net proceeds   (45.1)
Change in tax benefit                                                         6.0
                                                                           ------
Change in net income                                                       $(39.1)

                                                                           ======

</TABLE>
Because of the profit/(loss) split provisions between Curtice Burns and Pro-Fac,
business  conditions  and trends  affecting  Curtice Burns'  profitability  also
affect the  profitability  of Pro-Fac.  For these reasons,  management  believes
discussions  relating to the  financial  condition  and results of operations of
Pro-Fac should primarily focus on the operations of Curtice Burns.

<PAGE>
The following  comparisons of Curtice  Burns' results to its prior-year  periods
present  the  results  of  Curtice  Burns  for  both  the  period  prior  to its
Acquisition  by  Pro-Fac as well as the period  subsequent  to the  Acquisition.
Therefore,  comparisons to the prior-year  periods are not comparable in certain
respects  due to  differences  between the cost bases of the assets prior to the
Acquisition  compared  to those after the  Acquisition  as well as the effect on
Curtice Burns'  operations for  adjustments to  depreciation,  amortization  and
interest  expense.  The following  tables  illustrate  the Company's  results of
operations by business for the fiscal years ended June 28, 1997,  June 29, 1996,
and June 24,  1995,  and the  Company's  total assets by business as at June 28,
1997 and June 29, 1996.

<TABLE>
Net Sales
(Dollars in Millions)
<CAPTION>
                                                         Fiscal Years Ended
                                        6/28/97                6/29/96              6/24/95
                                             % of                   % of                 % of
                                     $       Total         $        Total        $       Total
                                   -----     -----       -----      -----      -----     -----

<S>                                <C>        <C>        <C>         <C>       <C>        <C> 
CMF, Southern Frozen Foods, and
   Brooks Foods1                   440.2      60.2       431.2       58.4      419.5      56.0
Nalley Fine Foods                  182.4      25.0       189.2       25.6      181.2      24.2
Snack Foods Group                   67.3       9.2        63.7        8.6       60.5       8.1
                                   -----     -----      ------      -----      -----     -----
     Subtotal ongoing operations   689.9      94.4       684.1       92.6      661.2      88.3
Businesses sold or to be sold2      40.9       5.6        55.0        7.4       87.3      11.7
                                   -----     -----      ------      -----      -----     -----
     Total                         730.8     100.0       739.1      100.0      748.5     100.0
                                   =====     =====       =====      =====      =====     =====

<FN>
1    CMF, Southern Frozen Foods, and Brooks Foods administrative operations were
     consolidated during fiscal 1997.

2    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>

<TABLE>
Operating Income1
(Dollars in Millions)
<CAPTION>
                                                                                       Fiscal Years Ended
                                                                  6/28/97                    6/29/96                  6/24/95
                                                                         % of                       % of                     % of
                                                               $         Total           $          Total          $         Total
                                                             -----       -----         -----        -----        -----       -----

<S>                                                         <C>          <C>          <C>          <C>           <C>         <C> 
CMF, Southern Frozen Foods, and Brooks Foods2                40.5         81.1         26.5         186.6         42.2        81.2
Nalley Fine Foods                                            10.8         21.7         (2.9)        (20.4)        18.7        35.9
Snack Foods Group                                             5.9         11.8          4.1          28.9          3.6         6.9
Corporate overhead                                          (10.5)       (21.0)        (6.8)        (47.9)       (10.3)      (19.8)
                                                            -----        -----         ----        ------        -----       -----
   Subtotal ongoing operations                               46.7         93.6         20.9         147.2         54.2       104.2
Businesses sold or to be sold and other non-recurring3        3.2          6.4         (6.7)        (47.2)        (2.2)       (4.2)
                                                            -----        -----         ----        ------        -----       -----
     Total                                                   49.9        100.0         14.2         100.0         52.0       100.0
                                                            =====        =====         ====         =====        =====       =====
<FN>

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

2    CMF, Southern Frozen Foods, and Brooks Foods administrative operations were
     consolidated during fiscal 1997.

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.

     In fiscal 1995, such amount includes change in control expenses,  a gain on
     assets  resulting  from a fire and  operating  activities  of Finger  Lakes
     Packaging,  the canned  vegetable  business,  Nalley  Canada Ltd.,  and the
     Nalley US Chips and Snacks business.
</FN>
</TABLE>
   See NOTE 3 to the "Notes to Consolidated Financial Statements."
<PAGE>
<TABLE>
EBITDA1,2
(Dollars in Millions)
<CAPTION>

                                                                              Fiscal Years Ended
                                                               6/28/97             6/29/96              6/24/95
                                                                    % of                 % of                  % of
                                                            $       Total        $       Total        $        Total
                                                         ------     -----      -----     -----      -----      -----

<S>                                                       <C>        <C>       <C>       <C>         <C>        <C> 
CMF, Southern Frozen Foods, and Brooks Foods3             57.1       74.4      44.4      101.6       55.0       72.7
Nalley Fine Foods                                         16.2       21.1       2.3        5.3       22.9       30.3
Snack Foods Group                                          7.6        9.9       6.0       13.7        5.4        7.1
Corporate                                                (10.1)     (13.1)     (6.9)     (15.8)     (10.6)     (13.9)
                                                         -----      -----      ----      -----      -----      -----
  Subtotal ongoing operations                             70.8       92.3      45.8      104.8       72.7       96.2
Businesses sold or to be sold and other non recurring4     5.9        7.7      (2.1)      (4.8)       2.9        3.8
                                                         -----      -----      ----      -----      -----      -----
  Total                                                   76.7      100.0      43.7      100.0       75.6      100.0
                                                         =====      =====      ====      =====      =====      =====

<FN>
1    In  conjunction  with the  Acquisition,  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
     difficult  to  analyze.  Nonetheless,   earnings  before  interest,  taxes,
     depreciation  and  amortization  (EBITDA)  for  ongoing  businesses  can be
     compared. 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    CMF, Southern Frozen Foods, and Brooks Foods administrative operations were
     consolidated during fiscal 1997.

4    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.

     In fiscal 1995, such amount includes change in control expenses,  a gain on
     assets  resulting  from a fire,  and  operating  activities of Finger Lakes
     Packaging,  the canned  vegetable  business,  Nalley  Canada Ltd.,  and the
     Nalley US Chips and Snacks business.
</FN>
</TABLE>

See NOTE 3 to the "Notes to Consolidated Financial Statements."

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

                                          6/28/97                6/29/96
                                                % of                     % of
                                     $          Total         $          Total
                                   -----        -----       -----        -----


<S>                                <C>           <C>        <C>           <C> 
CMF, Southern Frozen Foods and
  Brooks Foods1                    329.0         60.6       339.5         53.5
Nalley Fine Foods                  144.4         26.6       134.1         21.1
Snack Foods Group                   26.7          4.9        27.8          4.4
Corporate                           42.5          7.9        71.6         11.3
                                   -----        -----       -----        -----
    Subtotal ongoing operations    542.6        100.0       573.0         90.3
Businesses sold or to be sold2       0.0          0.0        61.3          9.7
                                   -----        -----       -----        -----
    Total                          542.6        100.0       634.3        100.0
                                   =====        =====       =====        =====

<FN>
1    CMF, Southern Frozen Foods, and Brooks Foods administrative operations were
     consolidated during fiscal 1997.

2    Includes  Finger Lakes  Packaging  and the portion of the canned  vegetable
     business  sold to Seneca  Foods.  See NOTE 3 to the "Notes to  Consolidated
     Financial Statements."
</FN>
</TABLE>
<PAGE>
                     CHANGES FROM FISCAL 1996 TO FISCAL 1997

Net income for fiscal 1997 of $5.5 million  represented a $17.4 million increase
over the prior  year's loss of $11.9  million.  Total EBITDA  before  cumulative
effect of an  accounting  change was $76.7  million  for the year ended June 28,
1997 versus $43.7 million in the prior year. EBITDA for ongoing business reached
$70.8  million  versus  the  prior  year's  $45.8  million.   This   significant
improvement reflected the benefits from numerous initiatives, the focus of which
was the  implementation  of a strategic plan that outlined several major efforts
including debt reduction and structural changes.

During  fiscal 1997,  the  outstanding  debt of the Company was reduced by $86.8
million.  Ongoing efforts to improve cash flow through inventory control and the
proceeds received from the sales of Finger Lakes Packaging,  the New York canned
vegetable business, the Georgia distribution center, and the sale of idle assets
were the primary factors in the reduction of debt and related interest expense.

Structural  changes within the Company's 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
versus  $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. In addition
during fiscal 1997, the Company completed the restructuring program begun in the
fourth quarter of fiscal 1996.  These efforts  focused on  consolidation  of the
Southern Frozen Foods and Brooks  operations into CMF and the  consolidation  of
support services such as human resources and agricultural services.

Net Sales:  Total net sales in fiscal 1997 decreased $8.3 million or 1.1 percent
compared to the prior year period. Net sales from ongoing  operations,  however,
increased $5.8 million or 0.8 percent.  This increase is primarily  attributable
to increased  volume and improved pricing at both CMF and the Snack Foods Group.
The vegetable and fruit categories at CMF have experienced  improved pricing due
to overall demand and increasing sales to new customers.

Increases   at  the  Snack   Foods   Group  are   attributable   to   successful
sales/marketing efforts and the acquisition of Matthews Candy Company during the
fourth quarter of fiscal 1996.

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 business units.  Improved pricing in the
vegetable,  fruit,  and popcorn  categories at CMF have increased  profitability
from a year ago.  Nalley's,  which in the prior year experienced  extremely high
start-up costs on the new salad dressing line, has managed  through those issues
and has significantly improved margins.
Increased sales from the Snack Foods Group also improved profitability.

Selling,  Administrative,  and General Expenses:  Selling,  administrative,  and
general  expenses have decreased  $10.7 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 are attributable to the significantly  improved earnings.  Overall, the
net decrease is attributed to a $5.8 million  decrease in selling,  advertising,
and trade  promotions  expenses  resulted from  decreased  spending 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 CMF,  Southern Frozen Foods, and Brooks  locations,
and the sale of Finger Lakes Packaging.

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 million which
were applied to Bank debt.  The  transaction  also  included a long-term  supply
agreement.

Interest  Expense:  The  decrease  in interest  expense of $7.0  million or 16.6
percent  resulted  from both the inventory  reduction  and cash flow  management
programs  initiated in fiscal 1996 as well as the debt  reduction in fiscal 1997
attributable  to the sales of  Finger  Lakes  Packaging,  the  canned  vegetable
business, and idle facilities.

Provision  for Taxes:  The  provision  for taxes in fiscal 1997 of $3.7  million
changed  $10.6  million  from the benefit of $6.9  million in fiscal  1996.  The
provision  for  taxes in  fiscal  1997  results  from  increased  earnings.  The
Company's  effective  tax rate in fiscal 1997 was 49.3  percent.  The  Company's
effective tax rate is negatively impacted by the  non-deductibility of goodwill.
A further  discussion  of tax  matters  is  included  at NOTE 6 to the "Notes to
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

<PAGE>


change is preferable because it provides a better matching of costs with related
revenues.  The favorable cumulative effect of the change (net of Pro-Fac's share
of $2.9 million and income taxes of $1.1  million) was $1.7  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.

                     CHANGES FROM FISCAL 1995 TO FISCAL 1996

EBITDA from ongoing businesses  declined $32.2 million from $76.5 million in the
prior year to $44.3 million in fiscal 1996.

Depressed  vegetable  pricing  significantly  impacted the  Company's  financial
results as well as much of the industry. The Company's vegetable category, which
includes  significant  segments of CMF and Southern Frozen Foods,  experienced a
71.2 percent  reduction in EBITDA  compared to the prior year.  Improvements  in
earnings of other product lines at CMF offset the vegetable earnings reduction.

Issues  impacting  Nalley  results  included the costly start up of the dressing
plant, other manufacturing  variances and increased  promotion expenses.  Nalley
EBITDA was $20.6 million lower than the prior year.  Several steps were taken to
address these problems, including senior management changes at the division.

A major  inventory  reduction  program  across all divisions was  implemented in
fiscal 1996.  Long-term debt was reduced $37.5 million in fiscal 1996 due to the
cash flow  generated  from these  programs and from  additional  payments to the
Company by Pro-Fac.  (See NOTES 2 and 5 to the "Notes to Consolidated  Financial
Statements.")

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

Net Sales:  The Company's net sales in fiscal 1996 of $739.1  million  decreased
$9.4  million or 1.3 percent from $748.5  million in fiscal 1995.  The net sales
attributable  to businesses sold or to be sold were $55.0 million in fiscal 1996
compared to $87.3  million in fiscal 1995.  The Company's net sales from ongoing
operations  were $684.1  million in fiscal 1996, an increase of $22.9 million or
3.5 percent from $661.2 million in fiscal 1995.

Gross  Profit:  Gross profit of $176.2  million in fiscal 1996  decreased  $42.2
million  or 19.3  percent  from  $218.4  million  in  fiscal  1995.  Of this net
decrease, a $14.0 million reduction was attributable to businesses sold or to be
sold.  The remaining  decrease of $28.2 million from ongoing  operations was the
result of  variations  in  volume,  selling  prices,  costs,  product  mix,  and
increased depreciation due to the Acquisition.

Reductions  at the  Company's  CMF/Southern  Frozen Foods  operations  primarily
relates to depressed vegetable pricing.

Reductions at the Company's Nalley operation  relates to higher costs on all the
product  lines,  but  particularly  in salad  dressings  due to  plant  start-up
activities.

Restructuring:  Restructuring  expenses,  as described  above,  amounted to $5.9
million in fiscal  1996.  Restructuring  expenses in fiscal 1995 of $8.4 million
reflect  the  impact of the sale of  certain  assets of the  Nalley US Chips and
Snacks business and other expenses relating to the disposal of this operation.

Change in Control Expenses:  Change in control expenses recorded in fiscal 1995,
amounting to $2.2 million, reflected non-deductible cost relating to the sale of
the Company (primarily legal, accounting, and investment banking fees).

Gain on Assets  Resulting From Fire Claim: The gain on assets resulting from the
fire claim  recorded  in fiscal  1995  amounted  to $4.1  million.  This  amount
represented the replacement value in excess of the depreciated book value of the
building and equipment  destroyed on July 7, 1994 at Southern Frozen Foods. This
amount is net of additional costs incurred.

Selling,  Administrative  and  General  Expenses:  Selling,  administrative  and
general expenses in fiscal 1996 of $156.1 million  decreased $3.8 million or 2.4
percent from $159.9  million in fiscal  1995.  This net decrease of $3.8 million
includes:



<PAGE>
<TABLE>
(In Millions)
<CAPTION>

                                                                        Businesses
                                                             Sold or
                                                            to be Sold    Ongoing     Total

<S>                                                            <C>          <C>       <C>   
Change in trade promotions, advertising and selling costs      $(8.3)       $0.7      $(7.6)
Change in other administrative expenses                          2.5         1.3        3.8
                                                               -----        ----      -----
                                                               $(5.8)       $2.0      $(3.8)
                                                               =====        ====      =====
</TABLE>

The $0.7 million decrease in trade promotions,  advertising and selling costs at
the Company's  ongoing  operations is the net from increased  costs at Nalley of
$3.7 million  (primarily in the canned and dressing  product  lines),  increased
costs of $1.0 million at the Snack Group  offset by  decreases  at  CMF/Southern
Frozen  Foods/Brooks  of $4.0  million  (primarily  in the  filling  and topping
product lines).

The $1.3 million  increase in other  administrative  costs  attributable  to the
Company's  ongoing  operations  was  primarily  related to increased  expense at
Nalley. The increased expense at Nalley included  administrative  expenses which
previously  had been allocated to Nalley Chips and Snacks and Nalley Canada Ltd.
The disposal of these businesses did not eliminate centralized functions leaving
costs which will be reduced over a period of time.

Interest  Expense:  Interest  expense in fiscal 1996 of $42.0 million  increased
$9.6 million or 29.6 percent from $32.4.  million in fiscal 1995.  This increase
was  primarily  attributable  to the increased  borrowing  and  increased  rates
related  to the  Acquisition  of the  Company  by  Pro-Fac.  The  impact  of the
Acquisition  was  reflected  for the full year in fiscal  1996 and for a partial
year in fiscal 1995.

Benefit/(Provision)  for Taxes:  The  benefit  for taxes in fiscal  1996 of $6.9
million  compared  to a  provision  of $6.0  million in fiscal  1995.  A further
discussion  of tax  matters  is  included  at NOTE 6 of "Notes  to  Consolidated
Financial Statements."

                         LIQUIDITY AND CAPITAL RESOURCES

The following  discussion  highlights the major  variances in the  "Consolidated
Statement of Changes in Cash Flows" for fiscal 1997 compared to fiscal 1996.

Net cash provided by operating activities decreased in fiscal 1997 primarily due
to an inventory-reduction program that favorably impacted fiscal 1996 cash flow.
Cash flow was also  positively  impacted  in fiscal  1996 due to the  receipt of
approximately   $8.5  million  in  insurance  proceeds  compared  to  the  final
settlement  of $4.0 million  received in fiscal 1997.  Earnings,  however,  were
greatly improved in fiscal 1997.

Net cash  provided by investing  activities  increased  significantly  in fiscal
1997,  primarily  due to the sales of Finger Lakes  Packaging,  a portion of the
canned  vegetable  business,  the  Georgia  distribution  center,  and the  idle
facilities.  These actions were part of an overall  initiative in fiscal 1997 to
reduce the Company's  outstanding debt. Management believes that the significant
reduction in debt will provide the Company with the added financial  flexibility
needed to operate the  business.  All proceeds  from asset sales were applied to
Bank debt in accordance with the terms of the New Credit Agreement.  Fiscal 1996
results  included  proceeds  from  the  disposition  of  Nalley's  Ltd.  and the
acquisition of Packer Foods.  The purchase of property,  plant, and equipment in
both years was for general operating purposes.

Borrowings:  Under the New  Credit  Agreement,  Pro-Fac  is able to borrow up to
$84.0 million for seasonal 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 total line and
(ii) the sum of 60 percent of eligible  accounts  receivable  plus 50 percent of
eligible  inventory.  On June 28, 1997,  Pro-Fac  established a seasonal line of
credit with the Bank. In doing so, the Bank limited the  Company's  availability
under the Seasonal  Facility to $66.0  million less  outstanding  borrowings  of
Pro-Fac.  Pro-Fac's  outstanding  borrowings under their seasonal line were $7.0
million at June 28, 1997.

The Company  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 28, 1997, (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 and Pro-Fac's  outstanding
borrowings, was $59.0

<PAGE>
million. In addition to its seasonal financing, as of June 28, 1997, the Company
had  $34.2  million  available  for  long-term  borrowings  under  the Term Loan
Facility.

The New Credit  Agreement and Indenture  requires that Pro-Fac and Curtice Burns
meet  certain   financial  tests  and  ratios  and  comply  with  certain  other
restrictions and limitations.  As of June 28, 1997, the Company is in compliance
with,  or has  obtained  waivers  for,  all  such  covenants,  restrictions  and
limitations.

Short- and  Long-Term  Trends:  Throughout  fiscal  1997 the  Company has worked
toward accomplishing the restructuring  initiatives begun in fiscal 1996. During
fiscal 1997, this program focused on debt reduction.  Ongoing  initiatives  will
include a focus 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."

The vegetable and fruit portions of the business,  which  includes  CMF/Southern
Frozen Foods,  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 effect of the 1996 growing season on fiscal 1997 financial  results has been
a minor improvement from the prior year.

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  million  of  the
restructuring  charge comprised  employee  termination  benefits.  During fiscal
1997,  approximately  $2.0  million  of  this  reserve  was  liquidated.  It  is
anticipated  that the  remaining  reserve  will be  liquidated  during the first
quarter of fiscal 1998.

Information  Services  Reorganization:  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.  Any material costs
associated  with this recall are  anticipated  to 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.



<PAGE>


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
    ITEM                                                                                                                   Page
<CAPTION>

                                           

<S>                                                                                                                           <C>
Pro-Fac Cooperative, Inc. and Consolidated Sub idiary:
   Management's Responsibility for Financial Statements....................................................................   21
   Report of Independent Accountants.......................................................................................   22
   Consolidated Financial Statements:
     Consolidated Statement of Operations and Net Proceeds for the years ended June 28, 1997, June 29, 1996,
       and June 24, 1995...................................................................................................   23
     Consolidated Balance Sheet for the years ended June 28, 1997 and June 29, 1996........................................   24
     Consolidated Statement of Cash Flows for the years ended June 28, 1997, June 29, 1996, and June 24, 1995..............   25
     Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock
       for the years ended June 28, 1997, June 29, 1996, and June 24, 1995.................................................   27
     Notes to Consolidated Financial Statements............................................................................   28
     Selected Quarterly Financial Data.....................................................................................   41

</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 Price Waterhouse LLP, independent
accountants, who were responsible for conducting their examination in accordance
with generally  accepted  auditing  standards.  Their resulting report is on the
succeeding 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/Stephen R. Wright                    /s/Earl L. Powers
   Stephen R. Wright                       Earl L. Powers
   General Manager                         Vice President Finance and
                                           Assistant Treasurer




August 1, 1997


<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 Form10-K present fairly, in all material  respects,  the financial position
of Pro-Fac  Cooperative,  Inc. and its  subsidiary  at June 28,1997 and June 29,
1996,  and the results of their  operations and their cash flows for each of the
three  fiscal  years in the  period  ended June 28,  1997,  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  when  read in  conjunction  with  the  related  consolidated  financial
statements.




PRICE WATERHOUSE LLP


Rochester, New York
August 1, 1997


<PAGE>
                              FINANCIAL STATEMENTS
<TABLE>
Pro-Fac Cooperative, Inc.
Consolidated Statement of Operations and Net Proceeds

(Dollars in Thousands)
<CAPTION>
                                                                                             Fiscal Years Ended
                                                                                  June 28,         June 29,          June 24,
                                                                                    1997             1996              1995
<S>                                                                              <C>               <C>              <C>     
Net sales                                                                        $730,823         $739,094          $522,413
Cost of sales                                                                     539,081          562,926           384,838
                                                                                 --------         --------          --------
Gross profit                                                                      191,742          176,168           137,575
Selling, administrative, and general expenses                                    (145,214)        (151,671)          (99,341)
Gain on sale of Finger Lakes Packaging                                              3,565                0                 0
Restructuring charge                                                                    0           (5,871)                0
Additional costs incurred as a result of fire                                           0                0            (2,315)
Income from Curtice Burns prior to Acquisition                                          0                0            11,239
Interest income                                                                         0              770             4,402
                                                                                 --------         --------          -------- 
Operating income                                                                   50,093           19,396            51,560
Interest expense                                                                  (36,473)         (41,998)          (29,035)
                                                                                 --------         --------          -------- 
Pretax income/(loss) before dividends and allocation of net proceeds               13,620          (22,602)           22,525
Tax (provision)/benefit                                                            (5,529)          13,071             7,028
                                                                                 --------         --------          -------- 
Income/(loss) before cumulative effect of an accounting change, dividends,
   and allocation of net proceeds                                                   8,091           (9,531)           29,553
Cumulative effect of an accounting change                                           4,606                0                 0
                                                                                 --------         --------          --------
Net income/(loss)                                                                $ 12,697         $ (9,531)         $ 29,553
                                                                                 ========         ========          ========
Allocation of Net Proceeds:
   Net income/(loss)                                                             $ 12,697         $ (9,531)         $ 29,553
   Dividends on common and preferred stock                                         (5,503)          (8,993)           (4,914)
                                                                                 --------         ---------         --------  
   Net proceeds/(deficit)                                                           7,194          (18,524)           24,639
   Allocation (to)/from earned surplus                                             (3,661)          18,524           (16,964)
                                                                                 --------         --------          --------
   Net proceeds available to members                                             $  3,533         $      0          $  7,675
                                                                                 ========         ========          ========

Allocation of net proceeds available to members:
   Payable to members currently (25% and 20% of qualified proceeds
     available to members in fiscal 1997 and 1995, respectively)                 $    883         $      0          $  1,475

   Allocated to members but retained by the Cooperative:
     Qualified retains                                                              2,650                0             5,900
     Non-qualified retains                                                              0                0               300
                                                                                 --------         --------          --------
     Net proceeds available to members                                           $  3,533         $      0          $  7,675
                                                                                 ========         ========          ========
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc.
Consolidated Balance Sheet
(Dollars in Thousands)
<CAPTION>
                                     ASSETS
                                                                                                   June 28, 1997      June 29, 1996
<S>                                                                                                  <C>                <C>     
 Current assets:                                                                                     
   Cash and cash equivalents                                                                         $  2,838           $  8,873
   Accounts receivable, trade, less allowances for bad debts of  $970 and $836,
      respectively                                                                                     48,661             47,259
   Accounts receivable, other                                                                           2,795              6,814
   Current deferred tax assets                                                                         12,312             13,731
   Inventories -
     Finished goods                                                                                    87,904             97,018
     Raw Materials and supplies                                                                        27,001             33,556
                                                                                                     --------           --------
       Total inventories                                                                              114,905            130,574
                                                                                                     --------           --------
   Prepaid manufacturing expense                                                                        8,265             11,339
   Prepaid expenses and other current assets                                                            6,323              1,066
   Current investment in Bank                                                                             946                  0
                                                                                                     --------           -------- 
       Total current assets                                                                           197,045            219,656
Investment in Bank                                                                                     24,321             24,439
Property, plant, and equipment, net                                                                   217,923            271,574
Assets held for sale                                                                                    3,259              5,368
Goodwill and other intangible assets, less accumulated amortization of $10,053
   and  $5,961, respectively                                                                           96,429            103,760
Other assets                                                                                            7,700             12,500
                                                                                                     --------           --------
       Total assets                                                                                  $546,677           $637,297
                                                                                                     ========           ========
</TABLE>
<TABLE>
                                     LIABILITIES AND SHAREHOLDERS' AND MEMBERS' CAPITALIZATION
<CAPTION>
<S>                                                              <C>                     <C>            <C>                <C>
Current liabilities: 
  Current portion of obligations under capital leases                                               $    558           $    547
   Current portion of long-term debt                                                                    8,075              8,075
   Accounts payable                                                                                    49,256             54,791
   Income taxes payable                                                                                 5,672              2,289
   Accrued interest                                                                                     8,663              9,447
   Accrued employee compensation                                                                       11,063              8,368
   Other accrued expenses                                                                              21,956             24,775
   Dividends payable                                                                                       61                128
   Amounts due members                                                                                 15,791              7,875
                                                                                                     --------           --------
       Total current liabilities                                                                      121,095            116,295
Long-term debt                                                                                         69,829            167,683
Senior subordinated notes                                                                             160,000            160,000
Obligations under capital leases                                                                          817              1,125
Deferred income tax liabilities                                                                        39,591             44,753
Other non-current liabilities                                                                          22,682             20,741
                                                                                                     --------           --------
       Total liabilities                                                                              414,014            510,597
                                                                                                     --------           --------
Commitments and contingencies
Class B cumulative  redeemable preferred stock,  liquidation
  preference $10 per share, authorized 500,000 shares; issued
  and outstanding 31,435 and 3,364, respectively                                                          315                334
Common stock, par value $5, authorized - 5,000,000 shares 

                                                                June 28, 1997           June 29, 1996
                                                                -------------           -------------
   Shares issued                                                 1,788,815               1,836,963
   Shares subscribed                                                54,557                  59,359
                                                                 ---------               ---------
       Total subscribed and issued                               1,843,372               1,896,322
   Less subscriptions receivable in installments                   (54,557)                (59,359)
                                                                 ---------               ---------
       Total issued and outstanding                              1,788,815               1,836,963      8,944              9,185
                                                                 =========               =========
Shareholders' and members' capitalization:
   Retained earnings allocated to members                                                              31,920             32,318
   Non-qualified allocation to members                                                                  2,960              3,275
   Non-cumulative Preferred Stock, par value $25, authorized - 5,000,000 shares;
     issued and outstanding - 53,797 and 105,788, respectively                                          1,345              2,645
   Class A Cumulative Preferred Stock, liquidation preference $25 per share; authorized
     49,500,000 shares; issued and outstanding 3,215,709 and 3,032,704, respectively                   80,393             75,818

   Earned surplus                                                                                       6,786              3,125
                                                                                                     --------           --------
       Total shareholders' and members' capitalization                                                123,404            117,181
                                                                                                     --------           --------
       Total liabilities and capitalization                                                          $546,677           $637,297
                                                                                                     ========           ========

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

<TABLE>
Pro-Fac Cooperative Inc.
Consolidated Statement of Cash Flows

(Dollars in Thousands)
<CAPTION>

                                                                                                  Fiscal Years Ended
                                                                                     June 28, 1997   June 29, 1996  June 24, 1995
                                                                                     -------------   -------------  -------------
<S>                                                                                   <C>             <C>             <C>     
Cash Flows from Operating Activities: 
  Net income/(loss)                                                                   $  12,697       $ (9,531)       $ 29,553
   Amount payable to members currently                                                     (883)             0          (1,475)
   Adjustments to reconcile net income/(loss) to net cash provided by
     operating activities:
     Restructuring and net gain from disposals                                           (3,565)         5,871               0
     Amortization of goodwill and other intangibles                                       4,092          3,422           2,618
     Amortization of debt issue costs                                                       800            800             600
     Depreciation                                                                        22,680         26,081          13,864
     Cumulative effect of an accounting change                                           (4,606)             0               0
     Provision/(benefit) for deferred taxes                                               4,557         (8,212)         (3,186)
     Provision for losses on accounts receivable                                            445            528              91
     Equity in undistributed earnings of the Bank                                        (1,143)        (1,532)         (1,288)
     Change in assets and liabilities:
       Accounts receivable                                                               (3,983)        13,482          12,148
       Inventories                                                                       (1,636)        33,347          67,022
       Income taxes payable/(refundable)                                                  2,272         12,395          (9,520)
       Accounts payable and accrued expenses                                             (2,424)       (15,027)        (16,331)
       Amounts due to members                                                             7,033         (5,935)           (729)
       Other assets and liabilities                                                         530         (1,385)         18,139
                                                                                      ---------       --------     -----------
Net cash provided by operating activities                                                36,866         54,304         111,506
                                                                                      ---------       --------      ----------
Cash Flows from Investing Activities:
   Purchase of property, plant, and equipment                                           (13,691)       (19,453)        (28,661)
   Proceeds from disposals                                                               74,683          5,005               0
   Return from investment in direct financing leases                                          0              0          11,344
   Proceeds from Investment in Bank                                                         315              0               0
   Cash paid for acquisition                                                                  0         (5,785)              0
                                                                                      ---------       --------        -------- 
Net cash provided by/(used in) investing activities                                      61,307        (20,233)        (17,317)
                                                                                      ---------       --------        --------
Cash Flows from Financing Activities:
   Proceeds from issuance of long-term debt                                                   0          5,400         359,000
   Payments on long-term debt including acquisition related financing fees              (97,854)       (25,056)       (192,095)
   Payments on capital leases                                                              (503)          (825)         (1,259)
   Amounts paid to shareholders for acquisition                                               0              0        (167,800)
   Net assets acquired from Curtice Burns                                                     0              0         (81,278)
   Issuance of stock, net of repurchases                                                   (260)           124            (889)
   Cash portion of non-qualified conversion                                                 (88)          (122)           (802)
   Cash paid in lieu of fractional shares                                                     0             (6)            (10)
   Cash dividends paid                                                                   (5,503)        (8,865)         (4,914)
                                                                                      ---------       --------        --------
Net cash used in financing activities                                                  (104,208)       (29,350)        (90,047)
                                                                                      ---------       --------        --------
Net change in cash and cash equivalents                                                  (6,035)         4,721           4,142
Cash and cash equivalents at beginning of period                                          8,873          4,152              10
                                                                                      ---------       --------        --------
Cash and cash equivalents at end of period                                            $   2,838       $  8,873        $  4,152
                                                                                      =========       ========        ========

<FN>
All  amounts  above  exclude  the  effects of  acquisitions  as  detailed in the
Supplemental Disclosure of Cash Flow Information
</FN>
</TABLE>


<PAGE>


<TABLE>
Pro-Fac Cooperative Inc.
Consolidated Statement of Cash Flows (Continued)

(Dollars in Thousands)
<CAPTION>

                                                                                                 Fiscal Years Ended
                                                                                    June 28, 1997   June 29, 1996  June 24, 1995
                                                                                    -------------   -------------  -------------
<S>                                                                                    <C>             <C>            <C>      
  Supplemental Disclosure of Cash Flow Information Cash paid/(received) during the
   year for:                                                                           
     Interest (net of amount capitalized)                                              $36,907         $41,508        $ 24,498
                                                                                       =======         =======        ========
     Income taxes, net                                                                 $(1,300)        $(9,206)       $  5,567
                                                                                       =======         =======        ========
   Acquisition of Packer Foods and Matthews Candy Co.:
     Accounts receivable                                                              $      0         $ 1,282   $           0
     Inventories                                                                             0           3,902               0
     Prepaid expenses and other current assets                                               0             270               0
     Property, plant and equipment                                                           0           6,044               0
     Goodwill                                                                                0             493               0
     Deferred tax asset                                                                      0             264               0
     Accounts payable                                                                        0          (4,954)              0
     Accrued expenses                                                                        0            (418)              0
     Other non-current liabilities                                                           0          (1,098)              0
                                                                                      --------         -------        --------
     Cash paid for acquisition                                                        $      0         $ 5,785        $      0
                                                                                      ========         =======        ========
   Net assets acquired from Curtice Burns:
     Accounts receivable                                                              $      0         $     0        $ 79,068
     Inventories                                                                             0               0         226,220
     Other assets                                                                            0               0          27,664
     Goodwill and other intangible assets                                                    0               0          24,156
     Fixed assets                                                                            0               0         159,985
     Accounts payable and accrued expenses                                                   0               0        (100,594)
     Short-term debt                                                                         0               0         (49,097)
     Long-term debt                                                                          0               0        (276,391)
     Deferred tax liability                                                                  0               0          (3,247)
     Other liabilities                                                                       0               0          (6,486)
                                                                                      --------         -------        --------
                                                                                      $      0         $     0        $ 81,278
                                                                                      ========         =======        ========

Supplemental Schedule of Non-Cash Investing and Financing Activities:
     Conversion of retains to preferred stock                                         $  3,275         $ 2,379        $ 11,665
                                                                                      ========         =======        ========
     Net proceeds allocated to members but retained by the Cooperative                $  2,650         $     0        $  6,200
                                                                                      ========         =======        ========
     Capital lease obligations incurred                                               $    206         $   113        $  1,562
                                                                                      ========         =======        ========
     Notes from Nalley Canada Ltd. forgiven in acquisition                            $  4,986         $     0        $      0
                                                                                      ========         =======        ========
     Receivables from Curtice Burns forgiven in the acquisition:
         Due from Curtice Burns for long-term debt                                    $      0         $     0        $110,576
                                                                                      ========         =======        ========

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



<PAGE>


<TABLE>
Pro-Fac Cooperative, Inc.
Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Redeemable Stock

(Dollars in Thousands)
<CAPTION>

                                                                                             Fiscal Years Ended
                                                                                 June 28,         June 29,          June 24,
                                                                                   1997             199               1995
                                                                                 --------        ---------          --------

<S>                                                                             <C>               <C>              <C> 
Retained earnings allocated to members:
0Qualified retains:                                                                 
   Balance at beginning of period                                               $ 32,318          $ 34,250         $ 36,924
   Net proceeds allocated to members                                               2,650                 0            5,900
   Converted to preferred stock                                                   (3,048)           (1,926)          (8,564)
   Cash paid in lieu of fractional shares                                              0                (6)             (10)
                                                                                --------          --------         --------
   Balance at end of period                                                       31,920            32,318           34,250
                                                                                --------          --------         --------

Non-qualified retains:
   Balance at beginning of period                                                  3,275             3,851            7,454
   Distribution of 1991, 1990, 1989, and 1988 non-qualified retains:
     Cash paid                                                                       (88)             (122)            (802)
     Converted to preferred stock                                                   (227)             (454)          (3,101)
   Net proceeds allocated to members                                                   0                 0              300
                                                                                --------          --------         --------
   Balance at end of period                                                        2,960             3,275            3,851
                                                                                --------          --------         --------
Total retains allocated to members at end of period                               34,880            35,593           38,101
                                                                                --------          --------         --------

Non-cumulative Preferred Stock:
   Balance at beginning of period                                                  2,645            76,083           64,418
   Converted from earnings retained for preferred stock                                0                 0            8,564
   Conversion of 1991, 1990, 1989, and 1988 non-qualified retains                      0                 0            3,101
   Conversion to cumulative preferred stock                                       (1,300)          (73,438)               0
                                                                                --------          --------         --------
   Balance at end of period                                                        1,345             2,645           76,083
                                                                                --------          --------         --------

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

Earned surplus (unallocated and apportioned):
   Balance at beginning of period                                                  3,125            21,649            4,685
   Allocation to/(from) earned surplus                                             3,661           (18,524)          16,964
                                                                                --------          --------         --------
   Balance at end of period                                                        6,786             3,125           21,649
                                                                                --------          --------         --------
Total shareholders' and members' capitalization                                 $123,404          $117,181         $135,833
                                                                                ========          ========         ========

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

Common stock:
   Balance at beginning of period                                               $  9,185          $  9,395         $ 10,284
   Repurchased, net of issued                                                       (241)             (210)            (889)
                                                                                --------          --------         --------
   Balance at end of period                                                     $  8,944          $  9,185         $  9,395
                                                                                ========          ========         ========

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


<PAGE>


                            PRO-FAC COOPERATIVE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.    SUMMARY OF ACCOUNTING POLICIES

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.

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  Curtice-Burns  Foods,  Inc.  ("Curtice  Burns"  or the
"Company").

Curtice Burns 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  70 percent of sales.  The  Company's  products are primarily
distributed in the United States.

Fiscal  Year:  The Fiscal  year of Pro-Fac  ends on the last  Saturday  in June.
Fiscal 1996 comprised 53 weeks and fiscal 1997 and 1995 each comprised 52 weeks.

Consolidation: As of all dates after November 3, 1994, and for all periods after
such date, the consolidated financial statements include the Cooperative and its
wholly-owned  subsidiary,  Curtice-Burns  Foods,  Inc.  ("Curtice Burns" or "the
Company")  after  elimination of  intercompany  transactions  and balances.  The
Acquisition  of Curtice  Burns was  completed on November 3, 1994 (see NOTE 2 of
"Notes to Consolidated Financial Statements").

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.  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.

Reclassification:  Certain  items  for  fiscal  1996 and  fiscal  1995 have been
reclassified to conform with fiscal 1997 presentations.

Cash  and  Cash  Equivalents:  Cash  and  cash  equivalents  include  short-term
investments  with  maturities  of three months or less.  Short-term  investments
amounted  to $5.3  million  at June  29,  1996.  There  were no such  short-term
investments at June 28, 1997 or June 24, 1995.

Inventories:  Inventories  are  stated  at the  lower of cost or  market  on the
first-in, first-out ("FIFO") method. Reserves recorded at June 28, 1997 and June
29, 1996 were $362,000 and $485,000, respectively.

Investment in CoBank ("The Bank"):  The  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).

Manufacturing  Overhead:  Allocation of manufacturing overhead to finished goods
produced is on the basis of a  production  year;  thus at the end of each fiscal
year,  manufacturing  costs  incurred  by  seasonal  plants,  subsequent  to the
previous pack, are deferred and included in the accompanying balance sheet under
the caption "Prepaid manufacturing expense."

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.

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.



<PAGE>


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 1997,  1996,  and 1995 was $800,000,  $800,000,  and
$600,000, respectively.

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.

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 1997,  1996, and 1995 amounted to $8,736,000,  $9,831,000 and
$13,150,000, respectively.

Disclosures Abut Fair Value of Financial Instruments:  The following methods and
assumptions  were used by the Company 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.

         Long-Term  Investments:  The carrying value of the Company's investment
         in CoBank  was $25.3  million at June 28,  1997.  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.

New Accounting Pronouncements: During fiscal 1997, the Company adopted Financial
Accounting  Standards  Board  Statement  No. 123 ("SFAS 123"),  "Accounting  for
Stock-Based  Compensation"  As  the  Company's  Long-Term  Incentive  Plan  is a
compensatory  plan,  the  adoption  of SFAS  123 had no  significant  impact  on
operations.



<PAGE>



NOTE 2. CHANGE IN CONTROL OF CURTICE BURNS

In 1993, the Company's management and Board of Directors began exploring several
strategic  alternatives  for the Company,  including a possible  sale of all the
equity of the  Company.  Those  activities  ultimately  resulted  in the Company
entering  into an Agreement  and Plan of Merger with Pro-Fac and its  subsidiary
PFAC on September 27, 1994 (the "Merger  Agreement").  On November 3, 1994, PFAC
merged  into the  Company,  making  the  Company a  wholly-owned  subsidiary  of
Pro-Fac.

In connection  with the  Acquisition,  PFAC sold $160.0 million of 12.25 percent
Senior  Subordinated  Notes (the  "Notes")  due 2005 and  entered  into a credit
agreement (the "New 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 New Credit  Agreement  have
become obligations of the Company and have been guaranteed by Pro-Fac.

Prior to the Acquisition on November 3, 1994, the Company  expensed $2.2 million
of legal,  accounting,  investment  banking,  and other expenses relative to the
change of control issue. In recognizing  these expenses,  the Company  allocated
half of these  amounts to Pro-Fac as a deduction  to the profit  split.  Pro-Fac
disputed these charges, however, such dispute was resolved with the merger.

The Acquisition  was accounted for using the purchase  method of accounting.  In
conjunction  with the  change in  ownership  all other  identifiable  assets and
liabilities   were  adjusted  to  reflect  their  fair  value  at  the  date  of
Acquisition.  These  allocations were finalized in fiscal 1996. In recording the
transaction,  approximately  $121.5  million was  recorded  to adjust  property,
plant, and equipment to fair market value, and the asset lives were adjusted for
assets acquired. In addition, approximately $110.0 million of goodwill and other
intangible  assets were  recorded as the excess of purchase cost over net assets
acquired.  Included in this amount was approximately  $42.0 million for deferred
tax adjustments to properly reflect the effects of the Acquisition in accordance
with the SFAS No. 109, "Accounting for Income Taxes." (See further discussion of
tax  matters at NOTE 6 of "Notes to  Consolidated  Financial  Statements.")  The
resulting  annual  amortization  of goodwill  and other  intangible  assets will
approximate $4.0 million using lives ranging from 5 to 35 years.

The contractual  relationship  between Pro-Fac and the Company is defined in the
Pro-Fac  Marketing and Facilitation  Agreement.  Under the Pro-Fac Marketing and
Facilitation  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 Curtice Burns,  it may be more or less than the price Curtice Burns
would pay in the open market in the absence of the Pro-Fac Marketing  Agreement.
The volume and type of crops to be purchased by Curtice  Burns under the Pro-Fac
Marketing  Agreement are  determined  pursuant to its annual profit plan,  which
requires  the approval of a majority of the  Disinterested  Directors of Curtice
Burns.  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 Curtice  Burns,  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.

Following, in capsule form, is the consolidated, unaudited results of operations
of Pro-Fac for the fiscal year ended June 24, 1995,  assuming the Acquisition by
Pro-Fac took place at the beginning of the 1994 fiscal year.

<TABLE>
(In Millions)
<CAPTION>

                                Fiscal Year Ended
                            (Pro Forma is unaudited)

                                    June 24, 1995
                               Actual         Pro Forma

<S>                            <C>              <C>   
Net sales                      $522.4           $748.5
Income before taxes            $ 22.5           $ 28.4
Net income                     $ 29.5           $ 31.4
</TABLE>



<PAGE>


NOTE 3.       RESTRUCTURING, ACQUISITIONS, AND DISPOSALS

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.

Nalley Canada Ltd.: In April 1997, the Company acquired certain  businesses from
Nalley Canada Ltd., a privately held,  independent snack food company and former
subsidiary of Curtice  Burns.  The acquired  Canadian  operations  include a $12
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.  The purchase price of approximately  $5.0 million was paid
through the forgiveness of various long-term  receivables  issued to the Company
in connection with its sale of the stock of Nalley's Canada Ltd. in 1995.

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.

Georgia  Frozen  Distribution  Center:  On June 27, 1997,  URS  Logistics,  Inc.
("URS")  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  URS  will  manage  its  facility  and all  frozen  food
transportation  operations of Curtice Burns 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.

Sale of New York  Canned  Vegetable  Businesses:  On May 6, 1997,  Seneca  Foods
Corporation ("Seneca") acquired the Curtice Burns 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
Curtice Burns.  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.

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.  Proceeds from
this sale were applied to outstanding Bank loans. The Company received  proceeds
of approximately $30.0 million. The transaction also included a long-term supply
agreement between Silgan and Curtice Burns.

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 its latest  fiscal year ended  December 31, 1994,  Packer had net
sales  of  $13  million,   operating  income  of  $300,000,  and  income  before
extraordinary items of $100,000. Packer Foods has been merged into the Company's
CMF 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.

Restructuring  initiatives  resulted in the following charges to earnings of the
company in fiscal 1996 and 1995:

         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

<PAGE>


         termination  benefits,  and  approximately  $1.9 million for  strategic
         consulting  incurred  throughout  the  year.  Reductions  in  personnel
         included both operational and administrative positions.

         Fiscal 1995 Restructuring Charge: Included in fiscal 1995 results was a
         restructuring charge of $8.4 million to reflect the estimated impact of
         the sale of certain assets of the Nalley US Chips and Snacks  operation
         and other  expenses  relating  to the  disposal of this  operation.  On
         December  19,  1994  this  operation  was sold for  approximately  $2.0
         million.  This sale was contemplated by Pro-Fac in conjunction with the
         acquisition.

NOTE 4. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS

The  following  is a summary  of  property,  plant  and  equipment  and  related
obligations at June 28, 1997 and June 29, 1996:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                   June 28, 1997                                   June 29, 1996
                                        Owned         Leased                         Owned           Leased
                                         Assets        Assets           Total         Assets          Assets            Total

<S>                                    <C>           <C>             <C>           <C>                <C>             <C>       
Land                                   $  5,755       $    0         $  5,755      $    6,005         $    0          $  6,005
Land improvements                         2,061            0            2,061           2,641              0             2,641
Buildings                                80,907          645           81,552          97,855            690            98,545
Machinery and equipment                 167,043        2,397          169,440         193,608          2,509           196,117
Construction in progress                 13,053            0           13,053          11,881              0            11,881
                                       --------       ------         --------        --------         ------          --------
                                        268,819        3,042          271,861         311,990          3,199           315,189
Less accumulated depreciation            52,194        1,744           53,938          42,042          1,573            43,615
                                       --------       ------         --------        --------         ------          --------
Net                                    $216,625       $1,298         $217,923        $269,948         $1,626          $271,574
                                       ========       ======         ========        ========         ======          ========
Obligations under capital leases1                     $1,375                                          $1,672
Less current portion                                     558                                             547
                                                      ------                                          ------
Long-term portion                                     $  817                                          $1,125
                                                      ======                                          ======

<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
$342,000 and $470,000 in fiscal 1997 and 1996, 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 28, 1997.

<TABLE>
(Dollars in Thousands)
<CAPTION>


Fiscal Year Ending Last                     Capital     Operating   Total Future
  Saturday In June                          Leases       Leases      Commitment
       <S>                                  <C>         <C>    
       1998                                $  783       $ 5,368       $ 6,151
       1999                                   556         4,248         4,804
       2000                                   125         2,522         2,647
       2001                                    92         1,115         1,207
       2002                                    66           444           510
   Later years                                200            71           271
                                           ------       -------       -------
Net minimum lease payments                  1,822       $13,768       $15,590
                                                        =======       =======
Less amount representing interest             447
Present value of minimum lease payments    $1,375
</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
$11,204,000,  $10,927,000,  and  $6,017,000  fiscal years 1997,  1996, and 1995,
respectively.



<PAGE>


NOTE 5.       DEBT

Bank Facility:  The Bank Facility  includes Term Loan,  Seasonal  Facility,  and
Letter of Credit facilities. The outstanding borrowings under the Term Loan were
$72.2 million at June 28, 1997.

The Seasonal Facility provides  seasonal  financing of up to $66.0 million.  The
Letter of Credit Facility provides $18.0 million.

         Guarantees and Security:  All  obligations  under the Bank Facility are
         guaranteed  by Pro-Fac and certain  subsidiaries  of Curtice Burns (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.

         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 8.6
         percent per annum for fiscal 1997.

         Borrowings under the Seasonal Facility are payable at the expiration of
         that portion of the facility,  which is December 1997;  except that for
         15 consecutive calendar days during each year, the borrowings under the
         Seasonal Facility must be zero.

Short-term borrowings for the three years ended June 28, 1997 were as follows:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                     Fiscal         Fiscal         Fiscal
                                                      1997           1996           19951

<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               $65,000         $94,000        $73,000


Average amount outstanding during the period        $34,300         $53,700        $55,600


Weighted average interest rate during the period        7.3%            7.4%           7.5%



<FN>

1 The above amounts include  borrowings  from commercial  banks and from Pro-Fac
under existing and pre-existing loan agreements.
</FN>
</TABLE>

         The Letter of Credit  Facility  provides for the issuance of letters of
         credit through December 1997. Management anticipates timely renewals of
         both the Seasonal and the Letter of Credit facilities.

         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, or
         has obtained waivers for, all covenants,  restrictions and requirements
         under the terms of the borrowing agreement.

         Commitment Fees: The Bank assesses  commitment fees of 0.55 percent on
         the seasonal  line and 0.25 percent on the unused  portion of the Term
         Loan.

         Fair Value:  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 New Credit Agreement was approximately  $71.8 million at June
         28, 1997.

         Based on an  estimated  borrowing  rate at fiscal  year end 1996 of 9.6
         percent for long-term debt with similar terms and maturities,  the fair
         value of the Company's  long-term debt outstanding under the New Credit
         Agreement was approximately $167.6 million at June 29, 1996.


<PAGE>


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 New Credit Agreement).

         Certain Covenants: The Notes limited the amount Pro-Fac can borrow from
         the Company to $10.0  million and provided  that,  if Pro-Fac  borrowed
         from a source  other than the  Company,  Pro-Fac  was  restricted  from
         borrowing  from the Company.  On June 28, 1996,  Pro-Fac  established a
         line of credit with the Bank and, therefore,  no longer can borrow from
         the Company.

         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  Curtice  Burns 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 Curtice  Burns'  Fixed  Charge  Coverage
         Ratio (as  defined in the  Indenture,  a ratio of cash flow to interest
         and  tax-adjusted  dividends) 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 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.

         Based on an  estimated  borrowing  rate at 1996 fiscal year end of 12.5
         percent for  borrowings  with similar  terms and  maturities,  the fair
         value of the Notes was $156.7 million at June 29, 1996.

Other Debt:  Other debt of $5.7 million carries rates up to 11.0 percent at June
28, 1997.

Maturities:  Total long-term debt maturities during each of the next five fiscal
years are as follows:  1998 through 1999, $8.1 million each; 2000, $9.7 million,
2001,  $16.9  million,  and 2002,  $11.5  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 defined in the Bank Facility.  As of June 28, 1997, 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
                             1997              1996             1995
<S>                         <C>            <C>                <C>    
Federal -
  Current                   $  658         $ (4,884)          $(3,796)
  Deferred                   4,409           (7,349)           (4,081)
                            ------         --------           -------
                             5,067          (12,233)           (7,877)
State and foreign -
  Current                      314               25               (46)
  Deferred                     148             (863)              895
                            ------         --------           -------
                               462             (838)              849
                            ------         --------           -------
                            $5,529         $(13,071)          $(7,028)
                            ======         ========           =======
</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 28,           June 29,         June 24,
                                                                1997               1996             1995

<S>                                                            <C>             <C>                <C>    
Federal                                                        $4,631          $ (7,697)          $ 7,884
State income taxes, net of federal income tax effect              484              (834)              564
Allocation to members                                            (230)                0            (2,581)
Goodwill amortization                                           1,041               784               637
Dividend received deduction                                      (472)             (521)                0
Utilization of net operating loss carryforward                      0                 0            (5,078)
Other (net)                                                        75               (95)              162
                                                               ------          --------           -------
Subtotal                                                        5,529            (8,363)            1,588
Tax benefits resulting from prior years' exempt status              0            (4,708)           (8,616)
                                                               ------          --------           ------- 
  Total                                                        $5,529          $(13,071)          $(7,028)
                                                               ======          ========           =======

Effective Tax Rate                                               40.6%             (57.7)%          (31.2)%
                                                                 ====              =====            =====
</TABLE>

The consolidated deferred tax  (liabilities)/assets  consist of the following at
June 28, 1997:
<TABLE>

                                               Fiscal           Fiscal
                                                1997             1996

<S>                                          <C>              <C>      
Liabilities
  Depreciation                               $(49,357)        $(61,350)
  Non-compete agreements                         (462)            (766)
  Long-term receivables                          (538)            (426)
  Prepaid manufacturing                        (3,215)          (4,411)
  Other                                          (215)             (39)
                                             --------         --------
                                              (53,787)         (66,992)
Assets
  Non-qualified retains                         1,006            1,114
  Inventory reserves                            2,322            2,203
  Allowance for doubtful accounts                 377              313
  Capital and operating loss carryforwards     10,159           34,615
  Accrued employee benefits                     3,431            3,014
  Insurance accruals                            2,058            2,031
  Pension/OPEB accruals                         7,128            6,368
  Restructuring reserves                        1,332            1,731
  Promotional Reserves                          1,592                0
  Other                                         3,315            2,564
                                             --------         --------
                                               32,720           53,953
                                             --------         --------
  Net deferred liabilities                    (21,067)         (13,039)
  Valuation allowance                          (6,212)         (17,983)
                                             --------         --------
                                             $(27,279)        $(31,022)
</TABLE>

The  Cooperative  has  recorded a benefit  for the federal  net  operating  loss
carryforwards  resulting  from fiscal 1996 results.  As of June 28, 1997 the net
operating  loss  carryforward  available is $11.8 million ($4.0 million of tax).
The net operating loss  carryforward  expires 2011.  During fiscal year 1997 the
cooperative  utilized  $32.4 million ($11.0 million of tax) of the net operating
loss available.

During fiscal year 1996,  the  Cooperative's  wholly owned  subsidiary,  Curtice
Burns, sold the stock of its wholly-owned  subsidiary Curtice Burns Meat Snacks,
Inc.  Substantially  all of the assets of this subsidiary were previously  sold.
The sale resulted in a capital loss of $36.3 million  ($14.2 million of tax). At
the time a full valuation  allowance has been recorded  against the capital loss
carryforward,  as it was more likely  than not that a tax  benefit  would not be
realized. During fiscal year 1997, the Cooperative utilized $21.6 million of the
capital loss carryforward.  In conjunction with the acquisition of Curtice Burns
by the Cooperative, the

<PAGE>


recognition of this capital loss carryforward reduces goodwill.  The decrease to
the Cooperative's  capital loss carryforward  corresponds to the decrease in the
valuation allowance. As of June 28, 1997 the Cooperative has $14.7 million ($5.7
million of tax) 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 Curtice Burns and Pro-Fac  approved
appropriate  amendments  to the Bylaws of the Curtice Burns to allow the company
to qualify as a cooperative  under Subchapter T of the Internal Revenue Code. In
August  1995,  Curtice  Burns 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 Curtice  Burns 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,  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 Curtice Burns 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.

Pension cost for fiscal years ended 1997,  1996, and 1995 includes the following
components:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                      Fiscal 1997     Fiscal 1996        Fiscal 1995
                                                      -----------     -----------        -----------

<S>                                                    <C>             <C>                <C>    
Service cost -- benefits earned during the period      $ 2,888         $  3,141           $ 2,427
Interest cost on projected benefit obligation            6,461            6,544             4,365
Return on assets:
  Actual gain                                           (4,884)         (19,430)                0
  Net amortization and deferral                         (4,063)          12,123            (4,789)
                                                       --------        ---------          --------
     Total gain                                         (8,947)          (7,307)           (4,789)
Amortization of prior service costs                        (22)               0                 0
Amortization of (gain)/loss                               (811)             (64)                0
                                                       --------        ---------          --------
                                                          (431)           2,314             2,003
Union and other pension costs                              282              385               147
                                                       --------        ---------          --------
Net pension cost                                       $  (149)        $  2,699           $ 2,150
                                                       ========        =========          =======
</TABLE>



<PAGE>


The pension plan's funded status was as follows:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                                     June 28, 1997     June 29, 1996      June 24, 1995
                                                                     -------------     -------------      -------------
                                                                        Assets            Assets             Assets
                                                                        Exceed            Exceed             Exceed
                                                                      Accumulated       Accumulated        Accumulated
                                                                       Benefits          Benefits           Benefits

<S>                                                                    <C>               <C>                <C>      
Actuarial present value of benefit obligations:
  Vested benefit obligation                                            $(72,223)         $(74,108)          $(65,350)
                                                                       ========          ========           ========
  Accumulated benefit obligation                                       $(75,138)         $(77,035)          $(69,449)
                                                                       ========          ========           ========

Projected benefit obligation                                           $(84,280)         $(85,307)          $(78,809)
Plan assets at fair value                                                88,979            89,716             74,897
                                                                       ---------         ---------          ---------
Plan assets excess of/(less than) projected benefit obligation            4,699             4,409             (3,912)
Unrecognized net (gain)/loss                                            (15,913)          (18,456)            (8,787)
Unrecognized prior service cost                                            (243)             (266)                 0
                                                                       --------          --------           --------
                                                                        (11,457)          (14,313)           (12,699)
Union and other pension plans                                            (2,125)           (2,318)            (2,243)
                                                                       --------          --------           --------

Pension liability                                                      $(13,582)         $(16,631)          $(14,942)
                                                                       ========          ========           ========
</TABLE>
In 1997,  the assumed  discount rate,  assumed  long-term rate of return on plan
assets and the assumed long-term rate of compensation increase were 8.0 percent,
10.0 percent,  and 4.5 percent,  respectively.  The year-end  projected  benefit
obligation  decreased  by  approximately  $2,606,000  due to the increase in the
discount rate from 7.75 percent to 8.0 percent.

In 1996 the assumed  discount  rate,  assumed  long-term  rate of return on plan
assets,  and the  assumed  long-term  rate of  compensation  increase  were 7.75
percent,  10.0 percent, and 4.50 percent,  respectively.  The year end projected
obligation  increased  by  approximately  $7,587,000  due to the decrease in the
discount rate from 8.5 percent to 7.75 percent.

In 1995 the assumed  discount  rate,  assumed  long-term  rate of return on plan
assets,  and the  assumed  long-term  rate of  compensation  increase  were 8.50
percent, 10.0 percent, and 4.50 percent, respectively.

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>

                                                                                   June 28, 1997     June 29, 1996


<S>                                                                                   <C>               <C>    
Accumulated postretirement benefit obligation:
  Fully eligible active participants                                                  $   169           $   141
  Other active participants                                                                75               108
  Retirees                                                                              2,360             2,446
                                                                                      -------           -------
     Total                                                                              2,604             2,695
  Less Plan assets at fair value                                                            0                 0
                                                                                      -------           -------
  Accumulated postretirement benefit obligation in excess of fair value of assets      (2,604)           (2,695)
  Unrecognized gains                                                                     (378)             (443)
                                                                                      -------           -------
  Accrued postretirement benefit cost                                                 $(2,982)          $(3,138)
                                                                                      =======           =======
</TABLE>



<PAGE>


Net periodic postretirement benefit cost included the following components:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                              Fiscal 1997       Fiscal 1996     Fiscal 1995
                                              -----------       -----------     -----------

<S>                                              <C>              <C>              <C> 
Service cost                                     $  8             $ 23             $ 15
Interest cost                                     199              222              154
Net amortization and deferral                     (15)               0                0
                                                 ----             ----             ----
Net periodic postretirement benefit cost         $192             $245             $169
                                                 ====             ====             ====
</TABLE>

The  weighted-average,  assumed  discount  rate  used  to  measure  the  benefit
obligations  was 7.75  percent at the  beginning  and 8.00 percent at the end of
fiscal  1997.   The  change  in  the  discount   rate  caused  the   accumulated
postretirement benefit obligation to decrease by approximately $53,000.

The annual rate of increase in the per capita cost of health care  benefits  was
assumed to be 10.0  percent  for 1997 and 11.0  percent  for 1996.  The rate was
assumed to decrease gradually to 5.0 percent by the year 2007 and remain at that
level thereafter.

The health  care cost  trend rate  assumption  has a  significant  effect on the
amounts reported.  To illustrate,  increasing the assumed health care cost trend
rates by one  percentage  point in each  year  would  increase  the  accumulated
postretirement  benefit  obligation  (APBO) and the aggregate of the service and
interest  cost  components  of the net periodic  postretirement  benefit cost as
follows:

<TABLE>
(Dollars in Thousands)
<CAPTION>

                                                         Fiscal 1997
                                                   Current          1% Higher
                                                    Trend             Trend

<S>                                                <C>               <C>   
APBO                                               $2,604            $2,696
Service cost + interest cost                       $  207            $  215
</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.  In fiscal
1995, $1.4 million was allocated to the plans.

On October 1, 1995, the Company merged the Deferred Profit Sharing Plan into the
401(k) Investment Plan. Under the new combined plan, 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 1997 and 1996 the Company  allocated  $500,000 and $400,000,
respectively,  in the form of matching  contributions and $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 Curtice Burns 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  1997  performance  units  is  determined  on  the  fourth
anniversary  of grant.  The total units granted were 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.  In fiscal 1997,  approximately  $1.5  million was  allocated to this
plan.

The value of the grants from the Curtice  Burns 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

<PAGE>

price of such shares is par value,  $10 per share.  During fiscal 1997 and 1996,
31,435 and 33,364 shares,  respectively,  were held by employees, and 833 shares
were subscribed to as of June 28, 1997.

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 28, 1997, there were 623 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 1996 dividends on common stock were paid at a rate of 5.0 percent.  No
dividends on common stock were paid in fiscal 1997.

At June 28, 1997 and June 29, 1996, there were outstanding subscriptions, at par
value, for 54,557 and 59,359 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 28, 1997,
the number of Class A Cumulative Preferred Stock record holders was 1,892.

Subsequent to June 28, 1997, 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 $1.3 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% cumulative preferred stock" (the "Class B Stock"). These
shares  will be issued to  employees  of Curtice  Burns  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:

<TABLE>
<S>                                   <C>                                                          
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.
</TABLE>

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.



<PAGE>


         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.

NOTE 9.       SUBSEQUENT EVENTS AND OTHER MATTERS

Formation of New Sauerkraut Company:  Subsequent to fiscal year-end,  on July 1,
1997,  the Company  and  Flanagan  Brothers,  Inc.,  of Bear  Creek,  Wisconsin,
contributed  all their assets  involved in  sauerkraut  production  into one new
sauerkraut company. This new company, Great Lakes Kraut Company, will operate as
a New York limited  liability  company,  with  ownership  split  between the two
companies.  Management  anticipates the alliance will  positively  impact fiscal
1998 earnings.

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  Southern  Frozen Foods  Division 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.

Southern  Frozen  Foods Fire:  In July 1994, a plant  operated by the  Company's
Southern Frozen Foods Division,  located in Montezuma,  Georgia,  was damaged by
fire.  All material  costs  associated  with the  facility  repairs and business
interruption  were covered under the  Company's  insurance  policies.  A gain on
assets  destroyed  in the fire was  recognized  by  Curtice  Burns  prior to the
Acquisition.



<PAGE>


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

Quarterly financial  information for the fiscal year ended June 28, 1997 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 1997                                     1                 2                3                 4        Total Year
                                            ---------         ---------         --------          --------    ----------

<S>                                          <C>               <C>              <C>               <C>          <C>     
Net sales                                    $174,000          $208,186         $179,146          $169,491     $730,823
Gross profit                                 $ 41,691          $ 59,556         $ 47,258          $ 43,237     $191,742
(Loss)/income before taxes and cumula-
     tive effect of an accounting change     $ (1,106)         $ 11,679         $  2,658          $    389     $ 13,620
Cumulative effect of an accounting change1   $  4,606                 0                0                 0     $  4,606
Net (loss)/income                            $  2,883          $  8,553         $  1,687          $   (426)    $ 12,697
Cash dividends declared per share on
   Class A Cumulative Preferred Stock        $   0.43          $   0.43         $   0.43          $   0.43     $   1.72
Market price per share (NASDAQ)
     High                                    $  14.00          $  14.00         $  19.25          $  18.75     $  19.25
     Low                                     $  12.50          $  12.00         $  13.38          $  16.50     $  12.00
</TABLE>

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

Not applicable.

1 Reflects  final  allocation of change in accounting  principle  (net of income
taxes) to Pro-Fac.


<PAGE>


                                                              PART III

ITEM 10.  DIRECTORS AND OFFICERS

<TABLE>
MANAGEMENT AND DIRECTORS OF PRO-FAC
<CAPTION>

                                    Date
    Name                          of Birth                         Positions

<S>                                 <C>              <C>                         
Bruce R. Fox                        1947             President and Director
Albert P. Fazio                     1936             Vice President and Director
Steven D. Koinzan                   1948             Treasurer and Director
Tommy R. Croner                     1942             Secretary and Director
Stephen R. Wright                   1947             Assistant Treasurer and General Manager
Earl L. Powers                      1944             Vice President Finance and Assistant Treasurer
Thomas R. Kalchik                   1947             Vice President Administration and Planning
Kevin M. Murphy                     1952             Vice President of Member Relations
Diana Bartalo                       1946             Assistant Treasurer
Dale W. Burmeister                  1940             Director
Robert V. Call, Jr.                 1926             Director
Glen Lee Chase                      1937             Director
Robert DeBadts                      1957             Director
Kenneth A. Mattingly                1948             Director
Allan W. Overhiser                  1960             Director
Paul E. Roe                         1939             Director
Darrell Sarff                       1949             Director
</TABLE>

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

Albert P. Fazio has been a Director of Pro-Fac since 1976. He was Vice President
of Pro-Fac  between  March 1993 and acted as President  from January 28, 1995 to
March 27, 1995.  He has been a member of Pro-Fac since 1975. He was Secretary of
Pro-Fac from 1991 to 1993. Mr. Fazio is a vegetable,  grain and livestock farmer
(New Columbia Garden Co., Inc.; Vancouver,  Washington). Mr. Fazio also operates
a sand and gravel business (Fazio Bros. Sand Co.; Vancouver, Washington).

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

Tommy 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 Curtice Burns."

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 Curtice
Burns."

Thomas R. Kalchik has served as Vice  President of  Administration  and Planning
since June 1995 and had been Vice President of Member  Relations of Pro-Fac from
June 1990 to June 1995 and  Assistant  Secretary  of  Pro-Fac  since  1983.  Mr.
Kalchik was  Director of Member  Relations  of Pro-Fac  from August 1983 to June
1990.

Kevin M. Murphy has been Vice  President of Member  Relations  of Pro-Fac  since
June  1995.  Mr.  Murphy  was  Director  of  Pro-Fac  Communications  and Member
Relations from August 1990 to June 1995.

Diana  Bartalo  has  been  Assistant   Treasurer  of  Pro-Fac  since  1988.  For
information  regarding Ms. Bartalo,  see  ""Management  and Directors of Curtice
Burns."



<PAGE>


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 Curtice Burns."

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).

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).

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).

Darrell  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 CURTICE BURNS

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 New 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 as well as other  corporate  officers and
the individuals who serve as presidents and chief executive  officers of certain
of the Company's divisions.
<TABLE>

                                       Year of
         Name                           Birth                              Positions
<CAPTION>

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

Roy A. Myers                            1931         Retired President and Chief Executive Officer and Director

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

Diana Bartalo                           1946         Treasurer and Director of Financial Reporting

Robert E. McMahon                       1941         Vice President Management Information Systems

Earl L. Powers                          1944         Vice President and Chief Financial Officer

Beatrice B. Slizewski                   1943         Vice President Corporate Communications

Lois J. Warlick-Jarvie                  1958         Vice President Human Resources

Stephen R. Wright                       1947         Executive Vice President Agriculture

Carl W. Caughran                        1953         President and Chief Executive Officer of Nalley Fine Foods
</TABLE>

<PAGE>




<TABLE>
                                      Year of
            Name                       Birth                               Positions
<CAPTION>

<S>                                     <C>          <C>                                            
Bernhard Frega                          1950         President and Chief Executive Officer of CMF

Tim Kennedy                             1948         President and Chief Executive Officer of Tim's Cascade Chips

David R. Ray                            1945         President and Chief Executive Officer of Husman and Snyder

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  since  May 1996 to  January  1997 and  Executive  Vice
President since January 1996. He had been President and Chief Executive  Officer
of CMF from March 1993 to May 1996.  He was Senior Vice  President  and Business
Unit  Manager   Foodservice   of  CMF  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.

Roy A. Myers was  President  and Chief  Executive  Officer from November 1994 to
January 1997.  Mr. Myers retired in January 1997.  Prior to his  retirement  Mr.
Myers served as a Director and Executive Vice President of the Company from 1987
to the completion of the  Acquisition  (at which time he was appointed the Chief
Executive Officer). He served as Vice  President-Operations  of the Company from
1985 to 1987 and as Vice President of the Company from 1983 to 1985. He has been
an employee of the Company or a predecessor to the Company since 1955 in various
other capacities including Industrial Relations Manager,  Operations Manager and
President of the Corporate Services Division.  He was General Manager of Pro-Fac
from 1987 until the  completion of the  Acquisition,  having served as Assistant
General Manager from 1983 to 1987.

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).

Diana  Bartalo has been  Treasurer  since March 1996 and  Director of  Financial
Reporting  since 1992;  Assistant  Treasurer from 1988 to March 1996;  Corporate
Accounting Manager 1976-1992.  She held several  administrative  staff positions
1970-1976 and has been Assistant Treasurer of Pro-Fac since 1987.

Robert E. McMahon has been Vice  President  Information  Systems since  November
1993;  prior  to that he was Vice  President,  Information  Systems  for the CMF
Division 1992-1993 and Director of Corporate  Information Systems since December
1991.  He joined the CMF  Division  as Systems  Integration  Manager in 1989 and
became  Director  of  Information  Systems for that  Division in 1990.  Prior to
employment  with Curtice  Burns,  he held  management,  executive  and technical
positions with such  organizations  as Abbott Labs,  BASF, IBM, MTech, and Price
Waterhouse LLP.

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,
CMF  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.



<PAGE>


Beatrice B.  Slizewski has been Vice President of Corporate  Communications  for
Curtice Burns and Pro-Fac  since March 1995.  She joined the Company as Director
of Corporate Communications in 1991. Prior to joining Curtice Burns (1988-1991),
she worked as a marketing and public relations consultant for J.P. Associates, a
business  consulting  agency in  Rochester,  New York.  Previous  food  industry
experience  includes 14 years with the R.T. French Company  (1974-1988) -- eight
years in public relations and six years in various accounting functions.

Lois J.  Warlick-Jarvie  has been Vice President  Human  Resources since January
1993;  Corporate  Director Human  Resources  July 1991 to January 1993;  Manager
Compensation,  Benefits and Risk Management  January 1989 to July 1991;  various
administrative staff positions within the Company 1982 to 1989.

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.

Carl W. Caughran has been President and Chief  Executive  Officer of Nalley Fine
Foods   since  March  1996.   Prior  to  joining  the   Company,   he  was  Vice
President/General  Manager of Borden's  Eastern Snacks Group 1993 to 1995,  Vice
President/General  Manager of Borden's  Western  Snacks Group 1991 to 1993,  and
held various executive positions at Borden 1983 to 1991.

Bernhard Frega has been President and Chief  Executive  Officer of CMF since May
1996. He had been Executive Vice  President and Chief  Operating  Officer of CMF
from December 1995 to May 1996. Prior to that he held  increasingly  responsible
positions at CMF, beginning in 1974 in sales and marketing.  He became Marketing
Director in 1984, Vice President Private Label in 1987 and Senior Vice President
for Consumer Products in 1995.

Tim Kennedy has been  President and Chief  Executive  Officer of Tim's since its
acquisition  by the Company in 1989.  Prior to that,  he was President and Chief
Executive  Officer at Tim's  which was a  privately-held  corporation  since its
inception in 1986.

David R. Ray has been  President  and Chief  Executive  Officer of Husman  since
1995. He was Executive Vice President and Chief Operating Officer of Husman 1990
to 1995 and Director of Sales for Chips and Snacks at Nalley 1987 to 1990.

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

<PAGE>


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.  Officers  of the  Company  serve for a term of office from the date of
election to the next  organization  meeting of the Board of  Directors  or until
their  respective  successors are elected and  qualified,  except in the case of
death, resignation, or removal.

Section 16(a) Beneficial Ownership Reporting Compliance:  In accordance with the
rules  of  the  Securities  and  Exchange  Commission  under  Section  16 of the
Securities Exchange Act of 1934, directors,  executive officers,  and beneficial
owners of 10 percent or more of the Company's stock must file certain reports of
stock ownership and changes of stock ownership.  Based solely upon its review of
copies of such  reports  received by it, or written  representations  of certain
reporting persons that no forms were required to be filed, Pro-Fac believes that
for the fiscal year ended June 28, 1997, all reports  required by such reporting
persons were timely filed with the Securities and Exchange Commission.



<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 certain other most highly
compensated executive officers of the Company,  earned during fiscal years ended
June 28,  1997,  June 29,  1996,  and June 24,  1995  (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 -                                                 1997         $349,181          $210,000              $ 8,013
   President and Chief Executive Officer                           1996         $216,107          $      0              $ 1,465
                                                                   1995(3)      $112,772          $ 71,207              $ 7,265

Roy A. Myers -                                                     1997         $224,000          $125,280              $ 2,736
   Retired President, Chief Executive Officer, and Director        1996         $410,154          $      0              $ 2,672
                                                                   1995(3)      $258,375          $200,539              $10,609

William D. Rice -                                                  1997         $259,422          $107,000              $ 5,990
   Senior Vice President Strategic Development and Secretary       1996         $249,642          $      0              $ 1,656
                                                                   1995(3)      $159,081          $116,143              $ 9,791

Stephen R. Wright                                                  1997         $180,043          $ 80,000              $ 4,321
   General Manager of Pro-Fac Cooperative, Inc. and                1996         $156,789          $      0              $ 1,627
   Executive Vice President of Curtice-Burns Foods, Inc.           1995(3)      $ 98,373          $ 51,628              $ 4,520

Earl L. Powers                                                     1997         $187,179          $107,000              $ 4,492
   Vice President Finance and Chief Financial Officer              1996         $157,990          $      0              $ 1,642
                                                                   1995(3)      $ 99,151          $ 60,333              $ 6,099

Bernhard Frega                                                     1997         $175,769          $ 90,000              $ 4,341
   President and Chief Executive Officer of CMF                    1996         $141,677          $      0              $ 1,675
                                                                   1995(3)      $ 81,800          $ 42,500              $ 4,539


<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").

3    Represents  partial year of annual  salary paid  subsequent  to November 3,
     1994.
</FN>
</TABLE>




<PAGE>


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

                                                                                         Estimated Future 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>
Roy A. Myers                        0                       6/25/2001                   $0                  $0
Dennis M. Mullen               32,085                       6/25/2001                   $0                  $0
William D. Rice                23,636                       6/25/2001                   $0                  $0
Stephen R. Wright              13,970                       6/25/2001                   $0                  $0
Earl L. Powers                 14,056                       6/25/2001                   $0                  $0
Bernhard Frega                 15,041                       6/25/2001                   $0                  $0

<FN>
(1)  On June 25, 1997,  the Company issued  performance  units under the Curtice
     Burns 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
     1997 performance units is determined on the fourth anniversary of grant.

(2)  The value of the June 25, 1997 grants from the Curtice  Burns 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 1997  earnings and debt levels and would yield no payout from the
     plan at those levels. If future performance equals fiscal 1997 performance,
     no payouts  will be made from the plan  relative to the options  granted on
     June 25, 1997.
</FN>
</TABLE>


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 28,  1997,  of the  Executive  Officers  listed  in the
Summary Compensation Table are as follows: Roy A. Myers-34,  Dennis M. Mullen-7,
William D.  Rice-25,  Stephen  R.  Wright-23,  Earl L.  Powers-5,  and  Bernhard
Frega-21.

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.



<PAGE>


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

  Final                                       Years of Plan Participation
 Average Pay           15               20                25               30              35
 <S>               <C>              <C>               <C>              <C>            <C>     
 $125,000          $22,142          $ 29,008          $ 35,775         $ 42,721       $ 49,805
  150,000           27,392            36,008            44,525           53,221         62,055
  175,000           32,642            43,008            53,275           63,721         74,305
  200,000           37,892            50,008            62,025           74,221         86,555
  225,000           43,142            57,008            70,775           84,721         98,805
  250,000           48,392            64,008            79,525           95,221        111,055
  275,000           53,642            71,008            88,275          105,721        123,305
  300,000           58,892            78,008            97,025          116,221        135,555
  325,000           64,142            85,008           105,775          126,721        147,805
  350,000           69,392            92,008           114,525          137,221        160,055
  375,000           74,642            99,008           123,275          147,721        172,305
  400,000           79,892           106,008           132,025          158,221        184,555
</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  1997,  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.  In fiscal 1997,  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. Mr. Myers was not paid directors' fees.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth certain  information,  as of July 15, 1997, 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)
<CAPTION>

<S>                                         <C>                                   <C>                       <C>   
Cherry Central Cooperative, Inc.            Common                                345,912                   19.34%
   PO Box 988                               Class A Cumulative Preferred           51,706                    1.61%
   Traverse City, MI 49685

Michigan Blueberry Growers Assoc.           Common                                116,400                    6.51%
   PO Drawer B                              Class A Cumulative Preferred           22,422                    0.70%
   Grand Junction, MI 49056

Dale E. Burmeister                          Common                                  6,646(c)                 0.29%
                                            Class A Cumulative Preferred              757(c)                 0.02%
                                            Class A Cumulative Preferred            8,900                    0.28%

Robert V. Call, Jr.                         Common                                 39,728(d)                 2.22%
                                            Class A Cumulative Preferred           24,493(d)                 0.77%
                                            Class A Cumulative Preferred           13,485(e)                 0.42%
                                            Class A Cumulative Preferred            5,361(f)                 0.17%
                                            Class A Cumulative Preferred            1,506                    0.05%
</TABLE>

<PAGE>


<TABLE>
                                                                            Amount and Nature of         Percent of
        Name                                    Title of Class              Beneficial Ownership(a)       Class(b)
<CAPTION>

  

<S>                                         <C>                                   <C>                      <C>  
Glen Lee Chase                              Common                                 9,472(g)                0.53%
                                            Class A Cumulative Preferred           5,585(g)                0.17%

Tommy R. Croner                             Common                                 7,026(h)                0.39%
                                            Class A Cumulative Preferred          10,593(i)                0.33%

Robert DeBadts                              Common                                11,513(j)                0.64%
                                            Class A Cumulative Preferred           5,982(j)                0.19%
                                            Class A Cumulative Preferred             100(k)                0.00%


Albert P. Fazio                             Common                                 8,000(l)                0.45%
                                            Class A Cumulative Preferred           9,072(l)                0.28%

Bruce R. Fox                                Common                                21,757(m)                1.22%
                                            Class A Cumulative Preferred           8,831(m)                0.27%
                                            Class A Cumulative Preferred           4,566(n)                0.14%
                                            Class A Cumulative Preferred           1,871                   0.06%

Steven D. Koinzan                           Common                                 7,800                   0.44%
                                            Class A Cumulative Preferred           2,460                   0.08%

Kenneth A. Mattingly                        Common                                 6,471(o)                0.36%
                                            Class A Cumulative Preferred           3,929(o)                0.12%

Dennis M. Mullen                            None                                       0                   0.00%

Allan W. Overhiser                          Common                                 2,412(p)                0.13%
                                            Class A Cumulative Preferred           1,607(p)                0.05%

Earl L. Powers                              None                                       0                   0.00%

Paul E. Roe                                 Common                                14,215(q)                0.79%
                                            Class A Cumulative Preferred           1,681(q)                0.05%

William D. Rice                             None                                       0                   0.00%

Darrell Sarff                               Common                                 1,140                   0.06%
                                            Class A Cumulative Preferred             224                   0.01%

Stephen R. Wright                           Class A Cumulative Preferred             840                   0.03%

All directors and officers as a group       Common                               136,180                   7.61%
                                            Class A Cumulative Preferred         111,843                   3.47%
<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

<PAGE>


     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 New Columbia Garden Co., 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>


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Borrowings by Pro-Fac:  The Indenture  governing the Notes permitted the Company
to make demand loans to Pro-Fac for working  capital  purposes in amounts not to
exceed  $10.0  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 was  required to be reduced to zero for a period of
not less than 15 consecutive days in each fiscal year.  Except for the foregoing
provision  and except for  Pro-Fac's  guarantee  of the Notes and the New Credit
Agreement,  as long as  Pro-Fac  has the  right  to  borrow  under  the  Pro-Fac
Marketing and Facilitation  Agreement,  the Indenture does not permit Pro-Fac to
incur any other indebtedness. During fiscal 1996, Pro-Fac repaid amounts due the
Company and incurred debt from the Bank.

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 28,  1997,  the  amount  of the
Company's investment in the Bank was approximately $25.3 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  1997,  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 Curtice Burns for the following aggregate
amounts:


<PAGE>



<TABLE>
                                                                         RELATIONSHIP                GROSS PURCHASES
            NAME                                                           TO PRO-FAC                 IN FISCAL 1997
<CAPTION>

<S>                                                                  <C>                                  <C>    
Dale E. Burmeister................................................   Director                             183,000
Robert V. Call, Jr................................................   Director                           2,254,000
Glen Lee Chase....................................................   Director                             199,000
Tommy R. Croner...................................................   Director and Secretary               261,000
Robert DeBadts....................................................   Director                             422,000
Albert P. Fazio...................................................   Director and Vice President          144,000
Bruce R. Fox......................................................   Director and President               935,000
Steven D. Koinzan.................................................   Director and Treasurer               475,000
Kenneth A. Mattingly..............................................   Director                             806,000
Allan W. Overhiser................................................   Director                              30,000
Paul E. Roe.......................................................   Director                             733,000
Darrell Sarff.....................................................   Director                              75,000
</TABLE>

                   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,  1998,  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..................................................................   21
   Report of Independent Accountants.....................................................................................   22
   Consolidated Financial Statements for the years ended June 28, 1997, June 29,
     1996, and June 24, 1995:
       Consolidated Statement of Operations and Net Proceeds.............................................................   23
       Consolidated Balance Sheet........................................................................................   24
       Consolidated Statement of Cash Flows..............................................................................   25
       Consolidated Statement of Changes in Shareholders' and Members' Capitalization and Common Stock...................   27
       Notes to Consolidated Financial Statements........................................................................   28
       Selected Quarterly Financial Data.................................................................................   41
</TABLE>

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

                  SCHEDULE II:  Valuation and Qualifying Accounts

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

                                          June 28, 1997    June 29, 1996    June 24, 1995
                                          -------------    -------------    -------------

<S>                                         <C>             <C>              <C>    
  Balance at beginning of period         $    836,000      $   673,000       $  683,000
  Additions charged to expense                446,000          537,000           91,000
  Deductions                                 (312,000)        (374,000)        (101,000)
                                         ------------      -----------       ---------
  Balance at end of period               $    970,000      $   836,000       $  673,000
                                         ============      ===========       ==========

Inventory reserve*
  Balance at beginning of period         $    485,000      $   144,000       $        0
  Net change                                 (123,000)        (341,000)         144,000
                                         ------------      -----------       ---------
  Balance at end of period*              $    362,000      $   485,000       $  144,000
                                         ============      ===========       ==========

Tax valuation allowance**
  Balance at beginning of period         $ 17,983,000      $ 7,366,000       $        0
  Net change                              (11,771,000)      10,617,000        7,366,000
                                         ------------      -----------       ----------
  Balance at end of period               $  6,212,000      $17,983,000       $7,366,000
                                         ============      ===========       ==========
<FN>

*    Difference  between  FIFO cost and market  applicable  to canned and frozen
     fruit and vegetable 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

                None

     (c) EXHIBITS:

                Exhibit
                Number                     Description

                 3.3(2)      Certificate of Incorporation of Curtice Burns.

                 3.4(3)      Bylaws of Curtice Burns.

                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 Curtice
                             Burns' 12.25 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"),
                             Curtice Burns 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  PFAC,
                             Curtice Burns and the Bank.

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

                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        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 Curtice Burns 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
                             Curtice Burns and the Bank.

                10.17(4)     Modifications  E -  F  of  Term  Loan,  Term  Loan
                             Facility,  and Seasonal Loan Agreement  Between
                             Curtice Burns 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      Modifications G - K of Term Loan, Term Loan Facility,
                           and Seasonal Loan Agreement Between Curtice Burns and
                           Bank.

                10.21      OnSite Services Agreement with Systems & Computer 
                           Technology.

                10.22      Raw-Product Supply Agreement with Seneca Foods 
                           Corporation.

                10.23      Reciprocal Co-Pack Agreement with Seneca Foods 
                           Corporation.



<PAGE>




                Exhibit
                Number               Description

                18(5) Accountant's Report Regarding Change in Accounting Method

                21.1  List of Subsidiaries.

                27    Financial Data Schedule.

(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.



<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 21, 1997                    BY:/s/  Stephen R. Wright
                                                    STEPHEN R. WRIGHT
                                                    GENERAL MANAGER



Date:    August 21, 1997                    BY:/s/  Earl L. Powers              
                                                    EARL L. POWERS
                                                    VICE PRESIDENT FINANCE AND
                                                    ASSISTANT TREASURER


                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that each person whose signature  appears below
constitutes and appoints STEPHEN R. WRIGHT 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 to this Annual Report on Form
10-K 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   satisfying   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.

         SIGNATURE                      TITLE                       DATE

/s/   Bruce R. Fox            President and Director          August 21, 1997
     (BRUCE R. FOX)

/s/  Albert P. Fazio          Vice President and Director     August 21, 1997
    (ALBERT P. FAZIO)

/s/  Steven D. Koinzan        Treasurer and Director          August 21, 1997
    (STEVEN D. KOINZAN)

/s/  Tommy R. Croner          Secretary and Director          August 21, 1997
    (TOMMY R. CRONER)

/s/  Dale W. Burmeister       Director                        August 21, 1997
    (DALE W. BURMEISTER)

/s/  Robert V. Call, Jr.      Director                        August 21, 1997
    (ROBERT V. CALL, JR.)

/s/  Glen Lee Chase           Director                        August 21, 1997
    (GLEN LEE CHASE)

/s/  Robert DeBadts           Director                        August 21, 1997
    (ROBERT DEBADTS)

/s/  Kenneth A. Mattingly     Director                        August 21, 1997
    (KENNETH A. MATTINGLY)

/s/  Allan W. Overhiser       Director                        August 21, 1997
    (ALLAN W. OVERHISER)

/s/  Paul E. Roe              Director                        August 21, 1997
    (PAUL E. ROE)

/s/  Darrell Sarff            Director                        August 21, 1997
    (DARRELL SARFF)

/s/  Stephen R. Wright         General Manager                August 21, 1997
    (STEPHEN R. WRIGHT)        (Principal Executive Officer)

/s/  Earl L. Powers             Vice President Finance and    August 21, 1997
    (EARL L. POWERS)            Assistant Treasurer
                               (Principal Accounting Officer)