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

                                    FORM 10-K


[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended July 31, 2003

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

For the transition period from __________ to __________


Commission file numbers   001-11331
                          333-06693
                          000-50182 and
                          000-50183

                            Ferrellgas Partners, L.P.
                        Ferrellgas Partners Finance Corp.
                                Ferrellgas, L.P.
                            Ferrellgas Finance Corp.
                        ---------------------------------
           (Exact name of registrants as specified in their charters)


                  Delaware                         43-1698480
                  Delaware                         43-1742520
                  Delaware                         43-1698481
                  Delaware                         14-1866671
             ------------------                 ------------------
     (States or other jurisdictions of          (I.R.S. Employer
        incorporation or organization)         Identification Nos.)

                   One Liberty Plaza, Liberty, Missouri 64068
               --------------------------------------------------
               (Address of principal executive office) (Zip Code)


Registrants' telephone number, including area code: (816) 792-1600
--------------------------------------------------------------------------------


Securities registered pursuant to Section 12(b) of the Act:
                                                        Name of each exchange on
         Title of each class                                which registered


     Common Units of Ferrellgas Partners, L.P.          New York Stock Exchange
--------------------------------------------------------------------------------


Securities registered pursuant to section 12(g) of the Act:


         Title of each class

     Limited Partner Interests of Ferrellgas, L.P.
     Common Stock of Ferrellgas Finance Corp.
--------------------------------------------------------------------------------



Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.

Yes    [X]    No    [   ]


<PAGE>


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 registrants' 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.                                                                 [ X ]

Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).

Ferrellgas Partners, L.P.                                 Yes  [ X ]   No  [   ]

Ferrellgas Partners Finance Corp., Ferrellgas, L.P. and
Ferrellgas Finance Corp.                                  Yes  [   ]   No  [ X ]

The  aggregate  market value as of January 31,  2003,  of  Ferrellgas  Partners,
L.P.'s Common Units held by nonaffiliates of Ferrellgas Partners, L.P., based on
the reported  closing price of such units on the New York Stock Exchange on such
date, was approximately $376,259,000.  There is no aggregate market value of the
common  equity of  Ferrellgas  Partners  Finance  Corp.,  Ferrellgas,  L.P.  and
Ferrellgas Finance Corp. as their common equity is not sold or traded.

At September 30, 2003, the registrants had common units or shares of common
stock outstanding as follows:

        Ferrellgas Partners, L.P.                37,707,384        Common Units

        Ferrellgas Partners Finance Corp.             1,000        Common Stock

        Ferrellgas, L.P.                              n/a                   n/a

        Ferrellgas Finance Corp.                      1,000        Common Stock


Documents Incorporated by Reference:   None


EACH OF FERRELLGAS  PARTNERS FINANCE CORP. AND FERRELLGAS FINANCE CORP. MEET THE
CONDITIONS SET FORTH IN GENERAL  INSTRUCTION  (I)(1)(A) AND (B) OF FORM 10-K AND
ARE THEREFORE, WITH RESPECT TO EACH SUCH REGISTRANT,  FILING THIS FORM 10-K WITH
THE REDUCED DISCLOSURE FORMAT.



<PAGE>


                            FERRELLGAS PARTNERS, L.P.
                        FERRELLGAS PARTNERS FINANCE CORP.
                                FERRELLGAS, L.P.
                            FERRELLGAS FINANCE CORP.

                          2003 FORM 10-K ANNUAL REPORT


                                Table of Contents

                                                                           Page
                                                                          ------
                                     PART I

ITEM   1.   BUSINESS.........................................................1
ITEM   2.   PROPERTIES.......................................................32
ITEM   3.   LEGAL PROCEEDINGS................................................33
ITEM   4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............34


                                     PART II


ITEM   5.   MARKET FOR REGISTRANTS' COMMON EQUITY AND
             RELATED UNITHOLDER AND STOCKHOLDER MATTERS......................34
ITEM   6.   SELECTED FINANCIAL DATA..........................................36

ITEM   7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................38
ITEM   7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......53
ITEM   8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................54

ITEM   9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE.............................54
ITEM   9A.  CONTROLS AND PROCEDURES..........................................54


                                    PART III


ITEM   10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS..............55
ITEM   11.  EXECUTIVE COMPENSATION...........................................58

ITEM   12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT AND RELATED UNITHOLDER MATTERS...................61
ITEM   13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................65
ITEM   14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES...........................65


                                     PART IV

ITEM   15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
             REPORTS ON FORM 8-K.............................................66





<PAGE>
                                     PART I

ITEM 1.       BUSINESS.

     Ferrellgas  Partners,  L.P. is a Delaware limited  partnership.  Our common
units are listed on the New York Stock Exchange and our activities are primarily
conducted   through  our  subsidiary   Ferrellgas,   L.P.,  a  Delaware  limited
partnership.  We are the  sole  limited  partner  of  Ferrellgas,  L.P.  with an
approximate 99% limited  partner  interest.  In this report,  unless the context
indicates otherwise:

o    when we refer to "us," "we," "our," or "ours," we generally mean Ferrellgas
     Partners,  L.P.  together  with its  consolidated  subsidiaries,  including
     Ferrellgas Partners Finance Corp., Ferrellgas,  L.P. and Ferrellgas Finance
     Corp.,  except  when used in  connection  with  "common  units" and "senior
     units," in which case these terms refer to Ferrellgas Partners, L.P.;

o    references to  "Ferrellgas  Partners"  refer to Ferrellgas  Partners,  L.P.
     itself, without its consolidated subsidiaries;

o    references  to  the  "operating  partnership"  refer  to  Ferrellgas,  L.P.
     together with its consolidated  subsidiaries,  including Ferrellgas Finance
     Corp.;

o    references to our "general partner" refer to Ferrellgas, Inc.;

o    the term  "unitholders"  refers to  holders of common  units of  Ferrellgas
     Partners, L.P.; and

o    references  to "Notes"  refers to the notes to the  consolidated  financial
     statements of Ferrellgas Partners, L.P.

     Ferrellgas Partners is a holding entity that conducts no operations and has
two direct  subsidiaries,  Ferrellgas  Partners  Finance Corp. and the operating
partnership.  Ferrellgas  Partner's only significant  assets are its approximate
99% limited  partnership  interest  in the  operating  partnership  and its 100%
equity interest in Ferrellgas Partners Finance Corp.

     The operating  partnership  was formed on April 22, 1994,  and accounts for
substantially  all of our  consolidated  assets,  sales and operating  earnings,
except for interest  expense related to $218.0 million of 8.75% senior notes due
2012.  See  "Management's  Discussion  and  Analysis  of  Financial  Condition -
Liquidity and Capital Resources - Financing  Activities" for additional  details
about our  redemption  in  September  2002 of $160.0  million  of 9.375%  senior
secured  notes with the  proceeds we received  from the issuance of senior notes
due 2012.

     Our  general  partner  performs  all  management  functions  for us and our
subsidiaries and holds a 1% general partner interest in Ferrellgas  Partners and
an  approximate 1% general  partner  interest in the operating  partnership.  An
employee stock ownership  trust owns 100% of the  outstanding  shares of Ferrell
Companies,  Inc.,  the parent company of our general  partner,  who in turn owns
approximately 47% of our outstanding common units.

     We file annual, quarterly, and other reports and other information with the
SEC. You may read and  download  our SEC filings over the internet  from several
commercial  document  retrieval  services  as well as at the  SEC's  website  at
www.sec.gov.  You may also read and copy our SEC  filings  at the  SEC's  public
reference room located at Judiciary  Plaza,  450 5th street,  N.W.,  Washington,
D.C.  20549.  Please  call the SEC at  1-800-SEC-0330  for  further  information
concerning the public  reference room and any applicable  copy charges.  Because
our common units are traded on the New York Stock Exchange,  we also provide our
SEC filings and particular other information to the New York Stock Exchange. You
may obtain copies of these filings and this other  information at the offices of
the New York Stock Exchange located at 11 Wall Street, New York, New York 10005.
In  addition,  our SEC filings are  available  at no cost as soon as  reasonably
practicable     after    the    filing     thereof    on    our    website    at
www.ferrellgas.com/investor.asp.   Please  note  that  any  internet   addresses
provided  in this  Form  10-K  are for  information  purposes  only  and are not
intended to be hyperlinks.  Accordingly, no information found and/or provided at
such internet  addresses is intended or deemed to be  incorporated  by reference
herein.

                                       1
<PAGE>


General

     We are the second largest  retail  marketer of propane in the United States
based on retail gallons sold during fiscal 2003, representing what we believe to
be approximately 11% of the retail propane gallons sold in the United States. As
of July 31,  2003,  we had 593 retail  outlets,  serving  more than one  million
residential,  industrial/commercial  and  agricultural and other customers in 45
states.  Our operations  primarily  include the retail  distribution and sale of
propane and related  equipment  and supplies and extend from coast to coast with
concentrations in the Midwest, Southeast, Southwest and Northwest regions of the
country.

     Our  retail  propane   distribution   business   consists   principally  of
transporting propane purchased from third parties to retail distribution outlets
and  then to  tanks  on  customers'  premises,  as well as to  portable  propane
cylinders. In the residential and commercial markets,  propane is primarily used
for space  heating,  water  heating and  cooking.  In the  agricultural  market,
propane is primarily used for crop drying,  space  heating,  irrigation and weed
control. In addition,  propane is used for a variety of industrial applications,
including use as an engine fuel which is burned in internal  combustion  engines
that power  vehicles  and  forklifts,  and use as a heating or energy  source in
manufacturing and drying processes.

     In our past three fiscal years,  we reported  annual  retail  propane sales
volumes of:

                                              Retail propane gallons
                                                     sold
              Fiscal year ended                  (in millions)
           -----------------------          --------------------------
                July 31, 2003                         899
                July 31, 2002                         832
                July 31, 2001                         957


     The  increase  in gallons  sold from our  fiscal  year 2002 to 2003 was due
primarily to national  average  heating season  temperatures  (November  through
March), as reported by the National Oceanic and Atmospheric Administration, that
approximated  normal as compared to 11% warmer than normal in fiscal 2002, which
was the third warmest heating season in recorded United States history, and to a
lesser extent, the effect of acquisitions.

Our History

     We were formed in 1994 in connection with our initial public offering.  Our
operations  began in 1939 as a single  location  propane  retailer in  Atchison,
Kansas.  Our initial growth largely  resulted from small  acquisitions  in rural
areas of eastern Kansas, northern and central Missouri,  Iowa, western Illinois,
southern  Minnesota,  South Dakota and Texas.  Since 1986, we have acquired more
than 100 propane retailers, expanding our operations from coast to coast, and as
of July 31,  2003,  we had 593  retail  outlets  nationwide.  Our three  largest
acquisitions since 1994 have been:

                                                        Estimated Retail
                                                        Gallons Acquired
Company                         Date Acquired             (in millions)
------------------------     -------------------     ----------------------
Thermogas                      December 1999                 270
Skelgas Propane                May 1996                       93
Vision Energy Resources        November 1994                  47


                                       2
<PAGE>


Business Strategy

Our business strategy is to:

o    achieve operating efficiencies through the utilization of technology in our
     operations;

o    capitalize on our national presence and economies of scale;

o    expand our operations through disciplined acquisitions and internal growth;
     and

o    align  employee  interest  with  investors  through  significant   employee
     ownership.

Using technology to improve operations.

     During  2001,  we  completed  a review  of our key  business  processes  to
identify  several  areas  where  we  can  use  new  technology  to  improve  our
operational  efficiency.  Specifically,  we identified areas where we believe we
can reduce  operating  expenses and improve  customer  satisfaction  in the near
future.  These areas of  opportunity  include  development  of new technology to
improve  our   routing  and   scheduling   of  customer   deliveries,   customer
administration and operational  workflow.  During fiscal years 2002 and 2003, we
allocated  considerable  resources  toward  these  improvements,  including  the
purchase of computer  hardware and software and development of new software.  We
have incurred  capital  expenditures of $44.9 million related to this technology
initiative during the last three fiscal years,  which were funded primarily from
net cash provided by operating activities.  These capital expenditures represent
a  substantial  majority  of the  capital  expenditures  we  expect  to incur in
connection with this technology initiative.  We conducted a pilot program of the
technology  initiative in a limited geographic area in fiscal 2003. This program
affected  less than 5% of our retail  distribution  outlets.  We intend to begin
deployment of this new technology  initiative to retail operations during fiscal
2004.  See  "Management's  Discussion  and  Analysis  of  Financial  Condition -
Liquidity and Capital Resources - Investing  Activities" for additional  details
about this technology initiative.

Capitalizing on our national presence and economies of scale.

     We believe our national  presence of 593 retail  outlets and  estimated 11%
market  share of retail  propane  gallons  sold in the  United  States  gives us
advantages over our smaller  competitors.  These advantages include economies of
scale in areas such as:

o  product procurement;
o  transportation;
o  fleet purchases;
o  customer administration; and
o  general administration.

     Our national presence also allows us to be one of the few propane retailers
that can  competitively  serve  commercial  customers on a nationwide  basis. In
addition, we believe that our presence in 45 states provides us opportunities to
make  acquisitions  of other  retail  propane  companies  that  overlap with our
existing  operations,  providing economies of scale and significant cost savings
in these markets.

Employing a disciplined acquisition strategy and achieving internal growth.

     We expect to  continue  the  expansion  of our  customer  base  through the
acquisition  of other retail propane  distributors.  We intend to concentrate on
acquisition   activities  in   geographical   areas  adjacent  to  our  existing
operations,  and on a  selected  basis  in areas  that  broaden  our  geographic
coverage.  We also  intend  to focus  on  acquisitions  that can be  efficiently
combined  with our  existing  operations  to  provide  an  attractive  return on
investment  after taking into account the economies of scale and cost savings we
anticipate  will  result  from those  combinations.  Our goal is to improve  the
operations and  profitability  of the businesses we acquire by integrating  them
into our established national organization. We also believe that, as a result of
our industry leadership and efficient operating standards,  we are positioned to
successfully  compete for growth  opportunities  within our  existing  operating
regions. In addition, we have implemented marketing programs that focus specific
resources towards internal growth.

                                       3
<PAGE>


Aligning employee interests with our investors.

     In 1998, we established an employee benefit plan that we believe aligns the
interests  of  employees  with  those  of our  investors.  Through  the  Ferrell
Companies,  Inc. Employee Stock Ownership Trust, employees own approximately 47%
of our outstanding  common units,  allowing them to participate  directly in our
overall success. This plan is unique in the retail propane distribution industry
and we believe that the entrepreneurial  culture fostered by  employee-ownership
provides us with a distinct competitive advantage.

Retail Distribution of Propane and Related Equipment and Supplies

     Our  retail  propane   distribution   business   consists   principally  of
transporting propane purchased from third parties to retail distribution outlets
and  then to  tanks  on  customers'  premises,  as well as to  portable  propane
cylinders.  Our market areas are generally  rural,  but also include urban areas
for industrial  applications.  We utilize marketing  programs targeting both new
and existing  customers by emphasizing  our efficiency in delivering  propane to
customers as well as our employee training and safety programs.

     We    sell    propane    primarily    to   four    markets:    residential,
industrial/commercial,  agricultural and other customers. In fiscal 2003, no one
customer  accounted  for 10% or more of our  consolidated  revenues.  The retail
distribution  of bulk propane  generally  involves large numbers of small volume
deliveries  averaging  approximately  250 gallons each.  Our bulk  deliveries of
propane are transported from our retail distribution outlets to our customers by
our fleet of 2,337 bulk delivery  trucks,  which are generally fitted with 3,000
gallon tanks.  Propane storage tanks located on our customers' premises are then
filled from these bulk delivery trucks. We also deliver propane to our customers
in portable cylinders using primarily our fleet of 557 cylinder delivery trucks.

     A  substantial  majority  of our gross  profit is  derived  from the retail
distribution and sale of propane and related risk management  activities.  Gross
profit from our retail distribution of propane is derived primarily from:

o  residential customers;

o  industrial/commercial customers; and

o  agricultural and other customers.

     Our gross profit from the retail distribution of propane is primarily based
on  margins;  that is the  cents-per-gallon  difference  between  our  costs  to
purchase  and  distribute  propane  and the sale  prices  we charge  our  retail
customers.  Our residential  customers typically provide us a greater margin and
tend to be a more stable  customer base and less sensitive to price changes than
our industrial/commercial and agricultural and other customers. Should wholesale
propane prices decline in the future, our margins on the distribution of propane
to retail customers should increase in the short-term because retail prices have
tended to change  less  rapidly  than  wholesale  prices.  Likewise,  should the
wholesale  cost of propane  increase,  retail  margins and  profitability  would
likely be reduced, for the short-term, until retail prices can be increased.

     Retail  propane  residential  customers  typically rent their storage tanks
from their distributors.  Over 80% of our retail propane  residential  customers
rent their tanks from us. Our rental  terms and the fire safety  regulations  in
some states  require  rented  tanks to be filled  only by the  propane  supplier
owning the tank. The cost and  inconvenience of switching tanks helps minimize a
customer's  tendency  to  switch  suppliers  of  propane  on the  basis of minor
variations in price, helping us minimize customer loss.

                                       4
<PAGE>


     Our retail  operations  also include the retail sale of propane  appliances
and  related  parts  and  fittings,  as well as  other  retail  propane  related
services.

Seasonality and Effect of Weather

     The market for propane is seasonal  because  propane is used  primarily for
heating  in  residential  and  commercial  buildings.  Consequently,  sales  and
operating  profits are concentrated in our second and third fiscal quarters.  In
addition, sales volume traditionally fluctuates from year to year in response to
variations  in  weather,  price and other  factors.  We  believe  that our broad
geographic  distribution  helps us minimize  exposure  to  regional  weather and
economic patterns.  See additional information about how seasonality affects our
debt to  cash  flow  ratios  and  the  payment  of  quarterly  distributions  in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  - Liquidity  and  Capital  Resources."  During  times of colder than
normal  winter  weather,  we have  been  able to take  advantage  of our  large,
efficient  distribution  network  to  avoid  supply  disruptions  such as  those
experienced  by  some  of our  competitors,  thereby  broadening  our  long-term
customer base.

Risk Management Activities

     Our risk management  activities primarily attempt to mitigate risks related
to the purchasing,  storing and transporting of propane.  We generally  purchase
propane in the contract and spot markets from major domestic energy companies on
a short-term basis. Our costs to purchase and distribute  propane fluctuate with
the movement of market prices.  That fluctuation  subjects us to potential price
risk,  which  we  attempt  to  minimize  through  the  use  of  risk  management
activities.

     Our risk management  activities include the use of energy commodity forward
contracts,  swaps and options traded on the  over-the-counter  financial markets
and futures and options traded on the New York Mercantile  Exchange.  These risk
management  activities  are  conducted  primarily to offset the effect of market
price fluctuations on propane inventory and purchase commitments and to mitigate
the price risk on sale commitments to our customers.

     Our risk management  activities are intended to generate a profit, which we
then  apply  to  reduce  our  cost of  product  sold.  The  results  of our risk
management  activities directly related to the delivery of propane to our retail
customers,  which includes our supply  procurement,  storage and  transportation
activities,  are included in our  discussions of cost of product sold and retail
margins and are accounted for at cost. The results of our other risk  management
activities  are presented  separately in our  discussion of cost of product sold
and gross profit as risk management  trading activities and are accounted for at
fair value. The results from our risk management  activities are included in our
discussions of cost of product sold and gross profit in "Management's Discussion
and  Analysis of  Financial  Condition  and Results of  Operations  - Results of
Operations",  "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations  -Liquidity and Capital Resources - Disclosures about Risk
Management  Activities  Accounted  for at  Fair  Value"  and  "Quantitative  and
Qualitative Disclosures about Market Risk."

Risk management activities - supply procurement, storage and transportation

     Through our supply  procurement  activities,  we purchase propane primarily
from major  domestic  energy  companies.  Supplies of propane from these sources
have traditionally  been readily  available,  although no assurance can be given
that they will be readily available in the future. As a result of our ability to
buy large  volumes of propane and utilize our national  distribution  system and
significant  underground  storage  capacity,  we believe we are in  position  to
achieve product cost savings and avoid shortages  during periods of tight supply
to an extent not generally  available to other retail propane  distributors.  We
are not  dependent  upon any  single  supplier,  the loss of which  would have a
material  adverse effect on us. During fiscal 2003, no supplier  provided us 10%
or more of our total propane purchases. However, if supplies were interrupted or
difficulties in obtaining alternative  transportation were to arise, the cost of
procuring replacement supplies may materially increase.

                                       5
<PAGE>


     A portion of our propane inventory is purchased under supply contracts that
typically  have a one-year  term and a price that  fluctuates  based on the spot
market  prices.  In order to limit  overall price risk, we will enter into fixed
price  over-the-counter  energy commodity  forward  contracts that have terms of
less than one year.  We also use  options to hedge a portion  of our  forecasted
purchases for up to one year in the future.

     Through our storage  activities,  we may purchase and store  inventories of
propane to avoid delivery  interruptions  during periods of increased demand and
to take advantage of favorable  commodity  prices.  We own three underground and
four above-ground storage facilities with an aggregate capacity of approximately
248 million gallons of propane.  As of July 31, 2003,  approximately 177 million
gallons of this  underground  capacity was leased to third  parties and revenues
from these leases are included in "other revenue" in our consolidated statements
of earnings.  The  remaining  space is available  for our use. We also lease 2.1
million gallons of underground and  above-ground  storage at third party storage
facilities and pipeline terminals.

     We also incur risks related to the price and availability of propane during
periods  of  much  colder  than  normal  weather,   temporary  supply  shortages
concentrated  in certain  geographic  regions and  commodity  price  distortions
between  geographic  regions.  In addition  to the use of other risk  management
activities,  we attempt to  mitigate  these  risks  through  our  transportation
activities  by utilizing  our  transport  truck and  railroad  tank car fleet to
distribute  propane between supply or storage locations and retail  distribution
outlets.  The propane we sell to our  customers  is generally  transported  from
natural gas processing  plants and  refineries,  pipeline  terminals and storage
facilities to retail  distribution  outlets or storage  facilities by our leased
railroad tank cars and our owned or leased highway  transport trucks. As of July
31, 2003, we had 128 leased  railroad tank cars and 212 owned or leased  highway
transport  trucks.  We also use common carrier  transport trucks during the peak
delivery  season in the  winter  months or to  provide  service  in areas  where
economic considerations favor common carrier use.

Risk management trading activities

     We also purchase and sell derivatives to manage other risks associated with
commodity  prices.   Our  risk  management  trading  activities  utilize  energy
commodity forward  contracts,  options and swaps traded on the  over-the-counter
financial  markets and futures  and  options  traded on the New York  Mercantile
Exchange  to  manage  and hedge  our  exposure  to the  volatility  of  floating
commodity prices and to protect our inventory  positions.  These risk management
trading  activities  are  intended to generate a profit,  which we then apply to
reduce our cost of product sold.  Although these activities  attempt to mitigate
our commodity price risk, they do not qualify for hedge accounting treatment and
are accounted for at fair value in our consolidated statements of earnings.

Industry

     Natural gas liquids are derived  from  petroleum  products  and are sold in
compressed or liquefied form.  Propane,  the predominant  natural gas liquid, is
typically  extracted  from natural gas or separated  during crude oil  refining.
Although  propane is gaseous at normal  pressures,  it is compressed into liquid
form at relatively  low pressures for storage and  transportation.  Propane is a
clean-burning energy source, recognized for its transportability and ease of use
relative to alternative forms of stand-alone energy sources.

Based upon industry publications, propane accounts for approximately 3% to 4% of
household  energy  consumption in the United States,  a level which has remained
relatively  constant for the past two decades.  Propane competes  primarily with
natural gas,  electricity  and fuel oil as an energy source  principally  on the
basis of price,  availability and portability.  Propane serves as an alternative
to natural  gas in rural and urban areas where  natural  gas is  unavailable  or
portability  of product is required.  Propane is generally  more  expensive than
natural gas on an  equivalent  British  Thermal Unit ("BTU")  basis in locations
served by natural gas, although propane is often sold in such areas as a standby
fuel for use during peak demands and during interruption in natural gas service.
The expansion of natural gas into  traditional  propane markets has historically
been inhibited by the capital costs required to expand distribution and pipeline
systems.  Although  the  extension  of natural gas  pipelines  tends to displace
propane  distribution  in  the  neighborhoods  affected,  we  believe  that  new
opportunities   for   propane   sales  arise  as  more   geographically   remote
neighborhoods are developed.

                                       6
<PAGE>


     Propane is  generally  less  expensive  to use than  electricity  for space
heating,  water heating and cooking and competes effectively with electricity in
those parts of the country where propane is less expensive  than  electricity on
an equivalent BTU basis. Although propane is similar to fuel oil in application,
market demand and price, propane and fuel oil have generally developed their own
distinct  geographic markets.  Because residential  furnaces and appliances that
burn  propane  will not operate on fuel oil, a  conversion  from one fuel to the
other requires the  installation  of new equipment.  Residential  retail propane
customers  will have an incentive to switch to fuel oil only if fuel oil becomes
significantly  less  expensive  than  propane.  Conversely,  we may be unable to
expand our customer  base in areas where fuel oil is widely  used,  particularly
the northeast United States, unless propane becomes significantly less expensive
than fuel oil. However,  many industrial  customers who use propane as a heating
fuel have the capacity to switch to other fuels,  such as fuel oil, on the basis
of availability or minor variations in price.

Competition

     In addition to competing  with  marketers  of other fuels,  we compete with
other companies engaged in the retail propane distribution business. Competition
within  the  retail  propane  distribution  industry  stems  from  two  types of
participants:    the   larger,   multi-state   marketers,   including   farmers'
cooperatives,  and the smaller,  local  independent  marketers,  including rural
electric cooperatives. Based upon industry publications, we believe that the ten
largest multi-state retail marketers of propane,  including  ourselves,  account
for  approximately 49% of the total retail sales of propane in the United States
and that there are approximately  5,000 local or regional  distributors.  We are
the second  largest  retail  marketer of propane in the United  States  based on
retail  gallons  sold during  fiscal  2003,  representing  what we believe to be
approximately 11% of the retail propane gallons sold in the United States.

     Most  of our  retail  distribution  outlets  compete  with  three  or  more
marketers or  distributors,  the principal  factors being price and service.  We
compete with other retail  marketers  primarily on the basis of  reliability  of
service and  responsiveness  to customer  needs,  safety and price.  Each retail
distribution  outlet operates in its own competitive  environment because retail
marketers  typically  reside in close  proximity to their customers to lower the
cost of  providing  service.  The  typical  retail  distribution  outlet  has an
effective marketing radius of approximately 40 miles.

Other Activities

     Our other activities include the following:

o    wholesale propane marketing and distribution;
o    wholesale marketing of propane appliances;
o    the sale of refined fuels;
o    chemical feedstocks marketing;
o    natural gas liquids storage; and
o    common carrier services.

                                       7
<PAGE>


These activities together with the retail sale of propane appliances and related
parts and fittings,  the renting of tanks to retail customers,  and other retail
propane related services comprised  approximately 12% of our gross profit in our
fiscal year 2003.

     We engage in the wholesale  marketing and  distribution of propane to other
retail  propane  distributors.  In our  past  three  fiscal  years,  we made the
following sales to wholesale customers:

(In millions)
                                      Wholesale                      Wholesale
   Fiscal year ended                Gallons Sold                     Revenues
   -----------------                ------------                     --------
     July 31, 2003                       83                           $ 32.4
     July 31, 2002                       92                           $ 39.6
     July 31, 2001                       97                           $ 65.1


Employees

     We have no employees and are managed by our general partner pursuant to our
partnership  agreement.  At September  30, 2003,  our general  partner had 4,385
full-time employees and 760 temporary and part-time employees.

Our general partner employed its full-time employees in the following areas:

        Retail Locations                                                3,727
        Transportation and Storage                                        245
        Corporate Offices in Liberty, MO and Houston, TX                  413
                                                                       -------
             Total                                                      4,385
                                                                       =======

     Less than one percent of our general partner's employees are represented by
four  local  labor  unions,  which  are all  affiliated  with the  International
Brotherhood  of  Teamsters.   Our  general   partner  has  not  experienced  any
significant work stoppages or other labor problems.

     Our risk  management  activities,  wholesale  propane  marketing,  chemical
feedstocks marketing,  and other related functions are operated primarily out of
our offices located in Houston, Texas by a total full-time corporate staff of 75
people.

Governmental Regulation - Environmental and Safety Matters

     We are not  subject to any price or  allocation  regulation  of propane and
propane is not a  hazardous  substance  within the  meaning of federal and state
environmental laws.

     In connection  with all  acquisitions  of retail  propane  businesses  that
involve the purchase of real estate, we conduct a due diligence investigation to
attempt to determine whether any substance other than propane has been sold from
or stored on any such real  estate  prior to its  purchase.  At a  minimum,  due
diligence  includes  questioning  the  sellers,  obtaining  representations  and
warranties concerning the sellers' compliance with environmental laws and visual
inspections of the properties.

     With respect to the  transportation  of propane by truck, we are subject to
regulations  promulgated  under the Federal  Motor  Carrier  Safety  Act.  These
regulations cover the transportation of hazardous materials and are administered
by the United States Department of Transportation.  The National Fire Protection
Association  Pamphlet No. 58 establishes a set of rules and procedures governing
the safe handling of propane.  Those rules and  procedures  have been adopted as
the industry standard by the states in which we operate.

                                       8
<PAGE>


     We  believe  that  we are in  material  compliance  with  all  governmental
regulations  and  industry  standards  applicable  to  environmental  and safety
matters. The Department of Transportation established new regulations addressing
emergency  discharge  control issues that became  effective on July 1, 1999 with
various  requirements  phased in over the next seven years. We have  implemented
the required  discharge  control  systems and are in  compliance in all material
respects with current regulatory requirements.

Trademarks and Service Marks

     We market our goods and services under various  trademarks and  tradenames,
which we own or have a right to use. Those  trademarks  and  tradenames  include
marks or pending marks before the United States Patent and Trademark Office such
as Ferrellgas, Ferrell North America, Ferrellmeter, American Energy Incorporated
and NRG  Distributors.  Our  general  partner  has an option to  purchase  for a
nominal value the  tradenames  "Ferrellgas"  and "Ferrell North America" and the
trademark "Ferrellmeter" that it contributed to us during 1994, if it is removed
as our general  partner other than "for cause." If our general partner ceases to
serve as our general partner for any reason other than "for cause," it will have
the option to purchase  our other  tradenames  and  trademarks  from us for fair
market value.

Businesses of Other Subsidiaries

     Ferrellgas Partners Finance Corp. is a Delaware  corporation formed in 1996
and is our  wholly-owned  subsidiary.  Ferrellgas  Partners  Finance  Corp.  has
nominal  assets and does not conduct any  operations,  but serves as a co-issuer
and co-obligor for our debt securities. Accordingly, and pursuant to the reduced
disclosure  format,  a discussion  of the results of  operations,  liquidity and
capital  resources  of  Ferrellgas  Partners  Finance  Corp.  is not  presented.
Institutional  investors  that might  otherwise  be limited in their  ability to
invest in our debt  securities,  because  we are a  partnership,  may be able to
invest in our debt securities  because  Ferrellgas  Partners  Finance Corp. is a
co-issuer and  co-obligor.  See Note B to Ferrellgas  Partners  Finance  Corp.'s
financial  statements  for a discussion of the debt  securities  with respect to
which  Ferrellgas   Partners  Finance  Corp.  is  serving  as  a  co-issuer  and
co-obligor.

     Ferrellgas Finance Corp. is a Delaware  corporation formed in 2003 and is a
wholly-owned  subsidiary of the operating partnership.  Ferrellgas Finance Corp.
has  nominal  assets and does not  conduct  any  operations,  but may serve as a
co-issuer and co-obligor of future issuances of debt securities of the operating
partnership.  Accordingly,  and  pursuant to the reduced  disclosure  format,  a
discussion  of the results of  operations,  liquidity  and capital  resources of
Ferrellgas  Finance Corp. is not presented.  Institutional  investors that might
otherwise  be  limited  in their  ability  to invest in debt  securities  of the
operating partnership.  because of its structure,  may be able to invest in debt
securities of the operating  partnership  because  Ferrellgas Finance Corp. is a
co-issuer and co-obligor.

     Ferrellgas  Receivables,  LLC was  organized  in September  2000,  and is a
wholly-owned,  unconsolidated qualifying special purpose entity and a subsidiary
of the operating partnership. The operating partnership transfers interests in a
pool of accounts receivable to Ferrellgas  Receivables.  Ferrellgas  Receivables
then  sells the  interests  to a  commercial  paper  conduit  of Banc  One,  NA.
Ferrellgas Receivables does not conduct any other activities. In accordance with
Statement of Financial  Accounting  Standards  ("SFAS") No. 140  "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
the  transactions   with  Ferrellgas   Receivables  are  accounted  for  in  the
consolidated  financial  statements  as sales of  accounts  receivable  with the
retention  of an interest  in  transferred  accounts  receivable.  The  accounts
receivable  securitization  is more fully described in "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations - Liquidity and
Capital  Resources - Investing  Activities" and in Note E - Accounts  receivable
securitization - to our consolidated financial statements provided herein.

                                       9
<PAGE>


Risk factors

Risks Inherent to Our Industry

Weather conditions may reduce the demand for propane; our financial condition is
vulnerable to warm winters.

     Weather  conditions have a significant impact on the demand for propane for
both heating and  agricultural  purposes.  Many of our customers rely heavily on
propane as a heating fuel. Accordingly,  our retail sales volumes of propane are
highest during the five-month  winter-heating  season of November  through March
and are directly affected by the temperatures during these months. During fiscal
2003,  approximately  62% of our retail propane volume was attributable to sales
during  the   winter-heating   season.   Actual  weather   conditions  can  vary
substantially  from year to year, which may  significantly  affect our financial
performance.  Furthermore, variations in weather in one or more regions in which
we operate  can  significantly  affect  our total  sales  volume of propane  and
therefore  our realized  profits.  A negative  effect on our sales volume may in
turn affect our results of operations.  The  agricultural  demand for propane is
also affected by weather,  as dry or warm weather  during the harvest season may
reduce the demand for propane used in some crop drying applications.

The retail propane business is highly competitive, which may negatively affect
our sales volumes and/or our results of operations.

     Our profitability is affected by the competition for customers among all of
the  participants  in the retail propane  business.  We compete with a number of
large national and regional firms and several thousand small independent  firms.
Because of the relatively low barriers to entry into the retail propane  market,
there is the potential for small independent propane retailers, as well as other
companies not previously engaged in retail propane distribution, to compete with
our retail outlets.  In recent years, some rural electric  cooperatives and fuel
oil distributors have expanded their businesses to include propane distribution.
As a result, we are subject to the risk of additional competition in the future.
Some of our competitors may have greater financial  resources than we do. Should
a competitor  attempt to increase market share by reducing prices, our operating
margins   and   customer   base   may   be   negatively   impacted.   Generally,
warmer-than-normal weather further intensifies competition.  We believe that our
ability  to  compete  effectively  depends  on  our  service  reliability,   our
responsiveness  to  customers  and our  ability to maintain  competitive  retail
propane prices and control our operating expenses.

The retail propane industry is a mature one, which may limit our growth.

     The retail propane industry is a mature one. We foresee only limited growth
in total national demand for propane in the near future.  We believe the overall
demand for retail propane has remained relatively constant over the past several
years, with year-to-year  industry volumes impacted primarily by fluctuations in
temperatures  and  economic  conditions.  Our ability to grow our sales  volumes
within the retail  propane  industry is primarily  dependent upon our ability to
acquire other retail  distributors and upon the success of our marketing efforts
to acquire new customers.  If we are unable to compete effectively in the retail
propane  business,  we may  lose  existing  customers  or  fail to  acquire  new
customers.

                                       10
<PAGE>


The retail propane business faces competition from other energy sources, which
may reduce the existing demand for our propane.

     Propane  competes  with other  sources  of  energy,  some of which are less
costly for  equivalent  energy  value.  We compete for  customers  against other
retail propane suppliers and against  suppliers of electricity,  natural gas and
fuel oil.  Electricity is a major competitor of propane,  but propane  generally
enjoys  a  competitive  price  advantage  over  electricity.   Except  for  some
industrial and  commercial  applications,  propane is generally not  competitive
with natural gas in areas where natural gas pipelines already exist because such
pipelines generally make it possible for the delivered cost of natural gas to be
less expensive  than the bulk delivery of propane.  The expansion of natural gas
into traditional  propane markets has historically been inhibited by the capital
cost required to expand distribution and pipeline systems,  however, the gradual
expansion of the nation's natural gas  distribution  systems has resulted in the
availability  of  natural  gas in areas  that  were  previously  dependent  upon
propane. Although propane is similar to fuel oil in some applications and market
demand, propane and fuel oil compete to a lesser extent primarily because of the
cost of converting  from one to the other and due to the fact that both fuel oil
and propane have generally  developed their own distinct  geographic markets. We
cannot predict the effect that the  development  of  alternative  energy sources
might have on our operations.

Energy efficiency and technology advances may affect demand for propane;
increases in propane prices may cause our customers to increase their
conservation efforts.

     The  national  trend  toward  increased   conservation  and   technological
advances,  including  installation of improved insulation and the development of
more efficient furnaces and other heating devices, has reduced the retail demand
for propane in our industry.  We cannot predict the materiality of the effect of
future  conservation  measures or the effect that any technological  advances in
heating,  conservation,  energy  generation  or other  devices might have on our
operations.  As the price of propane  increases,  our retail  customers  tend to
increase their  conservation  efforts and thereby decrease their  consumption of
propane.  We cannot predict the  materiality of the effect of those decreases on
our financial results.

Risks Inherent to Our Business

Our substantial debt and other financial obligations could impair our financial
condition and our ability to fulfill our obligations.

     We have  substantial  indebtedness and other financial  obligations.  As of
July 31, 2003, we had:

o    total indebtedness of approximately $900.2 million;

o    partners' capital of Ferrellgas Partners of approximately $2.9 million;

o    availability  under the  operating  partnership's  bank credit  facility of
     approximately $136.1 million; and

o    aggregate future minimum rental commitments under  non-cancelable  tank and
     other equipment operating leases of approximately $65.1 million.

     The operating  partnership  notes have maturity  dates ranging from 2005 to
2013, and bear interest at rates ranging from 6.99% to 8.87%. These notes do not
contain any sinking fund  provisions but do require annual  aggregate  principal
payments, without premium, during the following calendar years of approximately:

o    $109 million - 2005;

o    $ 58 million - 2006;

o    $ 90 million - 2007;

o    $ 52 million - 2008;

o    $ 73 million - 2009;

o    $ 82 million - 2010; and

o    $ 70 million - 2013.

                                       11
<PAGE>


     Amounts outstanding under the operating  partnership's bank credit facility
will be due on April 28, 2006.  All of the  indebtedness  and other  obligations
described  above are  obligations of the operating  partnership  except for $218
million of senior debt due 2012 issued by  Ferrellgas  Partners  and  Ferrellgas
Partners  Finance  Corp.  This $218 million in principal  amount of senior notes
also contain no sinking fund provisions.

     Subject  to  the   restrictions   governing  the  operating   partnership's
indebtedness  and  other  financial  obligations  and  the  indenture  governing
Ferrellgas Partners' outstanding senior notes due 2012, we may incur significant
additional  indebtedness and other financial  obligations,  which may be secured
and/or structurally senior to any debt securities we may issue.

     Our substantial  indebtedness  and other financial  obligations  could have
important consequences to our unitholders. For example, it could:

o    make it more  difficult for us to satisfy our  obligations  with respect to
     our securities;

o    impair our ability to obtain additional financing in the future for working
     capital, capital expenditures,  acquisitions, general corporate purposes or
     other purposes;

o    result in higher  interest  expense in the event of  increases  in interest
     rates since some of our debt is, and will continue to be, at variable rates
     of interest;

o    impair our  operating  capacity  and cash  flows if we fail to comply  with
     financial and restrictive  covenants in our debt agreements and an event of
     default occurs as a result of that failure that is not cured or waived;

o    require us to dedicate a  substantial  portion of our cash flow to payments
     on our indebtedness and other financial  obligations,  thereby reducing the
     availability  of our  cash  flow to fund  distributions,  working  capital,
     capital expenditures and other general partnership requirements;

o    limit our  flexibility  in planning  for, or  reacting  to,  changes in our
     business and the industry in which we operate; and

o    place us at a competitive  disadvantage  compared to our  competitors  that
     have proportionately less debt.

We may be unable to refinance our  indebtedness  or pay that  indebtedness if it
becomes due earlier than scheduled.

     If  Ferrellgas  Partners or the  operating  partnership  are unable to meet
their debt  service  obligations  or other  financial  obligations,  we could be
forced  to  restructure  or  refinance  our  indebtedness  and  other  financial
transactions,  seek additional equity capital or sell our assets. We may then be
unable to obtain such  financing  or capital or sell our assets on  satisfactory
terms,  if at all. Our failure to make payments,  whether after  acceleration of
the due date of that indebtedness or otherwise,  or our failure to refinance the
indebtedness would impair our operating capacity and cash flows.

The terms of our senior units limit our use of proceeds from sales of equity.

     While our senior  units are  outstanding,  other than  issuances  of equity
pursuant to an exercise of any of our common unit options,  Ferrellgas  Partners
may use up to $20 million of aggregate cash proceeds from sales of its equity to
reduce our  indebtedness.  Any other cash proceeds from equity issuances must be
used to redeem a portion of our outstanding senior units, all of which are owned
by JEF Capital Management,  Inc. As a result, as long as any of our senior units
are  outstanding,  our ability to access the equity capital markets for purposes
other than the  redemption  of our senior  units,  including  meeting our future
obligations  under our existing  securities or any other  securities that we may
issue, will be limited. JEF Capital Management is beneficially owned by James E.
Ferrell,  the President and Chief  Executive  Officer of our general partner and
the Chairman of its Board of Directors.

                                       12
<PAGE>


Restrictive covenants in the agreements governing our indebtedness and other
financial obligations may reduce our operating flexibility.

     The indenture  governing the outstanding  notes of Ferrellgas  Partners and
the  agreements  governing the operating  partnership's  indebtedness  and other
financial   obligations  contain,  and  any  indenture  that  will  govern  debt
securities  issued by  Ferrellgas  Partners  or the  operating  partnership  may
contain,  various  covenants that limit our ability and the ability of specified
subsidiaries of ours to, among other things:

o    incur additional indebtedness;

o    make distributions to our unitholders;

o    purchase or redeem our outstanding equity interests or subordinated debt;

o    make specified investments;

o    create or incur liens;

o    sell assets;

o    engage in specified transactions with affiliates;

o    restrict the ability of our subsidiaries to make specified payments, loans,
     guarantees and transfers of assets or interests in assets;

o    engage in sale-leaseback transactions;

o    effect a merger or consolidation  with or into other companies or a sale of
     all or substantially all of our properties or assets; and

o    engage in other lines of business.

     These  restrictions  could limit the ability of  Ferrellgas  Partners,  the
operating partnership and our other subsidiaries:

o    to obtain future financings;

o    to make needed capital expenditures;

o    to  withstand a future  downturn in our business or the economy in general;
     or

o    to conduct operations or otherwise take advantage of business opportunities
     that may arise.

     Some of the  agreements  governing  our  indebtedness  and other  financial
obligations  also require the maintenance of specified  financial ratios and the
satisfaction of other financial conditions.  Our ability to meet those financial
ratios and  conditions  can be  affected  by  unexpected  downturns  in business
operations beyond our control, such as significantly warmer than normal weather,
a  volatile  energy  commodity  cost   environment  or  an  economic   downturn.
Accordingly,  we may be unable to meet these ratios and conditions. This failure
could  impair  our  operating  capacity  and cash flows and could  restrict  our
ability to incur debt or to make cash  distributions,  even if sufficient  funds
were available.

     Our breach of any of these covenants or the operating partnership's failure
to meet any of these ratios or  conditions  could result in a default  under the
terms of the relevant indebtedness, which could cause such indebtedness or other
financial  obligations,  and  by  reason  of  cross-default  provisions,  any of
Ferrellgas  Partners' or the operating  partnership's other outstanding notes or
future debt securities, to become immediately due and payable. If we were unable
to repay those amounts,  the lenders could  initiate a bankruptcy  proceeding or
liquidation proceeding or proceed against the collateral, if any. If the lenders
of the  operating  partnership's  indebtedness  or other  financial  obligations
accelerate  the  repayment of  borrowings or other amounts owed, we may not have
sufficient  assets to repay our  indebtedness  or other  financial  obligations,
including our outstanding notes and any future debt securities.

                                       13
<PAGE>


Our results of operations and our ability to make  distributions or pay interest
or  principal  on debt  securities  could be  negatively  impacted  by price and
inventory risk and management of these risks.

     The amount of gross profit we make depends  significantly  on the excess of
the sales price over our costs to purchase and distribute propane. Consequently,
our  profitability  is sensitive  to changes in energy  prices,  in  particular,
changes in wholesale  propane prices.  Propane is a commodity whose market price
can fluctuate  significantly based on changes in supply, changes in other energy
prices  or  other  market  conditions.  We have no  control  over  these  market
conditions.  In general,  product supply  contracts  permit  suppliers to charge
posted prices plus  transportation  costs at the time of delivery or the current
prices  established  at major  delivery  points.  Any  increase  in the price of
product could reduce our gross profit  because we may not be able to immediately
pass rapid  increases in such costs, or costs to distribute  product,  on to our
customers.

     While we generally  attempt to minimize our  inventory  risk by  purchasing
product  on a  short-term  basis,  we may  purchase  and store  propane or other
natural gas liquids  depending on inventory and price outlooks.  We may purchase
large volumes of propane at the then current  market price during periods of low
demand and low prices,  which  generally  occurs during the summer  months.  The
market  price  for  propane  could  fall  below  the  price at which we made the
purchases,  which  would  adversely  affect our profits or cause sales from that
inventory to be  unprofitable.  A portion of our  inventory  is purchased  under
supply  contracts  that  typically  have a  one-year  term  and at a price  that
fluctuates  based on the prevailing  market  prices.  To limit our overall price
risk,  we may  purchase  and store  physical  product and enter into fixed price
over-the-counter  energy commodity forward contracts and options that have terms
of less than one year.  This strategy may not be effective in limiting our price
risk if, for example,  weather conditions  significantly reduce customer demand,
or market or weather  conditions prevent the delivery of physical product during
periods of peak demand,  resulting in excess  physical  product after the end of
the winter  heating  season  and the  expiration  of  related  forward or option
contracts.

     Some of our sales are pursuant to  commitments  at fixed prices.  To manage
these commitments,  we may purchase and store physical product and/or enter into
fixed price-over-the-counter  energy commodity forward contracts and options. We
may enter into these  agreements  at volume levels that we believe are necessary
to mitigate the price risk related to our  anticipated  sales  volumes under the
commitments.  If the price of propane  declines and our customers  purchase less
propane than we have purchased from our suppliers, we could incur losses when we
sell the excess  volumes.  If the price of propane  increases  and our customers
purchase more propane than we have purchased from our suppliers,  we could incur
losses  when we are  required  to  purchase  additional  propane to fulfill  our
customers'  orders.  The risk  management of our inventory and contracts for the
future  purchase  of  product  could  impair our  profitability  if the price of
product changes in ways we do not anticipate.

     We also purchase and sell derivatives to manage other risks associated with
commodity prices.  Our risk management  trading  activities use various types of
energy   commodity   forward   contracts,   options,   swaps   traded   on   the
over-the-counter  financial  markets and  futures and options  traded on the New
York  Mercantile  Exchange to manage and hedge our exposure to the volatility of
floating  commodity  prices and to protect our inventory  positions.  These risk
management trading activities are based on our management's  estimates of future
events and prices and are  intended to generate a profit  which we then apply to
reduce our cost of product sold.  However,  if those  estimates are incorrect or
other market events outside of our control occur, such activities could generate
a loss in future  periods  which  would  increase  our cost of product  sold and
potentially impair our profitability.

     The Board of  Directors  of our general  partner  adopted a commodity  risk
management  policy which places  specified  restrictions on all of our commodity
risk  management  activities  such as limits on the types of  commodities,  loss
limits,  time limits on contracts and  limitations  on our ability to enter into
derivative  contracts.  The policy also  requires  the  establishment  of a risk
management  committee of senior  executives.  This committee is responsible  for
monitoring  commodity risk management  activities,  establishing and maintaining
timely reporting and establishing and monitoring  specific limits on the various
commodity  risk  management  activities.   These  limits  may  be  waived  on  a
case-by-case  basis by a majority vote of the risk management  committee  and/or
Board of Directors,  depending on the specific limit being waived.  From time to
time,  for  valid  business  reasons  based  on  the  facts  and  circumstances,
authorization  has been  granted to allow  specific  commodity  risk  management
positions to exceed established limits. In addition, the operating partnership's
credit  facility  places  limitations on our ability to amend our commodity risk
management  policy.  If we  sustain  material  losses  from our risk  management
activities  due to our failure to  anticipate  future  events,  a failure of the
policy, incorrect waivers or otherwise, our ability to make distributions to our
unitholders  or  pay  interest  or  principal  of  any  debt  securities  may be
negatively impacted as a result of such loss.

                                       14
<PAGE>


We are dependent on our principal suppliers, which increases the risks from an
interruption in supply and transportation.

     Through our supply procurement  activities,  we purchased approximately 50%
of our propane  from ten  suppliers  during  fiscal 2003.  In  addition,  during
extended  periods of colder than normal  weather,  suppliers may temporarily run
out of propane necessitating the transportation of propane by truck, rail car or
other means from other areas. If supplies from these sources were interrupted or
difficulties in alternative  transportation were to arise, the cost of procuring
replacement supplies and transporting those supplies from alternative  locations
might be  materially  higher and, at least on a  short-term  basis,  our margins
could be reduced.

The availability of cash from our credit facilities may be impacted by many
factors beyond our control.

     We typically borrow on the operating  partnership's bank credit facility or
sell accounts receivable under its accounts receivable  securitization  facility
to fund our working  capital  requirements.  We may also borrow on the operating
partnership's bank credit facility to fund distributions to our unitholders.  We
purchase  product from suppliers and make payments with terms that are typically
within five to ten days of delivery.  We believe that the  availability  of cash
from  the  operating   partnership's  bank  credit  facility  and  the  accounts
receivable securitization facility will be sufficient to meet our future working
capital  needs.  However,  if we were to experience  an  unexpected  significant
increase in working  capital  requirements  or have  insufficient  funds to fund
distributions,  this need could  exceed  our  immediately  available  resources.
Events that could cause  increases in working  capital  borrowings  or letter of
credit requirements may include:

o    a significant increase in the cost of propane;

o    a significant delay in the collections of accounts receivable;

o    increased  volatility in energy commodity prices related to risk management
     activities;

o    increased liquidity requirements imposed by insurance providers;

o    a significant downgrade in our credit rating;

o    decreased trade credit; or

o    a significant acquisition.

     As is typical in our industry,  our customers do not pay upon receipt,  but
pay  between  thirty and sixty days after  delivery.  During the winter  heating
season, we experience significant increases in accounts receivable and inventory
levels and thus a significant decline in working capital availability.  Although
we have the ability to fund working  capital with  borrowings from the operating
partnership's  bank credit facility and sales of accounts  receivable  under its
accounts receivable  securitization  facility, we cannot predict the effect that
increases in propane  prices and colder than normal  winter  weather may have on
future working capital availability.

                                       15
<PAGE>


We may not be successful in making acquisitions and any acquisitions we make may
not result in our anticipated results; in either case, potentially limiting our
growth, limiting our ability to compete and impairing our results of operations.

     We  have  historically  expanded  our  business  through  acquisitions.  We
regularly  consider and evaluate  opportunities  to acquire local,  regional and
national  propane  distributors.  We may  choose to finance  these  acquisitions
through  internal cash flow,  external  borrowings or the issuance of additional
common  units  or  other  securities.   We  have  substantial   competition  for
acquisitions  of propane  companies  among the  publicly-traded  master  limited
partnerships.  Although we believe there are numerous  potential large and small
acquisition candidates in our industry, there can be no assurance that:

o    we  will be  able  to  acquire  any of  these  candidates  on  economically
     acceptable terms;

o    we will be able to  successfully  integrate  acquired  operations  with any
     expected cost savings;

o    any   acquisitions   made  will  not  be  dilutive  to  our   earnings  and
     distributions;

o    any additional equity we issue as consideration for an acquisition will not
     be dilutive to our unitholders; or

o    any additional debt we incur to finance an acquisition  will not affect the
     operating   partnership's  ability  to  make  distributions  to  Ferrellgas
     Partners or service the operating partnership's existing debt.

We are subject to operating and  litigation  risks,  which may not be covered by
insurance.

     Our  operations  are subject to all  operating  hazards and risks  normally
incidental to the handling,  storing and delivering of combustible  liquids such
as propane.  As a result,  we have been,  and are likely to be, a  defendant  in
various legal  proceedings  arising in the ordinary course of business.  We will
maintain  insurance  policies  with  insurers  in such  amounts  and  with  such
coverages and deductibles as we believe are reasonable and prudent.  However, we
cannot  guarantee  that such  insurance  will be adequate to protect us from all
material  expenses  related to potential  future claims for personal  injury and
property damage or that such levels of insurance will be available in the future
at economical prices.

Current  economic  and  political   conditions  may  harm  the  energy  business
disproportionately to other industries.

     Deteriorating  regional and global  economic  conditions and the effects of
ongoing military actions against terrorists may cause significant disruptions to
commerce  throughout the world. If those disruptions occur in areas of the world
which are tied to the  energy  industry,  such as the  Middle  East,  it is most
likely that our industry will be either  affected first or affected to a greater
extent than other industries. These conditions or disruptions may:

o    result in delays or cancellations of customer orders;

o    impair our ability to effectively market or acquire propane; or

o    impair  our  ability  to raise  equity or debt  capital  for  acquisitions,
     capital expenditures or ongoing operations.

Risks Inherent to an Investment in Our Debt Securities

Ferrellgas Partners and the operating partnership are required to distribute all
of their available cash to their equity holders and Ferrellgas  Partners and the
operating  partnership  are not required to  accumulate  cash for the purpose of
meeting their future obligations to holders of their debt securities,  which may
limit the cash available to service those debt securities.

                                       16
<PAGE>


     Subject  to  the  limitations  on  restricted  payments  contained  in  the
indenture that governs Ferrellgas  Partners'  outstanding notes, the instruments
governing the  outstanding  indebtedness  of the operating  partnership  and any
applicable indenture that will govern any debt securities Ferrellgas Partners or
the  operating  partnership  may  issue,  the  partnership  agreements  of  both
Ferrellgas  Partners and the operating  partnership require us to distribute all
of our  available  cash each  fiscal  quarter to our  limited  partners  and our
general  partner  and do not  require us to  accumulate  cash for the purpose of
meeting  obligations to holders of any debt securities of Ferrellgas Partners or
the operating partnership. As a result of these distribution requirements, we do
not expect either Ferrellgas Partners or the operating partnership to accumulate
significant  amounts  of cash.  Depending  on the  timing and amount of our cash
distributions and because we are not required to accumulate cash for the purpose
of meeting  obligations to holders of any debt securities of Ferrellgas Partners
or the operating partnership,  such distributions could significantly reduce the
cash  available  to us in  subsequent  periods  to  make  payments  on any  debt
securities of Ferrellgas Partners or the operating partnership.  Debt securities
of Ferrellgas Partners will be structurally subordinated to all indebtedness and
other liabilities of the operating partnership and its subsidiaries.

     Debt securities of Ferrellgas Partners will be effectively  subordinated to
all existing and future claims of creditors of the operating partnership and its
subsidiaries, including:

o    the lenders under the operating partnership's indebtedness;

o    the claims of lessors under the operating partnership's operating leases;

o    the  claims  of the  lenders  and  their  affiliates  under  the  operating
     partnership's accounts receivable securitization facility;

o    debt securities,  including any subordinated debt securities, issued by the
     operating partnership; and

o    all other possible  future  creditors of the operating  partnership and its
     subsidiaries.

     This subordination is due to these creditors'  priority as to the assets of
the operating  partnership and its subsidiaries over Ferrellgas Partners' claims
as an equity holder in the operating partnership and, thereby,  indirectly,  the
claims of holders of Ferrellgas Partners' debt securities. As a result, upon any
distribution to these creditors in a bankruptcy,  liquidation or  reorganization
or similar  proceeding  relating to  Ferrellgas  Partners or its  property,  the
operating partnership's creditors will be entitled to be paid in full before any
payment  may be made with  respect  to  Ferrellgas  Partners'  debt  securities.
Thereafter, the holders of Ferrellgas Partners' debt securities will participate
with its trade creditors and all other holders of its indebtedness in the assets
remaining,  if  any.  In  any of  these  cases,  Ferrellgas  Partners  may  have
insufficient  funds  to pay  all of  its  creditors,  and  holders  of its  debt
securities may therefore receive less, ratably,  than creditors of the operating
partnership and its subsidiaries. As of July 31, 2003, the operating partnership
had  approximately   $821.9  million  of  outstanding   indebtedness  and  other
liabilities  to which any of the debt  securities  of  Ferrellgas  Partners will
effectively rank junior.

All  payments  on any  subordinated  debt  securities  that we may issue will be
subordinated to the payments of any amounts due on any senior  indebtedness that
we may have issued or incurred.

     The right of the holders of subordinated debt securities to receive payment
of any amounts due to them,  whether  interest,  premium or  principal,  will be
subordinated to the right of all of the holders of our senior  indebtedness,  as
such term will be defined in the  applicable  subordinated  debt  indenture,  to
receive  payments of all  amounts due to them.  If an event of default on any of
our senior indebtedness occurs, then until such event of default has been cured,
we may be unable to make  payments  of any  amounts  due to the  holders  of our
subordinated debt securities. Accordingly, in the event of insolvency, creditors
who are holders of our senior indebtedness may recover more,  ratably,  than the
holders of our subordinated debt securities.

Debt  securities of Ferrellgas  Partners are expected to be  non-recourse to the
operating  partnership,  which will limit  remedies of the holders of Ferrellgas
Partners' debt securities.

                                       17
<PAGE>


     Ferrellgas Partners'  obligations under any debt securities are expected to
be non-recourse to the operating partnership. Therefore, if Ferrellgas Partners'
should fail to pay the  interest or  principal on the notes or breach any of its
other obligations under its debt securities or any applicable indenture, holders
of debt  securities of  Ferrellgas  Partners will not be able to obtain any such
payments  or obtain  any other  remedy  from the  operating  partnership  or its
subsidiaries.  The operating partnership and its subsidiaries will not be liable
for any of Ferrellgas  Partners'  obligations  under its debt  securities or the
applicable indenture.

Ferrellgas Partners or the operating partnership may be unable to repurchase
debt securities upon a change of control and it may be difficult to determine if
a change of control has occurred.

     Upon the occurrence of "change of control"  events as may be described from
time  to time in our  filings  with  the SEC  and  related  to the  issuance  by
Ferrellgas  Partners  or the  operating  partnership  of  debt  securities,  the
applicable  issuer or a third  party may be required to make a change of control
offer to  repurchase  those  debt  securities  at a premium  to their  principal
amount, plus accrued and unpaid interest. The applicable issuer may not have the
financial  resources  to  purchase  its debt  securities  in that  circumstance,
particularly  if a  change  of  control  event  triggers  a  similar  repurchase
requirement  for, or results in the  acceleration  of, other  indebtedness.  The
indenture  governing  Ferrellgas  Partners'  outstanding  notes  contains such a
repurchase   requirement.   Some  of  the  agreements  governing  the  operating
partnership's  indebtedness  currently  provide that specified change of control
events  will  result  in  the  acceleration  of  the  indebtedness  under  those
agreements.  Future debt  agreements  of  Ferrellgas  Partners or the  operating
partnership  may also contain  similar  provisions.  The obligation to repay any
accelerated  indebtedness  of the  operating  partnership  will be  structurally
senior to Ferrellgas  Partners'  obligations to repurchase  its debt  securities
upon a change of control.  In addition,  future debt  agreements  of  Ferrellgas
Partners or the  operating  partnership  may contain other  restrictions  on the
ability of Ferrellgas  Partners or the operating  partnership  to repurchase its
debt securities upon a change of control.  These  restrictions could prevent the
applicable   issuer  from  satisfying  its  obligations  to  purchase  its  debt
securities  unless  it  is  able  to  refinance  or  obtain  waivers  under  any
indebtedness of Ferrellgas Partners or of the operating  partnership  containing
these  restrictions.  The  applicable  issuer's  failure to make or consummate a
change of control  repurchase  offer or pay the change of control purchase price
when due will give the trustee and the holders of the debt securities particular
rights that will be described from time to time in our filings with the SEC.

     In addition, one of the events that may constitute a change of control is a
sale of all or substantially all of the applicable  issuer's assets. The meaning
of  "substantially  all" varies according to the facts and  circumstances of the
subject  transaction and has no clearly  established meaning under New York law,
which is the law that will likely govern any indenture for the debt  securities.
This ambiguity as to when a sale of substantially all of the applicable issuer's
assets has  occurred  may make it difficult  for holders of debt  securities  to
determine  whether the applicable issuer has properly  identified,  or failed to
identify, a change of control.

There may be no active trading market for our debt securities, which may limit a
holder's ability to sell our debt securities.

     We do not intend to list the debt securities we may issue from time to time
on any  securities  exchange  or to seek  approval  for  quotations  through any
automated  quotation system.  An established  market for the debt securities may
not  develop,  or if one  does  develop,  it may  not  be  maintained.  Although
underwriters  may  advise  us that  they  intend  to make a  market  in the debt
securities,  they are not expected to be obligated to do so and may  discontinue
such  market  making  activity  at  any  time  without   notice.   In  addition,
market-making  activity will be subject to the limits  imposed by the Securities
Act and the Exchange  Act.  For these  reasons,  we cannot  assure a debt holder
that:

o    a liquid market for the debt securities will develop;

o    a debt holder will be able to sell its debt securities; or

o    a debt holder will  receive  any  specific  price upon any sale of its debt
     securities.

                                       18
<PAGE>


     If a public market for the debt securities did develop, the debt securities
could trade at prices that may be higher or lower than their principal amount or
purchase price, depending on many factors,  including prevailing interest rates,
the  market  for  similar  debt   securities  and  our  financial   performance.
Historically,  the  market  for  non-investment  grade  debt,  such as our  debt
securities,  has been  subject  to  disruptions  that  have  caused  substantial
fluctuations in the prices of these securities.

Risks Inherent to an Investment in Ferrellgas Partners' Equity

Ferrellgas Partners may sell additional limited partner interests, diluting
existing interests of unitholders.

     The  partnership   agreement  of  Ferrellgas   Partners   generally  allows
Ferrellgas  Partners to issue  additional  limited  partner  interests and other
equity securities. When Ferrellgas Partners issues additional equity securities,
a  unitholder's  proportionate  partnership  interest  will  decrease.  Such  an
issuance could  negatively  affect the amount of cash distributed to unitholders
and the market price of common units.  The issuance of  additional  common units
will also diminish the relative  voting  strength of the previously  outstanding
common units.

Cash distributions are not guaranteed and may fluctuate with our performance and
other external factors.

     Although we are  required to  distribute  all of our  "available  cash," we
cannot  guarantee the amounts of available  cash that will be distributed to the
holders of our equity securities. Available cash generally means, for any fiscal
quarter,  the sum of all cash received by us from all sources and any reductions
in reserves,  less the sum of all of our cash disbursements and any additions to
reserves.  The actual  amounts  of  available  cash will  depend  upon  numerous
factors, including:

o    cash flow generated by operations;

o    weather in our areas of operation;

o    borrowing capacity under our credit facilities;

o    principal and interest payments made on our debt;

o    the costs of acquisitions, including related debt service payments;

o    restrictions contained in debt instruments;

o    issuances of debt and equity securities;

o    fluctuations in working capital;

o    capital expenditures;

o    adjustments in reserves made by our general partner in its discretion;

o    prevailing economic conditions; and

o    financial, business and other factors, a number of which will be beyond our
     control.

Cash distributions are dependent primarily on cash flow, including from reserves
and, subject to limitations,  working capital borrowings. Cash distributions are
not dependent on profitability,  which is affected by non-cash items. Therefore,
cash distributions  might be made during periods when we record losses and might
not be made during periods when we record profits.

Our general  partner has broad  discretion to determine the amount of "available
cash"  for  distribution  to  holders  of  our  equity  securities  through  the
establishment and maintenance of cash reserves,  thereby  potentially  lessening
and limiting the amount of "available cash" eligible for distribution.

                                       19
<PAGE>


     Our general partner  determines the timing and amount of our  distributions
and has  broad  discretion  in  determining  the  amount  of funds  that will be
recognized as "available  cash." Part of this discretion  comes from the ability
of our  general  partner  to  establish  and  make  additions  to our  reserves.
Decisions as to amounts to be placed in or released  from reserves have a direct
impact on the amount of available cash for  distributions  because increases and
decreases in reserves are taken into account in computing  available cash. Funds
within or added to our reserves are not  considered to be  "available  cash" and
are therefore not required to be distributed.  Each fiscal quarter,  our general
partner may, in its reasonable discretion, determine the amounts to be placed in
or  released  from  reserves,  subject to  restrictions  on the  purposes of the
reserves.  Reserves may be made,  increased or decreased for any proper purpose,
including, but not limited to, reserves:

o    to comply with the terms of any of our agreements or obligations, including
     the establishment of reserves to fund the payment of interest and principal
     in  the  future  of any  debt  securities  of  Ferrellgas  Partners  or the
     operating partnership;

o    to provide for level distributions of cash  notwithstanding the seasonality
     of our business; and

o    to provide for future capital expenditures and other payments deemed by our
     general partner to be necessary or advisable.

     The decision by our general partner to establish,  increase or decrease our
reserves may limit the amount of cash available for  distribution  to holders of
our  equity  securities.  Holders  of our  equity  securities  will not  receive
payments required by such securities unless we are able to first satisfy our own
obligations  and the  establishment  of any reserves.  See the first risk factor
under "--Risks Arising from Our Partnership  Structure and Relationship with Our
General Partner."

The debt  agreements of Ferrellgas  Partners and the operating  partnership  may
limit their ability to make distributions to holders of their equity securities.

     The  debt  agreements  governing  Ferrellgas  Partners'  and the  operating
partnership's  outstanding  indebtedness contain restrictive  covenants that may
limit or prohibit  distributions  to holders of their  equity  securities  under
various   circumstances.   Ferrellgas  Partners'  existing  indenture  generally
prohibits it from:

o    making any  distributions  to  unitholders if an event of default exists or
     would exist when such distribution is made;

o    if its consolidated fixed charge coverage ratio as defined in the indenture
     is  greater  than 1.75 to 1.00,  distributing  amounts in excess of 100% of
     available cash for the immediately preceding fiscal quarter; or

o    if its consolidated fixed charge coverage ratio as defined in the indenture
     is less than or equal to 1.75 to 1.00,  distributing  amounts  in excess of
     $25 million less any restricted  payments made for the prior sixteen fiscal
     quarters  plus the  aggregate  cash  contributions  made to us during  that
     period.

See the first risk factor under "--Risks Arising from Our Partnership  Structure
and Relationship with Our General Partner" for a description of the restrictions
on  the  operating  partnership's  ability  to  distribute  cash  to  Ferrellgas
Partners.  Any indenture  applicable to future  issuances of debt  securities by
Ferrellgas Partners or the operating  partnership may contain  restrictions that
are the same as or similar to those in their existing debt agreements.

                                       20
<PAGE>


The distribution priority to our common units owned by the public terminates no
later than December 31, 2005.

     Assuming  that the  restrictions  under our debt  agreements  are met,  our
partnership  agreements  require us to distribute  100% of our available cash to
our  unitholders  on a quarterly  basis.  Available cash is generally all of our
cash  receipts,  less cash  disbursements  and  adjustments  for net  changes in
reserves.  Currently,  the  common  units  owned by the  public  have a right to
receive  distributions  of available cash before any  distributions of available
cash are made on the common  units owned by Ferrell  Companies,  Inc.  After the
payment  of any  required  distributions  on our  senior  units,  we must  pay a
distribution on the  publicly-held  common units before we pay a distribution on
the common  units  held by Ferrell  Companies.  If there  exists an  outstanding
amount of deferred  distributions on the common units held by Ferrell  Companies
of $36 million,  the common units held by Ferrell  Companies will be paid in the
same manner as the  publicly-held  common  units.  While there are any  deferred
distributions  outstanding on common units held by Ferrell Companies, we may not
increase the  distribution  to our public common  unitholders  above the highest
quarterly  distribution  paid on our  common  units  for any of the  immediately
preceding four fiscal quarters. After payment of all required distributions,  we
will use remaining  available cash to reduce any amount  previously  deferred on
the common units held by Ferrell Companies.

     This distribution  priority right is scheduled to end December 31, 2005, or
earlier if there is a change of control,  we dissolve or Ferrell Companies sells
all of our common units held by it.  Whether an extension of the  expiration  of
the  distribution  priority is likely or unlikely  involves several factors that
are not  currently  known and/or  cannot be assessed  until a time closer to the
expiration  date. The  termination of this  distribution  priority may lower the
market price for our common units.

The holder of our senior units may have the right in the future to convert the
senior units into common units, substantially diluting our existing common
unitholders.

     The  senior  unitholder  has the option to  convert  our senior  units into
common units beginning on the earlier of December 31, 2005, or the occurrence of
a  material  event,  as  defined  in the  partnership  agreement  of  Ferrellgas
Partners.  The number of common units issuable upon  conversion of a senior unit
is equal to the  senior  unit  liquidation  preference,  currently  $40 plus any
accrued and unpaid distributions,  divided by the then current market price of a
common unit. This conversion may be dilutive to our existing common unitholders.

     Generally, a material event includes:

o    a change of control;

o    our treatment as an association taxable as a corporation for federal income
     tax purposes;

o    our failure to use the aggregate cash proceeds from equity issuances, other
     than  issuances of equity  pursuant to an exercise of any unit options,  to
     redeem a portion of our senior  units  other than up to $20 million of cash
     proceeds from equity issuances used to reduce our indebtedness; or

o    our  failure to pay the  senior  unit  distribution  in full for any fiscal
     quarter.

The  holder of our  senior  units  may have the right in the  future to sell our
senior  units,  or the common units  received  upon a  conversion  of our senior
units, with special indemnification rights.

     Currently,  our outstanding  senior units may not be transferred.  However,
that  restriction  will lapse on the earlier of December 31,  2005,  or upon the
occurrence of a material event as described  above. If the current  restrictions
on the sale or conversion  of our senior units lapse as discussed  above and the
holder were to sell any of our senior units prior to December  17, 2007,  we are
required to indemnify the holder for the amount of the shortfall, if any, if the
proceeds from that sale are less than the original  aggregate  face value of the
applicable senior units. The original face value of each senior unit is $40. The
aggregate face value of the 2.0 million senior units  outstanding as of July 31,
2003 was $79.8 million. The actual amount of a shortfall, if any, will depend on
our financial standing and market circumstances at the time of any sale.

                                       21
<PAGE>


A redemption of our senior units may be dilutive to our common unitholders.

     Our  senior  units  are  redeemable  in  whole or in part by us at our sole
discretion.  Each senior unit is redeemable at its liquidation preference of $40
plus  any  accumulated  and  unpaid  senior  unit  distributions.  We may  issue
additional  equity interests for cash to provide the funds to redeem all or part
of our outstanding  senior units. Such an issuance may be dilutive to our common
unitholders.

Persons owning 20% or more of Ferrellgas Partners' common units cannot vote.
This limitation does not apply to common units owned by Ferrell Companies, our
general partner and its affiliates or the common units into which our senior
units are converted by the current holder thereof.

     All common units held by a person that owns 20% or more of Ferrellgas
Partners' common units cannot be voted. This provision may:

o    discourage a person or group from  attempting to remove our general partner
     or otherwise change management; and

o    reduce  the  price at which our  common  units  will  trade  under  various
     circumstances.

     This  limitation  does not apply to our general partner and its affiliates.
Ferrell  Companies,  the  parent  of  our  general  partner,  owns  all  of  the
outstanding  capital stock of our general  partner in addition to  approximately
47% of our common units.

     If our senior units convert into common units,  the current holder may vote
any converted  common units even if the aggregate  number of common units issued
upon conversion  exceeds 20% of the then outstanding  common units.  This voting
exemption does not apply if the converted common units are held by someone other
than the current holder or a related party of the current holder,  as defined in
the partnership agreement of Ferrellgas Partners.

Risks Arising from Our Partnership  Structure and Relationships with Our General
Partner

Ferrellgas  Partners  is a holding  company and has no  material  operations  or
assets. Accordingly,  Ferrellgas Partners is dependent on distributions from the
operating  partnership to service its obligations.  These  distributions are not
guaranteed and may be restricted.

     Ferrellgas  Partners is a holding company for our  subsidiaries,  including
the operating  partnership.  Ferrellgas  Partners has no material operations and
only limited assets.  Ferrellgas  Partners Finance Corp. is Ferrellgas  Partners
wholly-owned  finance  subsidiary,  may be a  co-obligor  on  any  of  its  debt
securities, conducts no business and has nominal assets. Accordingly, Ferrellgas
Partners is dependent on cash distributions  from the operating  partnership and
its subsidiaries to service  obligations of Ferrellgas  Partners.  The operating
partnership  is required to  distribute  all of its  available  cash each fiscal
quarter, less the amount of cash reserves that our general partner determines is
necessary or appropriate in its reasonable  discretion to provide for the proper
conduct of our business,  to provide funds for distributions  over the next four
fiscal  quarters  or to comply  with  applicable  law or with any of our debt or
other  agreements.  This  discretion  may limit the amount of available cash the
operating partnership may distribute to Ferrellgas Partners each fiscal quarter.
Holders of Ferrellgas Partners' securities will not receive payments required by
those securities unless the operating  partnership is able to make distributions
to Ferrellgas  Partners  after the  operating  partnership  first  satisfies its
obligations  under the terms of its own borrowing  arrangements and reserves any
necessary amounts to meet its own financial obligations.

     In addition,  the various agreements governing the operating  partnership's
indebtedness and other financing  transactions  permit  quarterly  distributions
only so long as each  distribution  does not  exceed  a  specified  amount,  the
operating partnership meets a specified financial ratio and no default exists or
would result from such  distribution.  Those  agreements  include the indentures
governing the operating partnership's existing notes, a bank credit facility and
an accounts receivable securitization facility. Each of these agreements contain
various  negative  and  affirmative   covenants   applicable  to  the  operating
partnership and some of these  agreements  require the operating  partnership to
maintain specified financial ratios. If the operating  partnership  violates any
of these covenants or requirements, a default may result and distributions would
be limited. These covenants limit the operating  partnership's ability to, among
other things:

                                       22
<PAGE>


o    incur additional indebtedness;

o    engage in transactions with affiliates;

o    create or incur liens;

o    sell assets;

o    make restricted payments, loans and investments;

o    enter into business combinations and asset sale transactions; and

o    engage in other lines of business.

The ownership of our general partner could change if Ferrell Companies  defaults
on its outstanding indebtedness.

     Ferrell Companies owns all of the outstanding  capital stock of our general
partner in addition to  approximately  47% of our common  units.  As of July 31,
2003, Ferrell Companies had pledged these securities  against  approximately $59
million of senior debt, net of pledged cash reserves,  with a scheduled maturity
of June 2006.  If and when such senior debt is  completely  extinguished  in the
future,  Ferrell Companies has agreed to subsequently  pledge these common units
and other collateral against its then outstanding  subordinated debt, if any. As
of July  31,  2003,  the  outstanding  balance  of such  subordinated  debt  was
approximately $50 million, with a scheduled maturity of August 2007. In addition
to its cash reserves,  Ferrell  Companies'  primary sources of income to pay its
debt are dividends that Ferrell Companies  receives from our general partner and
distributions received on the common units it holds. For the year ended July 31,
2003, Ferrell Companies  received  approximately $38 million from these sources.
If Ferrell Companies  defaults on its debt, its lenders could acquire control of
our general  partner and the common units owned by it. In that case, the lenders
could change  management of our general  partner and operate the general partner
with different objectives than current management.

Unitholders have some limits on their voting rights; our general partner manages
and operates us precluding the  participation  of our unitholders in operational
decisions.

     Our general  partner  manages and operates us. Unlike the holders of common
stock in a corporation,  unitholders  have only limited voting rights on matters
affecting our business.  Amendments to the  partnership  agreement of Ferrellgas
Partners  may be proposed  only by or with the  consent of our general  partner.
Proposed amendments must generally be approved by holders of at least a majority
of our common units and also, if the amendment will adversely  affect our senior
units, a majority of our senior units.

     Unitholders will have no right to elect our general partner on an annual or
other  continuing  basis,  and our  general  partner  may not be removed  except
pursuant to:

o    the  vote of the  holders  of at  least  66 2/3% of the  outstanding  units
     entitled to vote  thereon,  which  includes  the common  units owned by our
     general partner and its affiliates; and

o    upon the election of a successor general partner by the vote of the holders
     of not less than a majority  of the  outstanding  units  entitled  to vote,
     which includes both common units and senior units.

     Because  Ferrell  Companies,  the  parent  of  our  general  partner,  owns
approximately  47% of our  outstanding  common units and JEF Capital  Management
owns  100%  of our  outstanding  senior  units,  amendments  to the  partnership
agreement of Ferrellgas Partners may not be made and our general partner may not
be removed  without its consent  and the consent of JEF Capital  Management,  if
applicable.  JEF Capital  Management is beneficially  owned by James E. Ferrell,
the president, chief executive officer and chairman of the Board of Directors of
our general partner.

                                       23
<PAGE>


Our general partner has a limited call right with respect to the limited partner
interests of Ferrellgas Partners.

     If at any time less than 20% of the  then-issued  and  outstanding  limited
partner interests of any class of Ferrellgas  Partners are held by persons other
than our general partner and its affiliates,  our general partner has the right,
which it may assign to any of its  affiliates  or to us, to acquire all, but not
less than all, of the remaining  limited partner interests of such class held by
such unaffiliated  persons at a price generally equal to the then-current market
price of limited partner interests of such class. As a consequence, a unitholder
may be required to sell its common units at a time when the  unitholder  may not
desire to sell them or at a price  that is less  than the  price  desired  to be
received upon such sale.

Unitholders may not have limited liability in specified circumstances and may be
liable for the return of distributions.

     The  limitations on the liability of holders of limited  partner  interests
for the obligations of a limited  partnership have not been clearly  established
in some states.  If it were determined  that we had been conducting  business in
any state without compliance with the applicable limited partnership statute, or
that the right, or the exercise of the right by the limited partners as a group,
to:

o    remove or replace our general partner;

o    make specified amendments to our partnership agreements; or

o    take other action pursuant to our partnership  agreements that  constitutes
     participation in the "control" of our business,

then the limited  partners  could be held liable in some  circumstances  for our
obligations to the same extent as a general partner.

     In addition,  under some circumstances a unitholder may be liable to us for
the amount of a  distribution  for a period of three  years from the date of the
distribution.  Unitholders  will not be liable for  assessments  in  addition to
their initial  capital  investment in our common units.  Under Delaware  General
Corporate  Law,  we may  not  make a  distribution  to  our  unitholders  if the
distribution  causes all our liabilities to exceed the fair value of our assets.
Liabilities  to  partners  on  account  of  their   partnership   interests  and
liabilities  for which recourse is limited to specific  property are not counted
for purposes of determining  whether a distribution  is permitted.  Delaware law
provides that a limited partner who receives such a distribution and knew at the
time of the distribution that the distribution violated the Delaware law will be
liable to the limited  partnership for the  distribution  amount for three years
from the  distribution  date.  Under  Delaware  law, an assignee  that becomes a
substituted  limited  partner  of  a  limited  partnership  is  liable  for  the
obligations of the assignor to make  contributions to the partnership.  However,
such an assignee is not  obligated for  liabilities  unknown to that assignee at
the time such assignee became a limited partner if the liabilities  could not be
determined from the partnership agreements.

Our general partner's liability to us and our unitholders may be limited.

     The  partnership  agreements  of  Ferrellgas  Partners  and  the  operating
partnership contain language limiting the liability of our general partner to us
and to our unitholders. For example, those partnership agreements provide that:

                                       24
<PAGE>


o    the general  partner does not breach any duty to us or our  unitholders  by
     borrowing  funds  or  approving  any  borrowing;  our  general  partner  is
     protected  even if the  purpose or effect of the  borrowing  is to increase
     incentive distributions to our general partner;

o    our general  partner does not breach any duty to us or our  unitholders  by
     taking any actions  consistent with the standards of reasonable  discretion
     outlined in the  definitions  of  available  cash and cash from  operations
     contained in our partnership agreements; and

o    our  general  partner  does  not  breach  any  standard  of care or duty by
     resolving  conflicts  of interest  unless our general  partner  acts in bad
     faith.

The  modifications  of state law  standards of fiduciary  duty  contained in our
partnership  agreements  may  significantly  limit the ability of unitholders to
successfully  challenge the actions of our general  partner as being a breach of
what would  otherwise have been a fiduciary duty.  These  standards  include the
highest duties of good faith, fairness and loyalty to the limited partners. Such
a duty of  loyalty  would  generally  prohibit  a general  partner of a Delaware
limited  partnership  from taking any action or engaging in any  transaction for
which it has a conflict  of  interest.  Under our  partnership  agreements,  our
general  partner  may  exercise  its  broad  discretion  and  authority  in  our
management  and the conduct of our  operations as long as our general  partner's
actions are in our best interest.

Our general partner and its affiliates may have conflicts with us.

     The directors and officers of our general  partner and its affiliates  have
fiduciary  duties  to  manage  itself  in a  manner  that is  beneficial  to its
stockholder.  At the same time,  our  general  partner has  fiduciary  duties to
manage us in a manner that is beneficial to us and our  unitholders.  Therefore,
our general  partner's duties to us may conflict with the duties of its officers
and directors to its stockholder.

     Matters in which, and reasons that, such conflicts of interest may arise
include:

o    decisions  of our general  partner with respect to the amount and timing of
     our cash expenditures,  borrowings,  acquisitions,  issuances of additional
     securities  and changes in reserves in any quarter may affect the amount of
     incentive distributions we are obligated to pay our general partner;

o    borrowings  do not  constitute  a breach  of any duty  owed by our  general
     partner to our  unitholders  even if these  borrowings  have the purpose or
     effect of directly or indirectly  enabling us to make  distributions to the
     holder of our incentive distribution rights, currently our general partner,
     or to hasten the  expiration  of the  deferral  period with  respect to the
     common units held by Ferrell Companies;

o    we do not have any  employees  and rely solely on  employees of our general
     partner and its affiliates;

o    under  the  terms of our  partnership  agreements,  we must  reimburse  our
     general  partner and its  affiliates  for costs  incurred  in managing  and
     operating us,  including  costs incurred in rendering  corporate  staff and
     support services to us;

o    our  general  partner is not  restricted  from  causing us to pay it or its
     affiliates for any services  rendered on terms that are fair and reasonable
     to us or causing us to enter into additional contractual  arrangements with
     any of such entities;

o    neither  our  partnership  agreements  nor  any  of the  other  agreements,
     contracts  and  arrangements  between us, on the one hand,  and our general
     partner  and its  affiliates,  on the  other,  are or will be the result of
     arms-length negotiations;

o    whenever   possible,   our  general  partner  limits  our  liability  under
     contractual  arrangements to all or a portion of our assets, with the other
     party thereto having no recourse against our general partner or its assets;

o    our  partnership  agreements  permit  our  general  partner  to make  these
     limitations  even if we could have  obtained  more  favorable  terms if our
     general partner had not limited its liability;

o    any agreements  between us and our general  partner or its affiliates  will
     not grant to our  unitholders,  separate  and apart  from us,  the right to
     enforce the  obligations of our general partner or such affiliates in favor
     of us;  therefore,  our general  partner will be primarily  responsible for
     enforcing those obligations;

                                       25
<PAGE>


o    our general  partner may exercise its right to call for and purchase common
     units as provided in the  partnership  agreement of Ferrellgas  Partners or
     assign that right to one of its affiliates or to us;

o    our partnership  agreements provide that it will not constitute a breach of
     our general  partner's  fiduciary duties to us for its affiliates to engage
     in activities of the type  conducted by us, other than retail propane sales
     to end users in the  continental  United States in the manner engaged in by
     our general partner immediately prior to our initial public offering,  even
     if these activities are in direct competition with us;

o    our  general  partner  and its  affiliates  have no  obligation  to present
     business opportunities to us; and

o    our general  partner  selects  the  attorneys,  accountants  and others who
     perform  services for us. These  persons may also perform  services for our
     general  partner and its  affiliates.  Our general partner is authorized to
     retain separate counsel for us or our unitholders,  depending on the nature
     of the conflict that arises.

     James E.  Ferrell  is the  President  and Chief  Executive  Officer  of our
general  partner and the Chairman of its Board of  Directors.  Mr.  Ferrell also
owns JEF Capital Management, the holder of our senior units, and other companies
with whom we conduct our ordinary business  operations.  Mr. Ferrell's ownership
of these entities may conflict with his duties as an officer and director of our
general partner. Matters in which such conflicts of interest may arise include:

o    our issuance of common units and the  redemption of our senior  units;  see
     "--Risks Inherent to Our Business--The  terms of our senior units limit our
     use  of  proceeds  from  sales  of  equity"  and  "--Risks  Inherent  to an
     Investment in Our Equity--The holder of our senior units may have the right
     in the future to convert the senior units into common units,  substantially
     diluting our existing common unitholders;"

o    a request by us for Mr. Ferrell to waive  particular  rights he may have as
     the beneficial owner of our senior units; and

o    our  relationship  and  conduct  of  business  with  any of  Mr.  Ferrell's
     companies.

See "Conflicts of Interest and Fiduciary Responsibilities."

Ferrell  Companies may transfer the ownership of our general partner which could
cause a change of our  management  and affect the decisions  made by our general
partner regarding resolutions of conflicts of interest.

     Prior to July 31, 2004, our general partner has agreed:

o    not to voluntarily  withdraw as the general partner of Ferrellgas  Partners
     without  the  approval  of  the  holders  of at  least  two-thirds  of  its
     outstanding  common  units,  excluding  common  units  held by our  general
     partner and its affiliates;

o    not  to  voluntarily  withdraw  as the  general  partner  of the  operating
     partnership without the approval of Ferrellgas Partners; and

o    not to sell its general  partner  interest,  other than to an  affiliate or
     under other limited  circumstances,  without the approval of the holders of
     at least a majority of our outstanding common units, excluding common units
     owned by our general partner and its affiliates.

     Ferrell Companies, the owner of our general partner, may however dispose of
the capital stock of our general partner without the consent of our unitholders.
In such an instance,  our general  partner will remain bound by our  partnership
agreements.  If, however, through share ownership or otherwise,  persons not now
affiliated with our general partner were to acquire its general partner interest
in  us  or  effective  control  of  our  general  partner,  our  management  and
resolutions  of conflicts  of interest,  such as those  described  above,  could
change substantially.

                                       26
<PAGE>


Our general partner can protect itself against dilution.

     Whenever we issue  equity  securities  to any person other than our general
partner  and its  affiliates,  our  general  partner  has the right to  purchase
additional  limited partner interests on the same terms. This allows our general
partner to maintain its  partnership  interest in us. No other  unitholder has a
similar right.  Therefore,  only our general  partner may protect itself against
dilution caused by our issuance of additional equity securities.

Tax Risks

The IRS could treat us as a corporation for tax purposes, which would
substantially reduce the cash available for distribution to our unitholders.

     The anticipated  after-tax  economic benefit of an investment in us depends
largely on our being treated as a partnership  for federal  income tax purposes.
We  believe  that,  under  current  law,  we have been and will  continue  to be
classified  as a  partnership  for  federal  income  tax  purposes.  One  of the
requirements  for such  classification  is that at least 90% of our gross income
for each  taxable  year has been and  will be  "qualifying  income"  within  the
meaning of Section 7704 of the Internal  Revenue Code.  Whether we will continue
to be classified  as a  partnership  in part depends on our ability to meet this
qualifying income test in the future.

     If we were classified as a corporation for federal income tax purposes,  we
would pay tax on our income at corporate  rates,  currently,  35% at the federal
level,  and we would  probably pay  additional  state  income taxes as well.  In
addition, distributions would generally be taxable to the recipient as corporate
distributions and no income,  gains,  losses or deductions would flow through to
our  unitholders.  Because a tax would be imposed upon us as a corporation,  the
cash  available  for  distribution  to our  unitholders  would be  substantially
reduced. Therefore,  treatment of us as a corporation would result in a material
reduction in the anticipated  cash flow and after-tax  return to our unitholders
and thus would  likely  result in a  substantial  reduction  in the value of our
common units.

     A change in current  law or a change in our  business  could cause us to be
treated as a corporation for federal income tax purposes or otherwise subject us
to entity-level  taxation.  Our partnership  agreements provide that if a law is
enacted or existing law is modified or  interpreted in a manner that subjects us
to taxation as a corporation or otherwise  subjects us to entity-level  taxation
for federal,  state or local income tax purposes,  provisions of our partnership
agreements will be subject to change.  These changes would include a decrease in
the minimum quarterly distribution and the target distribution levels to reflect
the impact of such law on us.

A successful  IRS contest of the federal income tax positions we take may reduce
the market  value of our common units and the costs of any contest will be borne
by us and therefore indirectly by our unitholders and our general partner.

     We have not requested any ruling from the IRS with respect to:

o    our classification as a partnership for federal income tax purposes; or

o    whether our propane operations  generate  "qualifying income" under Section
     7704 of the Internal Revenue Code.

The IRS may adopt positions that differ from those expressed  herein or from the
positions  we take.  It may be necessary  to resort to  administrative  or court
proceedings  in an effort to sustain some or all of the  positions we take,  and
some or all of these positions ultimately may not be sustained. Any contest with
the IRS may  materially  reduce  the market  value of our  common  units and the
prices at which our common  units trade.  In addition,  our costs of any contest
with the IRS will be borne by us and therefore indirectly by our unitholders and
our general partner.

                                       27
<PAGE>


Unitholders  may be required to pay taxes on income from us even if  unitholders
do not receive any cash distributions from us.

     A  unitholder  will be required to pay  federal  income  taxes and, in some
cases, state and local income taxes on its share of our taxable income,  even if
it does not receive cash  distributions  from us. A  unitholder  may not receive
cash  distributions  equal to its  share of our  taxable  income or even the tax
liability that results from that income.  Further,  a unitholder may incur a tax
liability  in excess  of the  amount  of cash it  receives  upon the sale of its
units.

The ratio of taxable income to cash distributions could be higher or lower than
our estimates, which could result in a material reduction of the market value of
our common units.

     We estimate  that a person who acquires  common units in the 2003  calendar
year  and  owns  those  common  units  through  the  record  dates  for all cash
distributions  payable for all  periods  within the 2003  calendar  year will be
allocated,  on a cumulative basis, an amount of federal taxable income that will
be less than 10% of the  cumulative  cash  distributed  to such person for those
periods. The taxable income allocable to a unitholder for subsequent periods may
constitute an increasing  percentage of distributable  cash. These estimates are
based on several  assumptions  and estimates  that are subject to factors beyond
our control.  Accordingly,  the actual  percentage  of  distributions  that will
constitute  taxable  income could be higher or lower and any  differences  could
result in a material reduction in the market value of our common units.

There are limits on the deductibility of losses.

     In the case of  unitholders  subject to the passive loss rules  (generally,
individuals and closely held corporations), any losses generated by us will only
be  available  to offset our future  income and cannot be used to offset  income
from other  activities,  including  passive  activities or  investments.  Unused
losses may be deducted when the unitholder  disposes of its entire investment in
us in a fully taxable  transaction with an unrelated party. A unitholder's share
of our net passive income may be offset by unused losses carried over from prior
years,  but not by losses from other passive  activities,  including losses from
other publicly-traded partnerships.

Tax gain or loss on the disposition of our common units could be different than
expected.

     If a unitholder  sells its common units,  the  unitholder  will recognize a
gain or loss equal to the  difference  between the amount  realized  and its tax
basis in those  common  units.  Prior  distributions  in excess of the total net
taxable income the unitholder was allocated for a common unit,  which  decreased
its tax basis in that common unit, will, in effect, become taxable income to the
unitholder  if the common unit is sold at a price  greater than its tax basis in
that common unit,  even if the price you receive is less than its original cost.
A substantial  portion of the amount  realized,  whether or not  representing  a
gain,  will  likely  be  ordinary  income  to that  unitholder.  Should  the IRS
successfully  contest  some  positions  we  take,  a  selling  unitholder  could
recognize  more gain on the sale of units  than  would be the case  under  those
positions,  without the benefit of decreased income in prior years. In addition,
if a unitholder  sells its units,  the  unitholder  may incur a tax liability in
excess of the amount of cash that unitholder receives from the sale.

Tax-exempt entities,  regulated investment  companies,  and foreign persons face
unique tax issues from owning  common  units that may result in  additional  tax
liability or reporting requirements for them.

     An  investment  in common units by  tax-exempt  entities,  such as employee
benefit plans,  individual retirement accounts,  regulated investment companies,
generally known as mutual funds, and non-U.S.  persons,  raises issues unique to
them. For example, virtually all of our income allocated to organizations exempt
from federal  income tax,  including  individual  retirement  accounts and other
retirement  plans,  will be unrelated  business  taxable income and thus will be
taxable  to them.  Very  little of our  income  will be  qualifying  income to a
regulated investment company or mutual fund.  Distributions to non-U.S.  persons
will be  reduced  by  withholding  taxes,  at the  highest  effective  tax  rate
applicable to individuals, and non-U.S. persons will be required to file federal
income tax returns and generally pay tax on their share of our taxable income.

                                       28
<PAGE>


Our tax shelter registration could increase the risk of a potential IRS audit.

     We are registered  with the IRS as a tax shelter.  The IRS has issued to us
the  following tax shelter  registration  number:  94201000010.  Issuance of the
registration  number does not indicate  that an  investment in us or the claimed
tax benefits have been  reviewed,  examined or approved by the IRS. The tax laws
require that some types of entities,  including some  partnerships,  register as
"tax shelters" in response to the  perception  that they claim tax benefits that
may be  unwarranted.  As a  result,  we may  be  audited  by  the  IRS  and  tax
adjustments  could be made.  The rights of a  unitholder  owning  less than a 1%
interest in us to  participate in the income tax audit process are very limited.
Further,  any  adjustments  in our tax returns will lead to  adjustments  in the
unitholders'  tax returns and may lead to audits of unitholders' tax returns and
adjustments  of items  unrelated to us. A  unitholder  will bear the cost of any
expenses incurred in connection with an examination of its personal tax return.

Reporting of partnership tax information is complicated and subject to audits;
we cannot guarantee conformity to IRS requirements.

     We will  furnish each  unitholder  with a Schedule K-1 that sets forth that
unitholder's  allocable  share of  income,  gains,  losses  and  deductions.  In
preparing  these  schedules,  we  will  use  various  accounting  and  reporting
conventions and adopt various  depreciation and amortization  methods. We cannot
guarantee that these schedules will yield a result that conforms to statutory or
regulatory  requirements or to administrative  pronouncements of the IRS. If any
of the information on these schedules is successfully challenged by the IRS, the
character  and amount of items of income,  gain,  loss or  deduction  previously
reported by  unitholders  might  change,  and  unitholders  might be required to
adjust their tax liability for prior years and incur interest and penalties with
respect to those adjustments.

Unitholders may lose tax benefits as a result of nonconforming depreciation
conventions.

     Because  we cannot  match  transferors  and  transferees  of common  units,
uniformity  of the  economic  and tax  characteristics  of our common units to a
purchaser  of common  units of the same class must be  maintained.  To  maintain
uniformity and for other reasons,  we will take  depreciation  and  amortization
positions  that may not conform to all aspects of the  Treasury  Regulations.  A
successful  IRS  challenge  to those  positions  could  reduce the amount of tax
benefits available to our unitholders.  A successful challenge could also affect
the timing of these tax  benefits  or the amount of gain from the sale of common
units and could  have a  negative  impact  on the value of our  common  units or
result in audit adjustments to a unitholder's tax returns.

As a result of investing in our common units, a unitholder will likely be
subject to state and local taxes and return filing requirements in jurisdictions
where it does not live.

     In addition to federal income taxes,  unitholders will likely be subject to
other taxes,  such as state and local taxes,  unincorporated  business taxes and
estate,  inheritance  or  intangible  taxes  that  are  imposed  by the  various
jurisdictions in which we do business or own property.  A unitholder will likely
be required  to file state and local  income tax returns and pay state and local
income taxes in some or all of the various jurisdictions in which we do business
or own property and may be subject to penalties for failure to comply with those
requirements.  We currently  conduct business in 45 states. It is a unitholder's
responsibility  to file all required United States federal,  state and local tax
returns.

States may subject partnership to entity-level  taxation in the future;  thereby
decreasing the amount of cash available to us for  distributions and potentially
causing a decrease  in the  distribution  levels,  including  a decrease  in the
minimum  quarterly  distribution.

     Because of widespread state budget deficits,  several states are evaluating
ways to subject partnerships to entity-level  taxation through the imposition of
state income,  franchise or other forms of taxation. If any state were to impose
a tax upon us as an entity,  the cash available for  distribution to unitholders
would be reduced.  The  partnership  agreements of  Ferrellgas  Partners and the
operating  partnership  each provide that if a law is enacted or existing law is
modified or  interpreted in a manner that subjects one or both  partnerships  to
taxation as a  corporation  or otherwise  subjects one or both  partnerships  to
entity-level  taxation  for  federal,   state  or  local  income  tax  purposes,
provisions  of one or both  partnership  agreements  will be  subject to change.
These changes would include a decrease in the minimum quarterly distribution and
the target distribution levels to reflect the impact of those taxes.

                                       29
<PAGE>


Unitholders may have negative tax consequences if we default on our debt or sell
assets.

     If we default on any of our debt, the lenders will have the right to sue us
for  non-payment.  That action could cause an  investment  loss and negative tax
consequences  for our  unitholders  through the realization of taxable income by
unitholders without a corresponding cash distribution.  Likewise,  if we were to
dispose of assets and  realize a taxable  gain while there is  substantial  debt
outstanding  and proceeds of the sale were applied to the debt, our  unitholders
could have increased taxable income without a corresponding cash distribution.

Conflicts of Interest

     Conflicts of interest could arise as a result of the relationships  between
us, on the one hand, and our general partner and its  affiliates,  on the other.
The  directors  and  officers of our general  partner have  fiduciary  duties to
manage our general  partner in a manner  beneficial to its  stockholder.  At the
same time,  our general  partner has  fiduciary  duties to manage us in a manner
beneficial to us and our  unitholders.  The duties of our general  partner to us
and our  unitholders,  therefore,  may conflict with the duties of the directors
and officers of our general partner to its stockholder.

     Matters in which, and reasons that, such conflicts of interest may arise
include:

o    decisions  of our general  partner with respect to the amount and timing of
     our cash expenditures,  borrowings,  acquisitions,  issuances of additional
     securities  and changes in reserves in any quarter may affect the amount of
     incentive distributions we are obligated to pay our general partner;

o    borrowings  do not  constitute  a breach  of any duty  owed by our  general
     partner to our  unitholders  even if these  borrowings  have the purpose or
     effect of directly or indirectly  enabling us to make  distributions to the
     holder of our incentive distribution rights, currently our general partner,
     or to hasten the  expiration  of the  deferral  period with  respect to the
     common units held by Ferrell Companies;

o    we do not have any  employees  and rely solely on  employees of our general
     partner and its affiliates;

o    under  the  terms of our  partnership  agreements,  we must  reimburse  our
     general  partner and its  affiliates  for costs  incurred  in managing  and
     operating us,  including  costs incurred in rendering  corporate  staff and
     support services to us;

o    our  general  partner is not  restricted  from  causing us to pay it or its
     affiliates for any services  rendered on terms that are fair and reasonable
     to us or causing us to enter into additional contractual  arrangements with
     any of such entities;

o    neither  our  partnership  agreements  nor  any  of the  other  agreements,
     contracts  and  arrangements  between us, on the one hand,  and our general
     partner  and its  affiliates,  on the  other,  are or will be the result of
     arms-length negotiations;

o    whenever   possible,   our  general  partner  limits  our  liability  under
     contractual  arrangements to all or a portion of our assets, with the other
     party thereto having no recourse against our general partner or its assets;

                                       30
<PAGE>


o    our  partnership  agreements  permit  our  general  partner  to make  these
     limitations  even if we could have  obtained  more  favorable  terms if our
     general partner had not limited its liability;

o    any agreements  between us and our general  partner or its affiliates  will
     not grant to our  unitholders,  separate  and apart  from us,  the right to
     enforce the  obligations of our general partner or such affiliates in favor
     of us;  therefore,  our general  partner will be primarily  responsible for
     enforcing those obligations;

o    our general  partner may exercise its right to call for and purchase common
     units as provided in the  partnership  agreement of Ferrellgas  Partners or
     assign that right to one of its affiliates or to us;

o    our partnership  agreements provide that it will not constitute a breach of
     our general  partner's  fiduciary duties to us for its affiliates to engage
     in activities of the type  conducted by us, other than retail propane sales
     to end users in the  continental  United States in the manner engaged in by
     our general partner immediately prior to our initial public offering,  even
     if these activities are in direct competition with us;

o    our  general  partner  and its  affiliates  have no  obligation  to present
     business opportunities to us; and

o    our general  partner  selects  the  attorneys,  accountants  and others who
     perform  services for us. These  persons may also perform  services for our
     general  partner and its  affiliates.  Our general partner is authorized to
     retain separate counsel for us or our unitholders,  depending on the nature
     of the conflict that arises.

     James E.  Ferrell  is the  President  and Chief  Executive  Officer  of our
general  partner and the Chairman of its Board of  Directors.  Mr.  Ferrell also
owns JEF Capital Management, the holder of our senior units, and other companies
with whom we conduct our ordinary business  operations.  Mr. Ferrell's ownership
of these entities may conflict with his duties as an officer and director of our
general partner. Matters in which such conflicts of interest may arise include:

o    our issuance of common units and the  redemption of our senior  units;  see
     "Risk  Factors - Risks  Inherent to Our  Business - The terms of our senior
     units limit our use of proceeds  from sales of equity" and "Risk  Factors -
     Risks  Inherent to an  Investment  in Our Equity - The holder of our senior
     units may have the right in the  future to convert  the  senior  units into
     common units, substantially diluting our existing common unitholders;"

o    a request by us for Mr. Ferrell to waive  particular  rights he may have as
     the beneficial owner of our senior units; and

o    our  relationship  and  conduct  of  business  with  any of  Mr.  Ferrell's
     companies.

Prior to July 31, 2004, our general partner has agreed:

o    not to voluntarily  withdraw as the general partner of Ferrellgas  Partners
     without  the  approval  of  the  holders  of at  least  two-thirds  of  its
     outstanding  common  units,  excluding  common  units  held by our  general
     partner and its affiliates;

o    not  to  voluntarily  withdraw  as the  general  partner  of the  operating
     partnership without the approval of Ferrellgas Partners; and

o    not to sell its general  partner  interest,  other than to an  affiliate or
     under other limited  circumstances,  without the approval of the holders of
     at least a majority of our outstanding common units, excluding common units
     owned by our general partner and its affiliates.

     Ferrell Companies, the owner of our general partner, may however dispose of
the capital stock of our general partner without the consent of our unitholders.
In such an instance,  our general  partner will remain bound by our  partnership
agreements.  If, however, through share ownership or otherwise,  persons not now
affiliated with our general partner were to acquire its general partner interest
in  us  or  effective  control  of  our  general  partner,  our  management  and
resolutions  of conflicts  of interest,  such as those  described  above,  could
change substantially.

                                       31
<PAGE>


Fiduciary Responsibilities

     Unless  otherwise  provided for in a  partnership  agreement,  Delaware law
generally requires a general partner of a Delaware limited partnership to adhere
to fiduciary duty standards under which it owes its limited partners the highest
duties of good faith,  fairness  and loyalty and which  generally  prohibit  the
general  partner  from taking any action or engaging  in any  transaction  as to
which it has a conflict of interest. Our partnership agreements expressly permit
our  general  partner to resolve  conflicts  of interest  between  itself or its
affiliates,  on the one hand, and us or our  unitholders,  on the other,  and to
consider,  in  resolving  such  conflicts of  interest,  the  interests of other
parties in  addition to the  interests  of our  unitholders.  In  addition,  the
partnership agreement of Ferrellgas Partners provides that a purchaser of common
units is deemed to have consented to specified conflicts of interest and actions
of our general  partner and its affiliates  that might  otherwise be prohibited,
including  those  described  above,  and to have agreed that such  conflicts  of
interest and actions do not  constitute  a breach by our general  partner of any
duty  stated or implied by law or equity.  Our  general  partner  will not be in
breach of its obligations  under our partnership  agreements or its duties to us
or our  unitholders if the resolution of such conflict is fair and reasonable to
us. Any resolution of a conflict  approved by the audit committee of our general
partner is conclusively  deemed fair and reasonable to us. The latitude given in
our  partnership  agreements  to our general  partner in resolving  conflicts of
interest may  significantly  limit the ability of a unitholder to challenge what
might otherwise be a breach of fiduciary duty.

     The  partnership  agreements  of  Ferrellgas  Partners  and  the  operating
partnership  expressly  limit the liability of our general  partner by providing
that our general  partner,  its affiliates and their officers and directors will
not be liable for monetary  damages to us, our unitholders or assignees  thereof
for errors of judgment or for any acts or omissions  if our general  partner and
such  other  persons  acted in good  faith.  In  addition,  we are  required  to
indemnify our general  partner,  its affiliates and their  respective  officers,
directors, employees, agents and trustees to the fullest extent permitted by law
against liabilities,  costs and expenses incurred by our general partner or such
other persons if our general  partner or such persons acted in good faith and in
a manner they  reasonably  believed to be in, or (in the case of a person  other
than our general  partner) not opposed to, the best  interests  of us and,  with
respect to any  criminal  proceedings,  had no  reasonable  cause to believe the
conduct was unlawful.

ITEM 2.       PROPERTIES.

     As of July 31,  2003,  we  owned or  leased  the  following  transportation
equipment that was utilized primarily in the retail distribution of propane.

                                                   Owned       Leased      Total
                                                   -----       ------      -----
Truck tractors ..............................        66          146        212
Transport trailers...........................        315          52        367
Cylinder delivery trucks......................       317         240        557
Bulk delivery trucks..........................     1,522         815      2,337
Pickup and service trucks.....................     1,139         487      1,626
Railroad tank cars............................        -          128        128

     The transport  trailers have an average  capacity of  approximately  10,000
gallons.  The bulk delivery trucks are generally fitted with 3,000 gallon tanks.
Each railroad tank car has a capacity of approximately 30,000 gallons.

     A typical retail  distribution outlet is comprised of one to three acres of
land, a small office,  a workshop,  aggregate bulk storage capacity of 12,000 to
368,000 gallons  operated at multiple sites and an inventory of customer storage
tanks and portable  propane  cylinders that it provides to its retail  customers
for propane storage. At July 31, 2003, we owned approximately 44 million gallons
of  propane  storage  at our retail  distribution  outlets.  We own our land and
buildings in the local markets of approximately half of our operating  locations
and lease the remaining facilities on terms customary in the industry.

                                       32
<PAGE>


     We own  approximately  1.1 million propane tanks, most of which are located
on customer  property and rented to those customers.  We also own  approximately
0.7 million portable propane cylinders, most of which are used by our industrial
and commercial customers.

     We own  underground  storage  facilities at  Hutchinson,  Kansas;  Adamana,
Arizona;  and Moab,  Utah and four  above-ground  storage  facilities  primarily
located  in the  Upper  Midwest  and North  Carolina.  Together,  these  storage
facilities are capable of holding 248 million gallons of natural gas liquids.

                  (in millions of gallons)
                                                                       Storage
                  Location                                            Capacity
                  --------                                            --------
                  Adamana, Arizona                                        96
                  Hutchinson, Kansas                                     142
                  Moab, Utah and above-ground storage                     10
                                                                      --------
                        Total                                            248
                                                                      ========

     Currently,  we lease  approximately 177 million gallons of this capacity to
third parties. The remaining space is available for our use.

     We own land and two  buildings  with 54,691 square feet of office space and
lease 6,250 square feet of office  space that  together  comprise our  corporate
headquarters in Liberty,  Missouri, and lease 27,696 square feet of office space
in Houston, Texas.

     We believe that we have satisfactory title to or valid rights to use all of
our material  properties.  Although some of those  properties  may be subject to
liabilities  and leases,  liens for taxes not yet  currently due and payable and
immaterial encumbrances,  easements and restrictions, we do not believe that any
such burdens will materially interfere with the continued use of such properties
in our  business.  We believe  that we have  obtained,  or are in the process of
obtaining,   all  required   material   approvals.   These   approvals   include
authorizations,    orders,   licenses,   permits,   franchises,   consents   of,
registrations,  qualifications  and filings  with,  the various  state and local
governmental  and  regulatory  authorities  which  relate  to our  ownership  of
properties or to our operations.

ITEM 3.       LEGAL PROCEEDINGS.

     Propane  is a  flammable,  combustible  gas.  Serious  personal  injury and
property damage can occur in connection with its transportation, storage or use.
In the ordinary  course of business,  we are  sometimes  threatened  with or are
named as a defendant in various lawsuits seeking actual and punitive damages for
product  liability,  personal injury and property damage. We maintain  liability
insurance  policies with insurers in amounts and with coverages and  deductibles
we believe are reasonable and prudent.  However,  there can be no assurance that
the levels of  insurance  protection  currently  in effect will be  continuously
available at reasonable  prices or adequate to protect us from material expenses
related to product liability, personal injury or property damage in the future.

     Currently,  we are not a party to any legal  proceedings other than various
claims  and  lawsuits  arising in the  ordinary  course of  business.  It is not
possible to determine the ultimate  disposition of these lawsuits.  However,  we
believe that there are no known claims or known contingent claims that will upon
resolution or final  adjudication  have a material adverse effect on our results
of operations, financial condition and cash flows.

                                       33
<PAGE>


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

         None

                                     PART II

ITEM 5.       MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED UNITHOLDER AND
              STOCKHOLDER MATTERS.

Common Units of Ferrellgas Partners

     Our common units represent limited partner interests in Ferrellgas Partners
and are listed and traded on the New York Stock  Exchange  under the symbol FGP.
As of September 30, 2003, we had 831 common unitholders of record. The following
table sets forth the high and low sales  prices for our common  units on the New
York Stock Exchange and the cash distributions  declared per common unit for the
periods indicated.

                                    Common Unit         Distributions
                                    Price Range       Declared Per Unit
                               -------------------- ---------------------
                                  High       Low
                                                  2002
                               ---------- ---------- ---------------------
First Quarter                    $19.89     $16.95         $0.50
Second Quarter                    20.46      17.90          0.50
Third Quarter                     19.90      18.32          0.50
Fourth Quarter                    20.11      16.58          0.50
                                                  2003
                               ---------- ---------- ---------------------
First Quarter                    $20.23     $18.95         $0.50
Second Quarter                    20.86      19.61          0.50
Third Quarter                     21.41      20.14          0.50
Fourth Quarter                    23.83      21.30          0.50

     We make quarterly cash distributions of our available cash.  Available cash
is  defined  in  our  partnership  agreement  as,  generally,  the  sum  of  our
consolidated cash receipts less  consolidated cash  disbursements and changes in
cash reserves established by our general partner for future requirements. To the
extent  necessary,  we will  generally  reserve cash inflows from the second and
third quarters for distribution in the first and fourth fiscal  quarters.  Based
upon our current  financial  condition  and results of  operations,  our general
partner  currently  believes that during our fiscal year 2004 we will be able to
make quarterly cash  distributions per common unit comparable to those quarterly
distributions made during our last two fiscal years;  however, no assurances can
be  given  that  such   distributions  will  be  made  or  the  amount  of  such
distributions.  See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources" for a discussion of
the financial  tests and covenants which place limits on the amount of cash that
we can use to pay distributions.

                                       34
<PAGE>


Recent Sales of Unregistered Securities

     During fiscal 2003, we made one issuance of common units in reliance on one
or more exemptions from registration under the Securities Act. On July 11, 2003,
we issued 8,752 restricted  common units to Wheeler's Bottled Gas, Inc. pursuant
to a purchase and noncompetition agreement as a portion of our consideration for
our  acquisition of assets from  Wheeler's  Bottled Gas. These common units were
issued to Wheeler's  Bottled Gas in reliance upon Section 4(2) of the Securities
Act.

     During  fiscal  2002,  we made the  following  issuances of common units in
reliance on one or more exemptions from registration under the Securities Act:

o    On November 29, 2001, we issued 80,000  restricted  common units to Alabama
     Butane  Company  pursuant to a purchase and  noncompetition  agreement as a
     portion of our  consideration  for our  acquisition  of assets from Alabama
     Butane.  These common units were issued to Alabama  Butane in reliance upon
     Section 4(2) of the Securities Act.

o    On December  12,  2001,  we issued  37,487  restricted  common units to our
     affiliate,  Ferrellgas  Acquisition Company, LLC pursuant to a contribution
     and  conveyance  agreement  entered by and between  Ferrellgas  Acquisition
     Company and  Ferrellgas  Partners as  consideration  for its  retention  of
     certain tax  liabilities  purchased in connection  with the  acquisition of
     Blue  Flame.  These  common  units were  issued to  Ferrellgas  Acquisition
     Company in reliance upon Section 4(2) of the Securities Act.

Ferrellgas Partners Tax Matters

     Ferrellgas Partners is a master limited partnership and thus not subject to
federal income taxes. Instead, our common unitholders are required to report for
income  tax  purposes  their  allocable  share  of our  income,  gains,  losses,
deductions  and  credits,  regardless  of whether we make  distributions  to our
common unitholders. Accordingly, each common unitholder should consult their own
tax  advisor  in  analyzing  the  federal,  state,  and local  tax  consequences
applicable to their ownership or disposition of our common units.

     Due to the effect of our issuance of senior units in December 1999, our tax
year changed to a December 31 year-end in accordance with Internal  Revenue Code
and Regulations,  effective in the calendar year 2002. However,  our fiscal year
continues to have a year-end of July 31.

Common Equity Of Other Registrants

     There is no established  public trading market for the common equity of the
operating  partnership,  Ferrellgas Partners Finance Corp. or Ferrellgas Finance
Corp.  All of the common  equity of the  operating  partnership  and  Ferrellgas
Partners  Finance  Corp.  is held by  Ferrellgas  Partners and all of the common
equity of Ferrellgas Finance Corp. is held by the operating  partnership.  There
are no equity  securities  of the  operating  partnership,  Ferrellgas  Partners
Finance Corp. or Ferrellgas  Finance  Corp.  authorized  for issuance  under any
equity  compensation  plan.  During  fiscal  2003,  there were no  issuances  of
securities of the operating  partnership,  Ferrellgas  Partners Finance Corp. or
Ferrellgas Finance Corp. which were not registered under the Securities Act.

     Ferrellgas  Partners  Finance  Corp.  has not  declared  or paid  any  cash
dividends on its common equity during  fiscal 2002 or 2003.  Ferrellgas  Finance
Corp.  has not declared or paid any cash  dividends on its common  equity during
fiscal 2003, the year in which it came into existence. The operating partnership
distributes  cash declared on its common equity four times per fiscal year.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  - Liquidity  and Capital  Resources  -  Financing  Activities  - The
operating  partnership" for a discussion of its distributions during fiscal 2002
and 2003. See "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations - Liquidity and Capital Resources" for a discussion of the
financial  tests and covenants which place limits on the amount of cash that the
operating partnership can use to pay distributions.

     On June 11, 2003, a shelf registration  statement was declared effective by
the Securities and Exchange Commission for the periodic sale by us of up to $500
million of equity and/or debt securities (File Nos.  333-103267,  333-103267-01,
333-103267-02  and  333-103267-03).  This was the first  registration  statement
filed under the Securities  Act by Ferrellgas  Finance Corp. and the first filed
by the operating  partnership  since June 24, 1994. As of October 16, 1998,  the
operating partnership was no longer subject to the reporting  requirements under
the Exchange Act in connection with this 1994 registration  statement.  Pursuant
to the shelf registration  statement,  the operating  partnership and Ferrellgas
Finance Corp. are permitted to issue debt  securities  from time to time to fund
acquisitions,  reduce  indebtedness,  redeem  senior units and provide funds for
general corporate purposes.  See "Business - Business of Other Subsidiaries." No
offerings of debt  securities  have been made by the  operating  partnership  or
Ferrellgas  Finance Corp.  since the shelf  registration  statement was declared
effective.  However  an  offering  of equity  securities  was  recently  made by
Ferrellgas Partners under the shelf-registration  statement.  See "Liquidity and
Capital Resources - Financing Activities."

                                       35
<PAGE>


ITEM 6.       SELECTED FINANCIAL DATA.

     The following tables presents our selected consolidated historical
financial data.

(in thousands, except per unit data)
<TABLE>
<S>                                         <C>              <C>            <C>              <C>           <C>
                                                                    Ferrellgas Partners, L.P.
                                            --------------------------------------------------------------------------

                                                                       Year Ended July 31,
                                            --------------------------------------------------------------------------
                                                2003             2002           2001            2000           1999
                                            ------------     -----------    ------------    -----------    -----------
Income Statement Data:
Total revenues                               $1,221,639      $1,034,796     $1,468,670      $959,023       $633,349
Interest expense                                 63,665          59,608         61,544        58,298         46,621
Earnings before cumulative effect of
   change in accounting principle                59,503          59,959         64,068           860         14,783
Basic and diluted earnings (loss) per
   common and subordinated unit before
   cumulative effect of change in
   accounting principle                           $1.33           $1.34          $1.43        $(0.32)         $0.47
Cash distributions declared per common
    and subordinated unit                         $2.00           $2.00          $2.00         $2.00          $2.00

Balance Sheet Data at end of period:
Working capital (deficit)                    $   (3,862)     $    9,436       $ 22,062       $(6,344)     $  (4,567)
Total assets                                  1,061,396         885,128        896,159       967,907        656,745
Long-term debt                                  888,226         703,858        704,782       718,118        583,840
Partners' capital (deficit)                       2,919          21,161         37,987        40,344        (69,651)

Operating Data:
Retail propane sales volumes (in
    thousands of gallons)                       898,622         831,592        956,718       846,664        680,477

Capital expenditures:
Maintenance                                    $ 14,187      $    9,576      $  11,996    $    8,917       $ 10,505
Growth                                            4,123           4,826          3,152        11,838         15,238
Technology initiative                            14,699          30,070            100          -              -
Tank lease buyout                               154,129           -               -             -              -
Acquisition                                      41,310          10,962          1,417       310,260         48,749
                                             -----------     -----------    ------------    -----------    -----------
Total                                          $228,448         $55,434       $ 16,665      $331,015       $ 74,492
                                             ===========     ===========    ============    ===========    ===========
</TABLE>

                                       36
<PAGE>



<TABLE>
<S>                                          <C>             <C>             <C>            <C>            <C>
                                                                         Ferrellgas, L.P.
                                             -------------------------------------------------------------------------

                                                                       Year Ended July 31,
                                             -------------------------------------------------------------------------
                                                2003            2002           2001            2000           1999
                                             -----------     -----------    ------------    -----------    -----------
Income Statement Data:
Total revenues                               $1,221,639      $1,034,796      $1,468,670       $959,023       $633,349
Interest expense                                 45,318          43,972          47,686         43,251         31,107
Earnings before cumulative effect of
  change in accounting principle                 86,198          76,359          82,032         16,069         17,690

Balance Sheet Data at end of period:
Working capital (deficit)                      $  7,792         $ 9,099        $ 23,831        $(4,640)     $  (2,692)
Total assets                                  1,055,691         882,233         892,778        964,944        653,278
Long-term debt                                  668,657         543,858         544,782        558,118        423,840
Partners' capital                               231,815         182,272         198,771        201,118         89,664

Operating Data:
Retail propane sales volumes (in
   thousands of gallons)                        898,622         831,592         956,718        846,664        680,477

Capital expenditures:
Maintenance                                     $14,187         $ 9,576      $  11,996         $ 8,917       $ 10,505
Growth                                            4,123           4,826          3,152          11,838         15,238
Technology initiative                            14,699          30,070            100
Tank lease buyout                               154,129          -               -              -              -
Acquisition                                      41,310          10,962          1,417         310,260         48,749
                                             -----------     -----------    ------------    -----------    -----------
Total                                          $228,448         $55,434       $ 16,665        $331,015       $ 74,492
                                             ===========     ===========    ============    ===========    ===========
</TABLE>



Our capital expenditures fall generally into four categories:

o    maintenance capital  expenditures,  which include capitalized  expenditures
     for betterment and replacement of property, plant and equipment;

o    growth capital  expenditures,  which include  expenditures for purchases of
     propane tanks and other  equipment to facilitate  expansion of our customer
     base and operating capacity;

o    technology initiative capital expenditures,  which include expenditures for
     purchases of computer  hardware and  software  and the  development  of new
     software;

o    tank lease buyout expenditure,  which is related to the purchase of propane
     tanks and related  assets  during  fiscal 2003 that we  previously  leased.
     These  tanks  were  originally  leased  in  connection  with the  Thermogas
     acquisition; and

o    acquisition capital expenditures, which include expenditures related to the
     acquisition of retail propane operations.  Acquisition capital expenditures
     represent the total cost of acquisitions less working capital acquired. Our
     fiscal 2001 capital  expenditures do not include a $4.6 million  adjustment
     made in the second fiscal quarter of fiscal 2001 to working capital related
     to a final valuation adjustment to record the Thermogas acquisition,  which
     we completed in December 1999.

     The tank lease buyout contributed to an increase in our interest expense
and a comparable decrease in equipment lease expense in fiscal 2003. This
transaction also contributed to a significant increase in total assets and
long-term debt as of July 31, 2003 as compared to July 31, 2002.

     The Thermogas  acquisition  contributed a significant increase in our total
revenues,  interest expense,  earnings and retail propane sales volume in fiscal
years 2001 and 2000. This acquisition also contributed to a significant increase
in total assets,  long-term  debt and  partners'  capital as of July 31, 2000 as
compared to July 31, 1999.


                                       37
<PAGE>




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

     Our management's discussion and analysis of financial condition and results
of operations relates to Ferrellgas Partners and the operating partnership.

     Ferrellgas Partners Finance Corp. and Ferrellgas Finance Corp. have nominal
assets, do not conduct any operations and have no employees. Ferrellgas Partners
Finance Corp.  may act as co-obligor of future  issuances of debt  securities of
Ferrellgas Partners and Ferrellgas Finance Corp. may act as co-obligor of future
issuances of debt securities of the operating partnership.  Accordingly, and due
to the reduced  disclosure  format,  a discussion of the results of  operations,
liquidity  and capital  resources  of  Ferrellgas  Partners  Finance  Corp.  and
Ferrellgas Finance Corp. are not presented.

     The following is a discussion  of our  historical  financial  condition and
results of  operations  and should be read in  conjunction  with our  historical
consolidated  financial  statements  and  accompanying  Notes  thereto  included
elsewhere in this Annual Report on Form 10-K.

     The discussions set forth in the "Results of Operations" and "Liquidity and
Capital  Resources"  sections  generally  refer to  Ferrellgas  Partners and its
consolidated  subsidiaries.  However,  there do exist three material differences
between  Ferrellgas  Partners  and the  operating  partnership.  Those  material
differences are:

o    the two partnerships  incur different  amounts of interest expense on their
     outstanding   indebtedness;   see  the  statements  of  earnings  in  their
     respective consolidated financial statements and Notes H - Long-Term Debt -
     in the respective notes to their consolidated financial statements;

o    during  the three  months  ended  October  31,  2002,  Ferrellgas  Partners
     incurred $7.1 million in expenses  related to the early  extinguishment  of
     its debt; and

o    Ferrellgas Partners issued common units in fiscal 2003 and 2001 to fund the
     redemption of senior units.

Forward-looking statements

     Statements  included in this  report  include  forward-looking  statements.
These  forward-looking  statements are identified as any statement that does not
relate  strictly to  historical or current  facts.  They often use words such as
"anticipate," "believe," "intend," "plan," "projection," "forecast," "strategy,"
"position,"  "continue," "estimate," "expect," "may," "will," or the negative of
those  terms  or  other  variations  of them or  comparable  terminology.  These
statements  often discuss  plans,  strategies,  events or  developments  that we
expect or  anticipate  will or may occur in the  future  and are based  upon the
beliefs and  assumptions  of our  management  and on the  information  currently
available to them. In particular,  statements,  expressed or implied, concerning
our future  operating  results or our ability to generate sales,  income or cash
flow are forward-looking statements.

     Forward-looking  statements are not guarantees of  performance.  You should
not put undue reliance on any  forward-looking  statements.  All forward-looking
statements are subject to risks,  uncertainties and assumptions that could cause
our actual results to differ  materially  from those  expressed in or implied by
these  forward-looking  statements.  Many of the  factors  that will  affect our
future results are beyond our ability to control or predict.

                                       38
<PAGE>


     Some of our forward-looking statements include the following:

o    whether the operating  partnership  will have sufficient  funds to meet its
     obligations,  including its obligations  under its debt securities,  and to
     enable it to distribute to Ferrellgas  Partners  sufficient funds to permit
     Ferrellgas  Partners to meet its  obligations  with respect to its existing
     securities;

o    whether Ferrellgas Partners and the operating  partnership will continue to
     meet  all of the  quarterly  financial  tests  required  by the  agreements
     governing their indebtedness;

o    the  expectation  that  future  periods  may not have  the same  percentage
     increase in revenues, cost of sales and interest expense as was experienced
     during fiscal 2003; and

o    the  expectation  that  future  periods  will have  increased  depreciation
     expense over the amount recognized during fiscal 2003.

When considering any forward-looking statement, you should also keep in mind the
risk factors in "Business - Risk  Factors."  Any of these risks could impair our
business,  financial condition or results of operation.  Any such impairment may
affect our ability to make  distributions  to our unitholders or pay interest on
the principal of any of our debt securities.  In addition, the trading price, if
any, of our securities could decline as a result of any such impairment.  Except
for our ongoing  obligations  to disclose  material  information  as required by
federal   securities   laws,   we   undertake  no   obligation   to  update  any
forward-looking statements or risk factors after the date of this annual report.

     In addition,  the  classification of Ferrellgas  Partners and the operating
partnership as partnerships for federal income tax purposes means that we do not
generally pay federal income taxes. We do,  however,  pay taxes on the income of
our  subsidiaries  that are  corporations.  We rely on a legal  opinion from our
counsel,  and not a ruling from the Internal Revenue  Service,  as to our proper
classification   for  federal  income  tax  purposes.   See  "Risk  Factors--Tax
Risks--The  IRS could treat us as a corporation  for tax  purposes,  which would
substantially reduce the cash available for distribution to our unitholders."

Results of Operations

Fiscal Year Ended July 31, 2003 vs. July 31, 2002

     Propane and other gas liquids  sales.  Propane and other gas liquids  sales
increased  $121.4  million  primarily due to an increase in the average  propane
sales  price per gallon and an  additional  $61.8  million  primarily  due to an
increase in retail propane sales volume.

     The  average  sales  price  per  gallon  increased  due to the  effect of a
significant  increase in the  wholesale  cost of propane  during  fiscal 2003 as
compared to the prior year  period.  The  wholesale  market  price at one of the
major supply points, Mt. Belvieu, Texas, averaged $0.54 per gallon during fiscal
2003, compared to an average of $0.37 per gallon in the prior year period. Other
major supply points in the United States also experienced significant increases.
Retail sales volumes also increased 67.0 million  gallons  compared to the prior
year  period,  primarily  due to  colder  winter  temperatures,  and to a lesser
extent, acquisitions.

     For the heating season (November  through March),  temperatures as reported
by the National Oceanic and Atmospheric Administration ("NOAA"), were relatively
normal as compared  to being 11% warmer  than  normal in the prior year  period,
which was the third warmest heating season in recorded United States history.

     Cost of  product  sold.  Cost of  product  sold  increased  $133.2  million
primarily due to an increase in the wholesale  price of propane and increased an
additional $36.4 million  primarily due to the effect of an 8.1% increase in our
retail sales volume compared to the prior year period.  This increase was offset
by improved results from risk management  trading  activities that resulted in a
decrease of $12.1 million in our cost of product sold compared to the prior year
period.

                                       39
<PAGE>


     Gross profit.  Gross profit  increased  5.8% primarily due to the effect of
the  increase in our retail  propane  volumes.  Improved  results  from our risk
management  trading  activities  were  largely  offset by retail  margins  that,
although  better than  expected,  were less than the prior year period.  We were
able to  temporarily  increase  the retail  margins in the prior year  period to
partially offset the impact of  significantly  warmer winter  temperatures.  See
additional  discussion  regarding risk management  trading activities in Item 7A
"Quantitative and Qualitative Disclosures about Market Risk."

     Operating  expense.  Operating  expense  increased  6.6%  primarily  due to
expenses  related  to  acquisitions  completed  during  fiscal  2003,  increased
expenses related to our technology initiative and increased vehicle-related fuel
and oil costs.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expense  decreased  2.8%  primarily  due to the effect of one of our  intangible
assets completing its amortizable life in fiscal 2002. This was partially offset
by the increased  depreciation and amortization  related to acquisitions and the
buyout of operating tank leases completed during fiscal 2003.

     Equipment lease expense. Equipment lease expense decreased 15.9% due to the
effect of the December  2002 buyout of our  operating  tank leases.  See further
discussion about the buyout of these leases in "Liquidity and Capital  Resources
- Investing Activities."

     Interest  expense.   Interest  expense  increased  6.8%  due  to  increased
borrowings  for the buyout of previously  leased  propane tanks in December 2002
and to finance acquisitions. This increase was partially offset by the effect of
refinancing  fixed-rate  debt at a lower interest  rate. See further  discussion
about the increased  borrowings to buyout these leases in "Liquidity and Capital
Resources - Financing Activities."

     Net  earnings.  Net  earnings  decreased  5.4%  primarily  due to increased
operating expenses,  a $7.1 million early extinguishment of debt expense related
to the  repurchase and redemption of our $160.0 million senior secured notes and
the $2.8 million  cumulative effect of a change in accounting  principle related
to the adoption of SFAS No. 143, "Accounting for Asset Retirement  Obligations",
partially offset by the increase in gross profit. See further discussion in Note
I - Asset  retirement  obligations - to our consolidated  financial  statements.
These decreases were substantially offset by the increase in gross profit.

Interest expense and net earnings of the operating partnership

     Interest expense.  The operating  partnership's  interest expense increased
3.1% due to  increased  credit  facility  borrowings  related  to the  buyout of
previously  leased propane tanks in December 2002. See further  discussion about
the  increased  borrowings  to buyout  these  leases in  "Liquidity  and Capital
Resources - Financing Activities."

     Net  earnings.  The operating  partnership's  net earnings  increased  9.2%
primarily  due to the effect of the  increase in retail  propane  volumes.  This
increase was partially offset by the increased  operating  expenses and the $2.8
million  cumulative  effect of a change in accounting  principle  related to the
adoption  of SFAS  No.  143.  The  operating  partnership  was not  affected  by
Ferrellgas  Partner's $7.1 million early  extinguishment of debt expense related
to the repurchase and redemption of its $160.0 million senior secured notes.

Forward looking statements.

     Assuming  that the  weather  remains  the same as in  fiscal  2003 and that
interest rates remain relatively  stable,  except for the possible effect of any
potential asset  acquisitions,  we do not anticipate similar increases in fiscal
2004 for revenue, cost of sales,  operating expenses and interest expense as was
recognized  in fiscal 2003 versus  fiscal 2002.  We do expect  depreciation  and
amortization expense to increase due to depreciation expense related to software
for our technology initiative,  which was placed in service in the first quarter
of fiscal 2004.

                                       40
<PAGE>


Fiscal Year Ended July 31, 2002 vs. July 31, 2001

     Propane and other gas liquids  sales.  Propane and other gas liquids  sales
decreased  $240.1  million due to a decrease in the average  propane sales price
per gallon and an  additional  $188.7  million  primarily  due to a  significant
decrease in retail propane sales volume.

     The propane  wholesale market price at one of our major supply points,  Mt.
Belvieu,  Texas,  averaged  $0.37 per gallon  during  fiscal 2002 compared to an
average of $0.58 per gallon for the prior year. Other major supply points in the
United States also experienced  significant declines in propane prices. However,
cost of product sold  increased  $29.5 million due to  exceptional  results from
risk  management  trading  activities  recognized  in fiscal  2001 that were not
repeated in fiscal 2002. See  additional  discussion  regarding risk  management
trading  activities in "Quantitative  and Qualitative  Disclosures  about Market
Risk."

The  average  propane  sales price per gallon  decreased  due to the effect of a
significant decrease in the wholesale cost of propane. In addition, retail sales
volumes  decreased  13.1% to 831.6 million gallons in fiscal 2002 as compared to
fiscal 2001, primarily due to the effect of the significantly warmer than normal
weather and to a lesser extent the weak national economy.  The heating season of
fiscal 2002 (November  through  March) was the third warmest in recorded  United
States history,  according to the NOAA data, with national average  temperatures
11% warmer  than normal as compared to 6% colder than normal for the same period
during the prior fiscal year.  During the peak winter heating  season  (December
through February) average national temperatures were 14% warmer than normal.

     Other revenues. Other revenues decreased 5.8% in fiscal 2002 as compared to
fiscal 2001, primarily due to lower appliance sales and service labor related to
the effect of the weak national economy.

     Cost of product sold. Cost of product sold decreased  $338.4 million due to
the significant  decline in the wholesale cost of propane during fiscal 2002 and
an additional $87.7 million primarily due to the effect of the decline in retail
sales volume compared to last year.

     Gross profit.  Gross profit decreased 6.9% primarily due to the effect of a
significant  decrease  in retail  propane  volumes and to a lesser  extent,  the
decrease in results from risk management trading activities.  These factors were
partially offset by an increase in retail margin per gallon.

     Operating  expense.  Operating  expense  decreased  3.0% primarily due to a
$13.0 million decrease in operating expenses incurred at our retail distribution
outlets generally  resulting from fewer gallons delivered to customers in fiscal
2002 as compared to fiscal 2001.

     General and  administrative  expense.  General and  administrative  expense
increased   6.5%   primarily  due  to  increased   performance-based   incentive
compensation expense.

     Depreciation  and  amortization  expense.   Depreciation  and  amortization
expense  decreased  25.8% primarily due to the  implementation  of SFAS No. 142,
which  eliminated   goodwill   amortization.   See  further  discussion  of  the
implementation  of SFAS No.  142 in Note B - Summary of  significant  accounting
policies - to our consolidated financial statements.

     Equipment lease expense. Equipment lease expense decreased 20.8% due to the
impact  that  significantly  lower  interest  rates  had  on our  variable  rate
operating leases as compared to fiscal 2001.

                                       41
<PAGE>


     Loss on disposal of assets and other. Loss on disposal of assets and other
decreased $1.8 million primarily due to a decrease in the activity related to
the transfer of accounts receivables pursuant to the accounts receivable
securitization facility. See further discussion about this facility in
"Liquidity and Capital Resources - Operating Activities."

     Interest expense.  Interest expense decreased 3.1% primarily due to reduced
borrowings  and the impact that  significantly  lower  interest rates had on our
credit facility borrowings.  This decrease was partially offset by the effect of
the  termination  of an interest  rate swap  agreement in the fourth  quarter of
fiscal 2001.

     Net  earnings.  Net  earnings  increased  6.4%  primarily  due to decreased
depreciation and amortization expenses and decreased equipment lease expenses.

Interest expense and net earnings of the operating partnership

     Interest expense.  The operating  partnership's  interest expense decreased
7.8% due to reduced borrowings and the impact that significantly  lower interest
rates had on our credit facility borrowings.

     Net  earnings.  The operating  partnership's  net earnings  decreased  6.9%
primarily due to the effect of a decrease in the average propane sales price per
gallon, a decrease in retail propane sales volume and an increase in general and
administrative expense.

Liquidity and Capital Resources

     Our  ability  to  satisfy  our   obligations   is  dependent   upon  future
performance,  which will be subject to prevailing economic, financial, business,
and weather conditions and other factors,  many of which are beyond our control.
Due  to  the  seasonality  of  the  retail  propane  distribution   business,  a
significant  portion of our cash flow from  operations  is generated  during the
winter heating season which occurs during our second and third fiscal  quarters.
Typically,  we generate  significantly  lower cash flows from  operations in our
first and fourth  fiscal  quarters as  compared  to the second and third  fiscal
quarters  because  fixed costs exceed gross profit  during the non-peak  heating
season.  Subject to meeting the financial  tests  discussed  below,  our general
partner  believes  that the operating  partnership  will have  sufficient  funds
available to meet its  obligations,  and to distribute  to  Ferrellgas  Partners
sufficient funds to permit  Ferrellgas  Partners to meet its obligations  during
fiscal 2004.  In  addition,  our general  partner  believes  that the  operating
partnership  will have  sufficient  funds  available to distribute to Ferrellgas
Partners  sufficient  cash to pay the  required  quarterly  distribution  on the
senior units and the minimum  quarterly  distribution on all common units during
fiscal  2004.  The minimum  quarterly  distribution  of $0.50 paid on all common
units on September 12, 2003,  represents the  thirty-sixth  consecutive  minimum
quarterly  distribution  paid to our common  unitholders  dating back to October
1994.

     Our bank credit facility, public debt, private debt and accounts receivable
securitization   facility   contain   several   financial  tests  and  covenants
restricting our ability to pay  distributions,  incur debt and engage in certain
other business  transactions.  In general,  these tests are based on our debt to
cash flow ratio and cash flow to interest  expense  ratio.  Our general  partner
currently  believes that the most restrictive of these tests are debt incurrence
limitations  under  the  terms  of  our  bank  credit  and  accounts  receivable
securitization facilities and limitations on the payment of distributions within
the terms of our 8.75%  senior  notes due 2012.  The bank  credit  and  accounts
receivable securitization facilities generally limit the operating partnership's
ability  to incur debt if it exceeds  prescribed  ratios of either  debt to cash
flow or cash flow to interest expense.  Our 8.75% senior notes restrict payments
if a minimum ratio of cash flow to interest expense is not met, assuming certain
exceptions to this ratio limit have previously been exhausted.  This restriction
places  limitations  on our  ability  to make  restricted  payments  such as the
payment of cash  distributions  to unitholders.  The cash flow used to determine
these  financial  tests  generally  is  based  upon our most  recent  cash  flow
performance  giving pro forma  effect for  acquisitions  and  divestitures  made
during the test period. It should be noted that our bank credit facility, public
debt,  private  debt and  accounts  receivable  securitization  facility  do not
contain repayment provisions related to a decline in our credit rating.

                                       42
<PAGE>


     As of July 31,  2003,  our  general  partner  believes  that we met all the
required quarterly  financial tests and covenants during fiscal 2003. Based upon
current estimates of our cash flow, our general partner believes that we will be
able to  continue  to meet all of the  required  quarterly  financial  tests and
covenants  during  fiscal  2004.  However,  if we were to  encounter  unexpected
downturns in business  operations in the future,  such as  significantly  warmer
than normal winter temperatures, a volatile energy commodity cost environment or
continued economic downturn,  we may not meet the applicable  financial tests in
future  quarters.  This could have a materially  adverse effect on our operating
capacity and cash flows and could  restrict our ability to incur debt or to make
cash distributions to our unitholders,  even if sufficient funds were available.
Depending  on the  circumstances,  we may  consider  alternatives  to permit the
incurrence of debt or the continued  payment of the quarterly cash  distribution
to our unitholders.  No assurances can be given, however, that such alternatives
can or will be implemented with respect to any given quarter.

     Our future capital  expenditures  and working capital needs are expected to
be provided by a combination of cash generated from future operations,  existing
cash   balances,   the  bank  credit   facility  or  the   accounts   receivable
securitization   facility.   To  fund  expansive  capital  projects  and  future
acquisitions,  we may borrow on our facilities,  we may issue additional debt to
the extent  permitted  under  existing  financing  arrangements  or we may issue
additional equity securities, including, among others, common units.

     Toward this purpose,  on June 11, 2003, a shelf registration  statement was
declared  effective by the SEC for the periodic sale by us of up to $500 million
of equity and/or debt securities.  The registered securities are available to us
for  sale  from  time to time in the  future  to fund  acquisitions,  to  reduce
indebtedness,  to redeem senior units or to provide funds for general  corporate
purposes.  During the fourth  quarter of fiscal 2003, we received $26.2 million,
after underwriting discounts,  commission and expenses, from the issuance of 1.2
million common units to the public from this shelf registration  statement.  See
further  discussion  about  this  equity  offering  in  "Liquidity  and  Capital
Resources - Financing Activities."

     We also maintain a shelf  registration  statement  with the  Securities and
Exchange  Commission for the issuance of up to 2.0 million common units.  We may
issue these common units in connection with our acquisition of other businesses,
properties or securities in business combination transactions.

Operating Activities

     Net cash  provided by operating  activities  was $130.6  million for fiscal
2003,  compared to $121.9  million for fiscal 2002.  This increase was primarily
due  to  higher  proceeds  from  accounts  receivable  securitization  activity,
partially offset by the effect of higher  wholesale cost of product,  the timing
of  collections  of  accounts  receivable  and the  timing of  purchases  of and
payments for  inventory.  The fiscal 2003 winter  heating  season  required more
working  capital to finance  operating  activities  than the fiscal  2002 winter
heating  season  because of the effect of  financing  the  purchase  and sale of
greater volumes of retail propane at higher average wholesale costs.

Accounts receivable securitization

     At July  31,  2003,  $34.0  million  had  been  funded  from  our  accounts
receivable  securitization  facility.  This funding  resulted from our increased
liquidity needs caused primarily by the seasonal increase in accounts receivable
outstanding and in propane inventory levels. We renewed this facility  effective
September 23, 2003, for a 364-day  commitment  with Banc One, N.A. In accordance
with  SFAS  No.  140,  these  transactions  are  reflected  on our  consolidated
financial  statements as sales of accounts receivable and a retained interest in
transferred  accounts  receivable.  See further discussion in Note E - "Accounts
receivable   securitization"   in  the  notes  to  our  consolidated   financial
statements.

                                       43
<PAGE>


The operating partnership

     Net cash  provided by operating  activities  was $153.3  million for fiscal
2003,  compared to net cash provided by operating  activities of $136.9  million
for fiscal 2002, for the reasons disclosed above.

Investing Activities

     On December 10, 2002, we purchased  $155.6 million of equipment whose lease
terms would have expired in June 2003. See "Financing  Activities"  and Note H -
Long-term debt - to our consolidated  financial  statements for discussion about
the financing of these equipment lease buyouts.

     We continue  to consider  opportunities  to expand our  operations  through
strategic  acquisitions  of retail  propane  operations  located  throughout the
United  States.   During  fiscal  2003,  we  made  total   acquisition   capital
expenditures of approximately  $49.2 million for five retail propane  companies,
which  included  the  acquisition  of $7.9  million  of working  capital.  These
expenditures were mainly funded by $39.1 million in cash payments,  the issuance
of 9 thousand  common  units  valued at an  aggregate  of $0.2  million and $9.9
million in the issuance of a non-interest bearing note payable to the seller and
other costs and consideration.

     During  fiscal 2003,  we made cash capital  expenditures  of $21.2  million
related to our technology  initiative and $18.3 million consisting  primarily of
the following:

o    upgrading district plant facilities;

o    vehicle lease buyouts; and

o    additional propane storage tanks and cylinders.

     During fiscal 2001, we completed a review of our key business  processes to
identify  areas  where  we could  use  technology  to  improve  our  operational
efficiency.  Specifically,  we  identified  areas where we believe we can reduce
operating expenses and improve customer  satisfaction in the near future.  These
areas of  opportunity  include  improvements  to our routing and  scheduling  of
customer deliveries,  customer  administration and operational workflow.  During
fiscal  2003  and  2002,  we  allocated   considerable  resources  toward  these
improvements,  including  the  purchase of computer  hardware  and  software and
development of new software. The capital expenditures related to this technology
initiative were funded primarily from net cash provided by operating activities.
These  capital  expenditures  represent  a  substantial  majority of the capital
expenditures we expect to incur in connection  with this technology  initiative.
We intend to fund any remaining  capital  requirements  from cash generated from
future net cash  provided by operating  activities or funds  available  from our
credit  facility.  We  incurred  the  following  expenditures  related  to  this
technology initiative between fiscal 2001 and 2003.

                                       44
<PAGE>

<TABLE>
<S>                                  <C>             <C>             <C>        <C>             <C>             <C>
                                     --------------------------------------     --------------------------------------
                                              Capital expenditures                          Expensed items
                                     --------------------------------------     --------------------------------------
(in thousands)                       Fiscal          Fiscal          Fiscal     Fiscal          Fiscal          Fiscal
                                      2003            2002            2001       2003            2002            2001
                                      ----            ----            ----       ----            ----            ----
Development of new computer
   software                          $14,266        $25,847           $100      $  -           $  -            $  -
Purchased computer software and
   licenses                                3          3,947              -         -              -               -
Computer hardware and other
   equipment                             430            276              -         -              -               -
Operating expense                          -              -              -       1,832          2,032             -
General and administrative expenses        -              -              -         -              -             1,703
                                     -----------    -----------    ---------    -----------    -----------    ------------
Total incurred                        14,699         30,070            100       1,832          2,032           1,703
Plus: Cash payments for
   Items incurred in prior year        6,956              -              -         -              -               -
Less: amounts payable to Vendors         452          6,956              -         -              -               -

                                     -----------    -----------    ---------    -----------    -----------    ------------
Total cash used for
   technology initiative             $21,203        $23,114           $100      $1,832         $2,032          $1,703
                                     ===========    ===========    =========    ===========    ===========    ============
</TABLE>

     We lease property, computer equipment, propane tanks, light and medium duty
trucks, tractors and trailers. We believe leasing is a cost-effective method for
meeting our equipment  needs.  During fiscal 2003, we purchased  $4.1 million of
vehicles whose lease terms expired during fiscal 2003.

The operating partnership

     The  investing  activities  discussion  above also applies to the operating
partnership,  except for cash flows  related to  business  acquisitions.  During
fiscal  2003,  the  operating   partnership  made  total   acquisition   capital
expenditures of $7.1 million  pursuant to the acquisition of four retail propane
companies.  In addition,  during December 2002, Ferrellgas Partners acquired and
contributed a propane company to the operating partnership.

Financing Activities

Credit facility

     On December 10, 2002, we refinanced our $157.0 million bank credit facility
with a $307.5  million  amended bank credit  facility.  This amended bank credit
facility  will  terminate on April 28, 2006,  unless  extended or renewed.  This
$307.5 million amended bank credit facility consists of the following:

                                       45
<PAGE>


o    a $151.5 million revolving working capital  facility,  general  partnership
     and  acquisition  facility,  including  an $80.0  million  letter of credit
     sub-facility; and

o    a $156.0 million revolving  facility,  which was used December 10, 2002, to
     purchase propane tanks and related assets that we previously leased.

All  borrowings  under the amended bank credit  facility bear  interest,  at our
option, at a rate equal to either:

o    a base rate,  which is defined as the higher of the federal funds rate plus
     0.50% or Bank of  America's  prime rate (as of July 31,  2003,  the federal
     funds  rate  and  Bank of  America's  prime  rate  were  1.04%  and  4.00%,
     respectively); or

o    the  Eurodollar  Rate plus a margin varying from 1.75% to 2.75% (as of July
     31, 2003, the one-month Eurodollar Rate was 1.04%).

In addition,  an annual commitment fee is payable on the daily unused portion of
the credit  facility  at a per annum rate  varying  from 0.375% to 0.625% (as of
July 31, 2003, the commitment fee per annum rate was 0.375%).

     At July 31, 2003, $126.7 million of borrowings and $44.7 million of letters
of credit were outstanding  under the amended bank credit  facility.  Letters of
credit  are  currently  used  to  cover   obligations   primarily   relating  to
requirements for insurance coverage and, to a lesser extent, our risk management
activities.  At July 31,  2003,  we had $136.1  million  available  for  working
capital, acquisition, capital expenditure and general partnership purposes under
the amended bank credit facility.

     We believe  that the  liquidity  available  from the  amended  bank  credit
facility and the accounts receivable  securitization facility will be sufficient
to meet our  future  working  capital  needs for  fiscal  2004.  See  "Investing
Activities"  for  discussion  about  our  accounts   receivable   securitization
facility.  However, if we were to experience an unexpected  significant increase
in working  capital  requirements,  our working  capital  needs could exceed our
immediately  available  resources.  Events that could cause increases in working
capital borrowings or letter of credit requirements include, but are not limited
to the following:

o    a significant increase in the wholesale cost of propane;

o    a significant delay in the collections of accounts receivable;

o    increased  volatility in energy commodity prices related to risk management
     activities;

o    increased liquidity requirements imposed by insurance providers;

o    a significant downgrade in our credit rating;

o    decreased trade credit; or

o    a significant acquisition.

If one or more of these events caused a significant use of available funding, we
may consider  alternatives  to provide  increased  working capital  funding.  No
assurances can be given, however, that such alternatives would be available, or,
if available, could be implemented.

Long-term debt

     On September 24, 2002, we issued,  in a public offering,  $170.0 million of
8.75% senior  notes due 2012.  Interest is payable  semi-annually  in arrears on
June 15 and December 15. These  senior notes are  unsecured  and not  redeemable
before June 15, 2007, except under specific circumstances.  We used the proceeds
from the $170.0 million senior note issuance to repurchase and redeem our $160.0
million 9.375% senior secured notes due 2006 and to fund related premiums, fees,
accrued and unpaid interest and tender consent payments.

     On December 18, 2002, we issued, in a public offering,  an additional $48.0
million of 8.75%  senior notes with the same terms as the $170.0  million  8.75%
senior notes.  We used the proceeds from the $48.0 million  senior note issuance
to reduce  borrowings  under the  amended  bank credit  facility  and to provide
increased  availability  of funds  for  working  capital,  acquisition,  capital
expenditure  and general  partnership  purposes.  The $48.0 million senior notes
were  issued  with a debt  premium of $1.7  million  that will be  amortized  to
interest expense through fiscal 2012.

                                       46
<PAGE>


     The following table summarizes our long-term debt obligations as of July
31, 2003:
<TABLE>
<S>                                  <C>           <C>          <C>          <C>          <C>          <C>
                                                          Principal Payments due by Fiscal Year
                                     --------------------------------------------------------------------------------
(in thousands)                                                                             2008 and
                                         2004         2005         2006         2007      Thereafter       Total
                                     ------------- ------------ ------------ ----------- ------------- --------------
Long-term debt, including
    Current portion                     $2,151       $2,146      $111,161     $38,455      $734,895       $888,808
</TABLE>

See Note H -  Long-term  debt - to our  consolidated  financial  statements  for
further  discussion  of the  maturity  dates and interest  rates  related to our
long-term debt.

Distributions

     We paid the  required  distributions  on the senior  units and the  minimum
quarterly  distribution  on  all  common  units,  as  well  as  general  partner
interests,  totaling  $84.7  million and $84.1 million in fiscal 2003 and fiscal
2002, respectively.  The required quarterly distribution on the senior units and
the minimum  quarterly  distribution  on all common  units for the three  months
ended  July 31,  2003 was paid on  September  12,  2003 to  holders of record on
August 29, 2003. See related  disclosure about the distributions and redemptions
of senior  units in  "Disclosures  about  Effects of  Transactions  with Related
Parties."

Common unit equity issuance and senior unit redemption

     During the fourth quarter of fiscal 2003, we received $26.0 million,  after
underwriting  discounts,  commission  and  expenses,  from the  issuance  of 1.2
million  common  units to the public.  We used these net  proceeds to redeem 0.8
million senior units and to pay the related accrued senior unit distribution.

     During  fiscal 2003 and 2002 we received  $6.7  million and $0.9 million in
connection  with to the  issuance of 0.4 million  and 55 thousand  common  units
pursuant  to the  Ferrellgas  unit  option  plan.  See Note P - Unit  options of
Ferrellgas and stock options of Ferrell  Companies,  Inc. - to our  consolidated
financial statements, for additional disclosure about the Ferrellgas unit option
plan.

     On April 6, 2001, we announced a series of transactions  that increased the
cash  distribution  coverage to our public common  unitholders  and modified the
structure of our  outstanding  senior units.  In addition,  we announced that an
entity owned by our general  partner's  Chairman,  Chief  Executive  Officer and
President, James E. Ferrell, purchased all the outstanding senior units from The
Williams  Companies  for a purchase  price of $195.5  million  plus  accrued and
unpaid  distributions.  We pay the senior  units a quarterly  cash  distribution
equivalent to 10 percent per annum of the  liquidating  value,  currently $1 per
quarter.  We can redeem the senior units at any time, in whole or in part,  upon
payment in cash of the liquidating value of the senior units,  currently $40 per
unit, plus the amount of any accrued and unpaid distributions. The holder of the
senior units has the right, subject to various events and conditions, to convert
any  outstanding  senior  units into common  units  beginning  on the earlier of
December 31, 2005 or upon the  occurrence of a material  event as defined by our
partnership agreement.  The number of common units issuable upon conversion of a
senior unit is equal to the senior unit liquidation  value,  divided by the then
current market price of a common unit. Generally,  a material event includes (1)
a change of control;  (2) the treatment of Ferrellgas Partners as an association
taxable as a  corporation  for  federal  income  tax  purposes;  (3)  Ferrellgas
Partners'  failure to use the aggregate  cash  proceeds  from equity  issuances,
other than  issuances  of equity  pursuant  to an  exercise  of any common  unit
options, to redeem a portion of its senior units other than up to $20 million of
cash  proceeds  from  equity  issuances  used  to  reduce  Ferrellgas  Partners'
indebtedness;  or (4)  Ferrellgas  Partners'  failure  to pay  the  senior  unit
distribution  in  full  for any  fiscal  quarter.  Such  conversion  rights  are
contingent  upon us not previously  redeeming  such  securities.  Also,  Ferrell
Companies  granted us the option,  until  December  31,  2005,  to defer  future
distributions  on the  common  units held by it up to an  aggregate  outstanding
amount of $36.0  million.  As of July 31, 2003, we have not elected to defer any
common unit distributions due Ferrell Companies.

                                       47
<PAGE>


The operating partnership

     The  financing  activities  discussion  above also applies to the operating
partnership except for cash flows related to distributions,  the issuance of the
8.75% senior notes due 2012,  the issuance of common units and the redemption of
senior  units.  The  following  table  summarizes  the  operating  partnership's
long-term debt obligations as of July 31, 2003:
<TABLE>
<S>                                      <C>             <C>         <C>           <C>         <C>           <C>
(in thousands)                                                Principal Payments due by Fiscal Year
                                         --------------------------------------------------------------------------------
                                                                                                2008 and
                                             2004          2005         2006         2007      Thereafter      Total
                                         -------------- ----------- ------------- ----------- ------------- -------------
Long-term debt, including current
  portion of long-term debt                 $2,151        $2,146      $111,161     $38,455      $516,895      $670,808
</TABLE>

See  Note  H -  Long-term  debt - in the  operating  partnership's  consolidated
financial statements for further discussion of maturity dates and interest rates
related to its long-term debt.

     The operating  partnership paid  distributions  totaling $102.2 million and
$100.1  million in fiscal 2003 and fiscal 2002,  respectively.  On September 12,
2003, the operating  partnership paid a cash distribution to Ferrellgas Partners
and our general partner of $21.3 million.

Disclosures about Risk Management Activities Accounted for at Fair Value

     The following  table  summarizes the change in the unrealized fair value of
contracts from our risk management trading activities for fiscal 2003.

(in thousands)                                                          2003
                                                                    ------------
Unrealized losses in fair value of contracts
    outstanding at beginning of period                              $ (4,569)
Other unrealized gains recognized                                      5,921
Less: realized gains recognized                                        3,070
                                                                    ------------
Unrealized losses in fair value of contracts
    outstanding at July 31                                          $ (1,718)
                                                                    ============

     The  following  table  summarizes  the maturity of contracts  from our risk
management trading activities for the valuation  methodologies we utilized as of
July 31, 2003.

                                       48
<PAGE>

<TABLE>
<S>                                                             <C>                      <C>
(in thousands)                                                      Fair value of contracts at period-end
                                                                ---------------------------------------------
                                                                                          Maturity greater
                                                                 Maturity less than        than 1 year and
Source of fair value                                                   1 year            less than 18 months
------------------------------------------------------------    ---------------------    --------------------
Prices actively quoted                                                $     9                $     -
Prices provided by other external sources                              (1,727)                     -
Prices based on models and other
  valuation methods                                                      -                         -
                                                                ---------------------    --------------------
Unrealized losses in fair value of contracts
  outstanding at July 31, 2003                                        $(1,718)               $     -
                                                                =====================    ====================
</TABLE>

See additional discussion about market,  counterparty credit and liquidity risks
related to our risk  management  trading  activities  and other risk  management
activities in "Quantitative  and Qualitative  Disclosures about Market Risk" and
Note L - Derivatives - to our consolidated financial statements.

Disclosures about Effects of Transactions with Related Parties

     We have no employees and are managed and controlled by our general partner.
Pursuant  to our  partnership  agreement,  our  general  partner is  entitled to
reimbursement for all direct and indirect expenses incurred or payments it makes
on our behalf,  and all other necessary or appropriate  expenses allocable to us
or  otherwise  reasonably  incurred by our general  partner in  connection  with
operating our business.  These costs,  which totaled  $201.3  million for fiscal
2003, include compensation and benefits paid to employees of our general partner
who  perform   services  on  our  behalf,   as  well  as  related   general  and
administrative costs.

     During fiscal 2003, we paid JEF Capital  Management $31.5 million to redeem
a  total  of  0.8  million  senior  units  and  $11.6  million  in  senior  unit
distributions.  We accrued a senior unit  distribution  of $2.0  million that we
subsequently  paid to JEF Capital  Management on September 12, 2003. JEF Capital
Management is beneficially  owned by James E. Ferrell,  the Chairman,  President
and Chief Executive Officer of our general partner, and thus is an affiliate.

     During fiscal 2003, our named executive officers exercised  Ferrellgas unit
options.  See  "Executive  Compensation  -  Aggregated  Ferrellgas  Unit  Option
Exercises  in Last Fiscal Year and Fiscal  Year-end  Option  Values" for details
about these transactions

     Ferrell  International  Limited and FI Trading, Inc. are beneficially owned
by James E. Ferrell and thus are also our affiliates. We enter into transactions
with Ferrell  International  Limited and FI Trading in connection  with our risk
management  activities  and  do so at  market  prices  in  accordance  with  our
affiliate  trading policy approved by our general  partner's Board of Directors.
These  transactions  include  forward,  option  and swap  contracts  and are all
reviewed for compliance  with the policy.  During fiscal 2003, we recognized net
disbursements  from purchases,  sales and commodity  derivative  transactions of
$0.2 million. These net purchases,  sales and commodity derivative  transactions
with Ferrell  International  Limited and FI Trading,  are  classified as cost of
product sold on our consolidated  statements of earnings.  There were no amounts
due from (to) Ferrell International Limited or FI Trading at July 31, 2003.

     We believe these related party  transactions  were under terms that were no
less favorable to us than those available with third parties.

     See both  "Certain  Relationships  and Related  Transactions"  and Note M -
Transactions with related parties - to our consolidated financial statements for
additional discussion.

                                       49
<PAGE>


Off-Balance Sheet Arrangements

     Our off-balance  sheet  arrangements  include the leasing of transportation
equipment,  property, computer equipment and propane tanks. We account for these
arrangements  as  operating  leases.   We  believe  these   arrangements  are  a
cost-effective method for financing our equipment needs. These off-balance sheet
arrangements  enable us to lease equipment from third parties rather than, among
other options,  purchasing the equipment using on-balance  sheet financing.  See
further discussion about these leases in "Investing Activities."

     Most of the operating leases involving our transportation equipment contain
residual value guarantees. These transportation equipment lease arrangements are
scheduled  to  expire  over the next  seven  years.  Most of these  arrangements
provide that the fair value of the  equipment  will equal or exceed a guaranteed
amount,  or we will be required to pay the lessor the  difference.  Although the
fair  values at the end of the lease  terms  have  historically  exceeded  these
guaranteed amounts, the maximum potential amount of aggregate future payments we
could be  required  to make  under  these  leasing  arrangements,  assuming  the
equipment is worthless at the end of the lease term, is $14.5 million. We do not
know of any event, demand, commitment, trend or uncertainty that would result in
a  material  change  to these  arrangements.  See Note J -  Guarantees  - to our
consolidated financial statements for further discussion of Financial Accounting
Standards Board Financial  Interpretation  No. 45,  "Guarantor's  Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness of Others."

     The following  table  summarizes  our future  minimum  rental  payments and
amounts we currently  anticipate to exercise  purchase buyout options as of July
31, 2003:
<TABLE>
<S>                          <C>        <C>        <C>        <C>        <C>        <C>          <C>
    (in thousands)                     Future Minimum Rental and Buyout Amounts by Fiscal Year
                             -----------------------------------------------------------------------------
                                2004       2005       2006       2007       2008     Thereafter    Total
                             ---------- ---------- ---------- ---------- ---------- ------------ ---------
    Operating lease
      rental payments        $20,161    $14,840    $12,226    $ 8,253    $ 4,862      $4,748      $65,090
    Operating lease buyouts    6,061      5,316      2,077      6,319      2,343       3,279       25,395
</TABLE>


     Historically,  we have been successful in renewing  certain leases that are
subject to buyouts. However, there is no assurance that we will be successful in
the future.

Adoption of New Accounting Standards

     The Financial  Accounting Standards Board ("FASB") recently issued SFAS No.
143 "Accounting for Asset Retirement Obligations",  SFAS No. 144 "Accounting for
the Impairment or Disposal of Long-lived  Assets",  SFAS No. 145  "Rescission of
FASB  Statements  No. 4, 44, and 64,  Amendment  of FASB  Statement  No. 13, and
Technical  Corrections",  and SFAS No. 146 "Accounting for Costs Associated with
Exit  or  Disposal   Activities,"  SFAS  No.  148  "Accounting  for  Stock-Based
Compensation - Transition and Disclosure,"  SFAS No. 149 "Amendment of Statement
133 on Derivative  Instruments and Hedging Activities," SFAS No. 150 "Accounting
for Certain Financial  Instruments with  Characteristics of Both Liabilities and
Equity,"  FASB  Financial  Interpretation  No. 45  "Guarantor's  Accounting  and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness of Others" and FASB Financial  Interpretation No. 46 "Consolidation
of Variable Interest Entities."

     SFAS No. 143  requires  the  recognition  of a liability if a company has a
legal or contractual financial obligation in connection with the retirement of a
tangible  long-lived  asset. We implemented SFAS No. 143 beginning in the fiscal
year ending July 31,  2003.  This  cumulative  effect of a change in  accounting
principle  resulted  in a one-time  charge to  earnings  of $2.8  million at the
beginning of the year ended July 31, 2003,  together with the  recognition  of a
$3.1 million long-term  liability and a $0.3 million long-term asset. See Note I
- Asset retirement obligations - for further discussion of these obligations. We
believe  the  implementation  will not have a  material  ongoing  effect  on our
financial position, results of operations and cash flows.

                                       50
<PAGE>


     SFAS No. 144 modifies the financial accounting and reporting for long-lived
assets  to  be  disposed  of  by  sale  and  it  broadens  the  presentation  of
discontinued  operations to include more disposal  transactions.  We implemented
SFAS No. 144 beginning in the fiscal year ending July 31, 2003, with no material
effect on our financial position, results of operations and cash flows.

     SFAS No. 145  eliminates  the  requirement  that material  gains and losses
resulting   from  the  early   extinguishment   of  debt  be  classified  as  an
extraordinary  item  in  the  consolidated  statements  of  earnings.   Instead,
companies must evaluate whether the transaction meets both the criteria of being
unusual in nature and  infrequent in  occurrence.  Other aspects of SFAS No. 145
relating to accounting  for  intangible  assets of motor carriers and accounting
for lease  modifications  do not currently apply to us. We implemented  SFAS No.
145  beginning  in the fiscal  year ending July 31,  2003,  and began  reporting
expenses associated with early extinguishments of debt in income from continuing
operations.  For the year ended July 31,  2003,  we  recognized  $7.1 million of
expenses  associated  with the early  retirement  of the $160.0  million  senior
secured notes.  Prior to the adoption of SFAS No. 145, we would have  classified
this type of expense as an extraordinary item.

     SFAS No. 146 modifies the  financial  accounting  and  reporting  for costs
associated  with exit or disposal  activities.  This  standard  requires  that a
liability for a cost associated with an exit or disposal  activity be recognized
when the  liability  is  incurred.  Additionally,  the  statement  requires  the
liability to be recognized and measured  initially at fair value. Under previous
rules,  liabilities  for exit costs were  recognized at the date of the entity's
commitment to an exit plan. We adopted and implemented SFAS No. 146 for any exit
or disposal  activities  initiated  after July 31, 2002.  We believe it will not
have a material effect on our financial position, results of operations and cash
flows.

     SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation"
to provide  alternative  methods of  transition  for a  voluntary  change to the
fair-value  based method of accounting for  stock-based  employee  compensation.
This statement also amends SFAS No. 123 disclosure  requirements  for annual and
interim  financial  statements to provide more prominent  disclosures  about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. This statement is effective for the fiscal year
ending July 31, 2003. We implemented the interim disclosure  requirements during
the three  months  ended  April 30,  2003.  See Note B - Summary of  significant
accounting  policies - to our consolidated  financial  statements for additional
information  related  to  these  requirements.  We are  currently  studying  the
voluntary aspects of SFAS No. 148 and the related implications of SFAS No. 123.

     SFAS No. 149 amends SFAS No. 133,  "Accounting  for Derivative  Instruments
and Hedging  Activities"  and clarifies  financial  accounting and reporting for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  and for hedging  activities.  This  statement  is, in general,
effective for contracts  entered into or modified  after June 30, 2003,  and for
hedging  relationships  designated after June 30, 2003. We have studied SFAS No.
149 and believe it will not have a material  effect on our  financial  position,
results of operations and cash flows.

     SFAS  No.  150  establishes  standards  for how an  issuer  classifies  and
measures certain financial  instruments with characteristics of both liabilities
and equity.  It requires that an issuer classify a financial  instrument that is
within its scope as a  liability  (or an asset in some  circumstances).  Many of
those  instruments  were  previously  classified  as equity.  This  statement is
effective for financial instruments entered into or modified after May 31, 2003,
and  otherwise  is effective  for the fiscal year ending July 31, 2004.  We have
studied  SFAS No.  150 and  believe  it will not have a  material  effect on our
financial position, results of operations and cash flows.

                                       51
<PAGE>


     FASB  Financial  Interpretation  No. 45  expands  the  existing  disclosure
requirements  for guarantees  and requires that companies  recognize a liability
for   guarantees   issued  after   December  31,  2002.  We   implemented   this
interpretation  beginning in the three months ended January 31, 2003. During the
year ended July 31, 2003, the  implementation  resulted in the  recognition of a
liability of $0.2 million,  and a related  asset of $0.2 million,  both of which
will be  recognized  into income over the life of the  guarantees.  See Note J -
Guarantees - to our  consolidated  financial  statements for further  discussion
about these guarantees.

     FASB Financial Interpretation No. 46 clarifies Accounting Research Bulletin
No. 51, "Consolidated Financial Statements." If certain conditions are met, this
interpretation  requires the primary beneficiary to consolidate certain variable
interest  entities  in which  equity  investors  lack the  characteristics  of a
controlling  financial  interest or do not have sufficient  equity investment at
risk to permit the variable  interest  entity to finance its activities  without
additional   subordinated   financial   support   from   other   parties.   This
interpretation  is effective  immediately for variable interest entities created
or obtained  after January 31, 2003.  For variable  interest  entities  acquired
before  February 1, 2003, the  interpretation  is effective for the first fiscal
year or interim period  beginning  after June 15, 2003. We currently do not have
any variable interest entities that would be subject to this interpretation.

     Emerging Issues Task Force ("EITF") 02-3 "Issues Involved in Accounting for
Derivative  Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk  Management  Activities"  eliminates any basis for  recognizing
physical  inventories  included in energy trading activities at fair value. This
new accounting  rule applies to all physical  inventory  purchased after October
22, 2002. We had previously  recognized  physical  inventories  included in risk
management trading activities at fair value.

     EITF  No.  00-21,   "Accounting  for  Revenue  Arrangements  with  Multiple
Deliverables"  addresses  how to  account  for  arrangements  that  may  involve
multiple  revenue-generating  activities,  i.e.,  the delivery or performance of
multiple  products,  services,  and/or  rights to use assets.  In applying  this
guidance,  separate  contracts with the same party,  entered into at or near the
same time, will be presumed to be a bundled  transaction,  and the consideration
will be measured and  allocated to the  separate  units based on their  relative
fair values.  This consensus  guidance will be applicable to agreements  entered
into in  quarters  beginning  after  June  15,  2003.  We will  adopt  this  new
accounting pronouncement beginning August 1, 2003. We believe this pronouncement
will not have a material impact on our financial position, results of operations
and  cash  flows,  because  we  do  not  enter  into  a  significant  number  of
arrangements that may involve multiple revenue-generating activities.

Critical Accounting Policies and Estimates

     The  preparation of financial  statements in conformity  with United States
Generally Accepted  Accounting  Principles  requires us to establish  accounting
policies and make estimates and assumptions  that affect our reported amounts of
assets and liabilities at the date of the consolidated financial statements.  We
evaluate our  policies and  estimates  on an on-going  basis.  Our  consolidated
financial statements may differ based upon different estimates and assumptions.

     We  discuss  our  significant  accounting  policies  in Note B - Summary of
significant accounting policies - to our consolidated  financial statements.  We
believe the following are our critical accounting policies:

Depreciation of Property, Plant and Equipment

     We  calculate  depreciation  using the  straight-line  method  based on the
estimated  useful lives of the assets  ranging from two to 30 years.  Changes in
the  estimated  useful lives of our assets  could have a material  effect on our
results of  operations.  We do not  anticipate  future  changes in the estimated
useful lives of our property, plant and equipment.

                                       52
<PAGE>


Amortization of Intangible Assets

     We calculate amortization using either straight-line or accelerated methods
over  periods  ranging  from two to 15 years.  We use  amortization  methods and
determine  asset  values  based  on our  best  estimates  using  reasonable  and
supportable assumptions and projections.  Changes in the amortization methods or
asset values could have a material  effect on our results of  operations.  We do
not anticipate  future  changes in the estimated  useful lives of our intangible
assets.

Fair Value of Derivative Commodity Contracts

     We enter into  commodity  forward,  futures,  swaps and  options  contracts
involving propane and related  products,  which, in accordance with SFAS No. 133
"Accounting  for  Derivative   Instruments  and  Hedging  Activities,"  are  not
accounting  hedges,  but are used for risk management  trading purposes.  To the
extent such contracts are entered into at fixed prices and thereby subject us to
market risk, the contracts are accounted for using the fair value method.  Under
this  valuation  method,  derivatives  are carried in the  consolidated  balance
sheets at fair value with changes in value  recognized in earnings.  We classify
all gains and  losses  from these  derivative  contracts  entered  into for risk
management  trading  purposes  as  cost  of  product  sold  in the  consolidated
statements   of   earnings.   We  utilize   published   settlement   prices  for
exchange-traded  contracts,  quotes  provided by brokers and estimates of market
prices  based on daily  contract  activity to  estimate  the fair value of these
contracts.  Changes in the  methods  used to  determine  the fair value of these
contracts could have a material effect on our results of operations. For further
discussion of derivative commodity contracts,  see "Management's  Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations  -  Results  of
Operations",   "Liquidity  and  Capital   Resources  -  Disclosures  about  Risk
Management  Activities  Accounted  for at  Fair  Value"  and  "Quantitative  and
Qualitative  Disclosures  about Market Risk" and Note L -  Derivatives  - to our
consolidated  financial  statements.  We do not anticipate future changes in the
methods used to determine the fair value of these derivative contracts.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Our risk management  activities primarily attempt to mitigate risks related
to the purchasing,  storing and transporting of propane.  We generally  purchase
propane in the contract and spot markets from major domestic energy companies on
a short-term basis. Our costs to purchase and distribute  propane fluctuate with
the movement of market prices.  This fluctuation  subjects us to potential price
risk,  which  we  attempt  to  minimize  through  the  use  of  risk  management
activities.

     Our risk management  trading activities include the use of energy commodity
forward contracts,  swaps and options traded on the  over-the-counter  financial
markets  and futures and  options  traded on the New York  Mercantile  Exchange.
These risk management activities are conducted primarily to offset the effect of
market price  fluctuations on propane inventory and purchase  commitments and to
mitigate the price risk on sale commitments to our customers.

     Our risk management  activities are intended to generate a profit, which we
then  apply  to  reduce  our  cost of  product  sold.  The  results  of our risk
management  activities directly related to the delivery of propane to our retail
customers,  which  include our supply  procurement,  storage and  transportation
activities,  are presented in our discussion of retail margins and are accounted
for at cost. The results of our other risk  management  activities are presented
separately  in our  discussion  of cost of product sold and gross profit as risk
management trading activities and are accounted for at fair value.

     Market risks  associated  with energy  commodities  are monitored  daily by
senior management for compliance with our commodity risk management policy. This
policy includes an aggregate dollar loss limit and limits on the term of various
contracts.  We also utilize  volume limits for various  energy  commodities  and
review our  positions  daily where we remain  exposed to market  risk,  so as to
manage exposures to changing market prices.

                                       53
<PAGE>


     Market,  Credit and Liquidity  Risk. New York  Mercantile  Exchange  traded
futures and options are guaranteed by the New York Mercantile  Exchange and have
nominal  credit risk. We are exposed to credit risk  associated  with  forwards,
swaps and option  transactions in the event of nonperformance by counterparties.
For each counterparty, we analyze its financial condition prior to entering into
an agreement,  establish a credit limit and monitor the  appropriateness  of the
limit. The change in market value of Exchange-traded  futures contracts requires
daily cash settlement in margin  accounts with brokers.  Forwards and most other
over-the-counter  instruments  are  generally  settled at the  expiration of the
contract  term.  In order to  minimize  the  liquidity  risk of cash,  margin or
collateral requirements of counterparties for over-the-counter  instruments,  we
attempt to balance  maturities  and positions  with  individual  counterparties.
Historically,  our risk management  activities have not experienced  significant
credit-related losses in any year or with any individual counterparty.  Our risk
management  contracts do not contain material repayment  provisions related to a
decline in our credit rating.

     Sensitivity  Analysis.  We prepared a sensitivity  analysis to estimate the
exposure to market risk of our energy commodity  positions.  Forward  contracts,
futures,  swaps and options  outstanding as of July 31, 2003 and 2002, that were
used  in our  risk  management  trading  activities  were  analyzed  assuming  a
hypothetical  10% adverse change in prices for the delivery month for all energy
commodities.  The potential loss in future  earnings  regarding  these positions
from  a  10%  adverse  movement  in  market  prices  of  the  underlying  energy
commodities  was estimated at $0.9 million and $1.1 million for risk  management
trading  activities  as of July 31, 2003 and 2002,  respectively.  The preceding
hypothetical  analysis is limited because changes in prices may or may not equal
10%, thus actual results may differ.

     At  July  31,  2003  and  2002,  we had  $126.7  million  and  $0  million,
respectively,  in variable rate amended bank credit facility  borrowings.  Thus,
assuming a one percent increase in our variable interest rate, our interest rate
risk related to the borrowings on the variable rate amended bank credit facility
would result in a loss in future earnings of $1.3 million for fiscal 2004.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Our consolidated financial statements and the Independent Auditors' Reports
thereon and the Supplementary  Financial  Information listed on the accompanying
Index to Financial  Statements  and  Financial  Statement  Schedules  are hereby
incorporated  by  reference.  See Note T - Quarterly  data  (unaudited) - to our
consolidated financial statements for Selected Quarterly Financial Data.

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

     None.

ITEM 9A.      CONTROLS AND PROCEDURES.

     An  evaluation  was performed  with the  participation  of our  management,
including the principal executive officer and principal financial officer of our
general partner,  of the effectiveness of our disclosure controls and procedures
(as such terms are defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).
Based on that  evaluation,  our  management,  including the principal  executive
officer and principal  financial officer of our general partner,  concluded that
our disclosure controls and procedures were designed to be and were adequate and
effective  as of the end of fiscal 2003 to  reasonably  ensure that  information
required to be  disclosed  by us in the reports that we file or submit under the
Exchange Act are recorded,  processed,  summarized and reported, within the time
periods specified in the SEC's rules and forms.

                                       54
<PAGE>


     It should be noted that any system of disclosure  controls and  procedures,
however  well  designed  and  operated,  can provide  only  reasonable,  and not
absolute,  assurance that the objectives of the system are met. In addition, the
design of any system of disclosure controls and procedures is based in part upon
assumptions  about the likelihood of future  events.  Because of these and other
inherent  limitations  of any such system,  there can be no  assurance  that any
design will always  succeed in achieving  its stated  goals under all  potential
future conditions, regardless of how remote.



                                    PART III


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.

Our Management

     Our general  partner  manages and operates our activities  and  anticipates
that its activities will be limited to that management and operation.  We do not
directly employ any of the persons responsible for our management or operations,
rather,  these  individuals are employed by our general partner.  Unitholders do
not directly or indirectly participate in our management or operations.

Audit Committee

     Our general  partner has appointed  members of its Board of Directors  (the
Board) to serve on its audit committee who are neither officers nor employees of
Ferrellgas,  Inc. Moreover, none of its affiliates serve on our audit committee.
The Board has determined that audit committee  member Michael F. Morrissey is an
audit  committee  financial  expert.  The  Board  has also  determined  that Mr.
Morrissey is independent of management.  At the request of our general  partner,
the audit  committee has the  authority to review  specific  matters,  which our
general  partner  believes  may be a  conflict  of  interest  with us. The audit
committee  determines  if the  resolution  of that  conflict  as proposed by our
general  partner is fair and reasonable to us. In addition,  the audit committee
has the  authority and  responsibility  for  selecting  our  independent  public
accountants,   reviewing  our  annual  audit  and  resolving  accounting  policy
questions.  Any matters approved by the audit committee are conclusively  deemed
to be fair and  reasonable  to us,  approved  by all our  unitholders  and not a
breach by our general partner of any duties it may owe us or our unitholders.

Code of Ethics

     The Board has adopted a code of ethics for our general partner's  principal
executive officer,  principal financial officer, principal accounting officer or
controller and/or those persons performing  similar functions.  This code can be
viewed on our website at www.ferrellgas.com/investor.asp.  Any amendments to, or
any waivers  from, a provision of the code will be posted to our website  within
five business days of occurrence  and will remain on our website for a period of
at least  twelve  months  thereafter.  Any  technical,  administrative  or other
non-substantive  amendments to the code however will not be posted.  Please note
that the preceding internet address is for information  purposes only and is not
intended to be a hyperlink. Accordingly, no information found and/or provided at
such internet addresses or at our website in general is intended or deemed to be
incorporated by reference herein.

Directors and Executive Officers of our General Partner

     The  following  table sets forth  certain  information  with respect to the
directors and executive  officers of our general  partner as of October 6, 2003.
Each of the persons named below is elected to their respective office or offices
annually.

                                       55
<PAGE>

                                       Director
Name                            Age     Since       Position
----                            ---    --------     --------
James E. Ferrell                64       1984       Chairman of the Board,
                                                    Chief Executive Officer,
                                                    President and Director

Patrick J. Chesterman           53       n/a        Executive Vice President and
                                                    Chief Operating Officer

Kenneth A. Heinz                39       n/a        Senior Vice President,
                                                    Corporate Development

Kevin T. Kelly                  38       n/a        Senior Vice President and
                                                    Chief Financial Officer

Ron M. Logan, Jr.               42       n/a        Senior Vice President,
                                                    Ferrell North America

William K. Hoskins              68       2003       Director

A. Andrew Levison               47       1994       Director

John R. Lowden                  46       2003       Director

Michael F. Morrissey            61       1999       Director

Elizabeth T. Solberg            64       1998       Director


     James E.  Ferrell--Mr.  Ferrell  has been  with  Ferrell  Companies  or its
predecessors  and its  affiliates in various  executive  capacities  since 1965,
including  Chairman  of the Board of our  general  partner.  He was named  Chief
Executive  Officer and  President of our general  partner on October 5, 2000. He
previously  served as our general partner's Chief Executive Officer until August
1998 and as President until October 1996.

     Patrick J.  Chesterman--Mr.  Chesterman was named  Executive Vice President
and Chief  Operating  Officer of our general  partner in June 2000.  He had been
Executive  Vice  President and Chief  Operating  Officer,  Ferrell North America
since April 1998 after  having  served as Senior Vice  President,  Supply  since
September 1997.  After joining our general partner in June 1994, he had one-year
assignments as Vice President - Retail Operations, Director of Field Support and
Director of Human Resources.

     Kenneth  A.  Heinz--Mr.   Heinz  was  named  Vice  President  of  Corporate
Development  in November  2001 and was named Senior Vice  President  during June
2003. After joining our general partner in November,  1996, he served as Manager
of Taxation, Director of Finance and Taxation, and Vice President of Finance and
Corporate Development.

     Kevin T.  Kelly--Mr.  Kelly was named Senior Vice President in October 2000
and Chief  Financial  Officer in May 1998.  After joining our general partner in
June 1996, he served as Director of Finance and Corporate  Controller  until May
1998.

     Ron M. Logan, Jr.--Mr.  Logan joined Ferrellgas as Senior Vice President of
Ferrell North America in June 2003 and was named as an executive  officer by the
general  partner's  board of  directors  in October  2003.  Prior to joining the
general  partner,  he served as Vice President of Dynegy  Midstream  Services in
Houston, Texas.

                                       56
<PAGE>


     William K.  Hoskins--Mr.  Hoskins  was  elected a Director  of our  general
partner in January 2003. He is also  Chairman of the  Corporate  Governance  and
Nominating  Committee and a member of the Audit  Committee.  Mr.  Hoskins is the
Managing Partner of Resolution Counsel,  LLP, President of Hoskins & Associates,
as well as the  Managing  Partner of Hoskins  Group,  LP. He also  serves on the
Board of Directors of Isotechnika, Inc.

     A.  Andrew  Levison--Mr.  Levison  was  elected a Director  of our  general
partner in September  1994.  He is also a member of the Audit  Committee and the
Compensation  Committee.  Mr.  Levison is the Chairman of Levison & Co.,  LLC, a
Greenwich,  Connecticut-based,  private  merchant banking firm and is the former
head of Leveraged Finance at Donaldson, Lufkin & Jenrette in New York City.

     John R. Lowden--Mr. Lowden was elected a Director of our general partner in
January  2003.  He is  also a  member  of the  Compensation  Committee  and  the
Corporate  Governance and Nominating  Committee.  Mr. Lowden is the President of
NewCastle Partners, LLC.

     Michael F.  Morrissey--Mr.  Morrissey was elected a Director of our general
partner in  November  1999.  He is also  Chairman  of the Audit  Committee.  Mr.
Morrissey  retired as the Managing Partner of Ernst & Young's Kansas City office
in the fall of 1999. He had been with that firm, or its predecessor, since 1975.
Mr. Morrissey also serves on the Board of Directors of Westar Energy, Inc.

     Elizabeth  T.  Solberg--Ms.  Solberg  was elected a Director of our general
partner in July 1998. She is also Chairman of the Compensation  Committee and is
a member of the Corporate  Governance and Nominating  Committee.  Ms. Solberg is
Regional  President and Senior Partner of  Fleishman-Hillard,  Inc. and has been
with the firm since  1976.  She has been a member of the Board of  Directors  of
Kansas City Life Insurance Company since 1997 and Midwest Express Holdings since
2001.

Compensation of our general partner

     Our general partner  receives no management fee or similar  compensation in
connection  with its  management  of our business  and receives no  remuneration
other than:

o    distributions  on its combined 2% general  partner  interest in  Ferrellgas
     Partners and the operating partnership; and

o    reimbursement  for all direct and indirect  costs and expenses  incurred on
     our behalf, all selling,  general and  administrative  expenses incurred by
     our  general  partner  on our behalf and all other  expenses  necessary  or
     appropriate  to the  conduct  of our  business  and  allocable  to us.  The
     selling,  general and administrative  expenses  reimbursed include specific
     employee  benefits  and  incentive  plans for the benefit of the  executive
     officers and employees of our general partner.

Compliance with Section 16(a) of the Securities and Exchange Act

     Section  16(a) of the  Securities  and  Exchange  Act of 1934  requires our
general partner's officers and directors, and persons who own more than 10% of a
registered  class  of our  equity  securities,  to file  reports  of  beneficial
ownership and changes in beneficial  ownership  with the  Commission.  Officers,
directors  and  unitholders  with greater than 10% ownership are required by the
Commission's  regulation  to furnish  our  general  partner  with  copies of all
Section 16(a) forms.

     Based  solely on its  review of the copies of such  forms  received  by our
general partner, or written  representations from certain reporting persons that
no  Annual  Statement  of  Beneficial  Ownership  of  Securities  on Form 5 were
required for those persons, our general partner believes that during fiscal 2003
all filing  requirements  applicable to its officers,  directors,  or beneficial
owners with greater than 10% ownership were met in a timely manner.

                                       57
<PAGE>


ITEM 11.      Executive Compensation.

   Summary Compensation Table

     The following table sets forth the  compensation  for the past three fiscal
years of our general  partner's chief executive officer and the three other most
highly  compensated  executive  officers other than the chief executive officer,
who were serving as executive officers at the end of fiscal 2003.
<TABLE>
<S>                               <C>     <C>         <C>           <C>          <C>               <C>          <C>
                                                                                    Long-Term Compensation
                                                                                 ------------------------------
                                           Annual Compensation                        Awards        Pay-outs
                                         --------------------------------------- ------------------------------
                                                                       Other        Securities     Long-Term    All Other
                                                                      Annual        Underlying     Incentive     Compen-
            Name and                       Salary      Bonus (1)      Compen-        Options        Payouts       sation
       Principal Position         Year       ($)          ($)       sation $(2)      (#) (3)          ($)          ($)
--------------------------------- ------ ------------ ------------  ------------ ------------------------------ -------------
James E. Ferrell                   2003      624,000     500,000         ---          ---             ---         6,597 (5)
   Chairman, Chief Executive       2002      500,000     500,000         ---          ---             ---        14,674
   Officer and President           2001      431,075   1,000,000         ---        1,050,000         ---         9,682

Patrick J. Chesterman              2003      348,000     141,750        4,530         ---             ---        12,934 (5)
   Executive Vice President,       2002      322,000     300,000        3,403         ---             ---        17,227
   and Chief Operating Officer     2001      285,900     425,000        2,134          90,000         ---         8,714

Kevin T. Kelly                     2003      271,000     200,000        4,530         ---             ---        14,481 (5)
  Senior Vice President and        2002      221,000     200,000        3,403         ---             ---         9,231
  Chief Financial Officer          2001      180,000     208,000        2,104         120,000         ---         9,619

Kenneth A. Heinz (4)               2003      219,000     130,000        4,530         ---             ---        14,694 (5)
  Senior Vice President,           2002      171,800     125,000        3,403         ---             ---         6,936
  Corporate Development
</TABLE>

(1)  Awards under bonus plans are for the year reported, regardless of the year
     paid.
(2)  All amounts represent the value of shares contributed to each individual's
     Employee Stock Ownership Plan account.
(3)  The awards are grants of unit options from the Ferrellgas, Inc. Unit Option
     Plan and stock options from the Incentive Compensation Plan, a stock option
     plan of Ferrell Companies (see below for unit option and stock option grant
     tables).
(4)  Kenneth A. Heinz was named Vice President of Corporate Development in
     November 2001.
(5)  Includes for Mr. Ferrell contributions of $6,597 to the employee's 401(k)
     and profit sharing plans. Includes for Mr. Chesterman contributions of
     $12,120 to the profit sharing plans and compensation of $814 resulting from
     the payment of life insurance premiums. Includes for Mr. Kelly
     contributions of $14,481 to the employee's 401(k) and profit sharing plans.
     Includes for Mr. Heinz contributions of $14,277 to the employee's 401(k)
     and profit sharing plans and compensation of $417 resulting from the
     payment of life insurance premiums.

     Unit Options

     The  Second  Amended  and  Restated  Ferrellgas  Unit  Option  Plan  grants
employees of our general partner unit options to purchase our common units.  The
original  Unit Option Plan was adopted and became  effective  in August 1994 and
was most recently  amended  effective April 2001. The purpose of the Unit Option
Plan is to  encourage  certain  employees  of our  general  partner to develop a
proprietary  interest in our growth and  performance,  to generate an  increased
incentive to contribute to our future success and prosperity, thus enhancing our
value for the  benefit of our  unitholders,  and to enhance  the  ability of our
general  partner to attract and retain key  individuals who are essential to our
progress, growth and profitability.

     As of July  31,  2003  we had  outstanding  704,100  unit  options,  with a
weighted average exercise price of $18.20 per option. The unit options generally
vest over a five-year period, and expire on the tenth anniversary of the date of
the grant.  As of July 31, 2003,  364,300 of the unit options  outstanding  were
exercisable.

                                       58
<PAGE>


     There were no grants of unit options during fiscal 2003.

     The following table lists information on our general partner's Chief
Executive Officer and other named executive officers' exercisable/unexercisable
unit options as of July 31, 2003.

       AGGREGATED FERRELLGAS UNIT OPTION EXERCISES IN LAST FISCAL YEAR AND
                          FISCAL YEAR-END OPTION VALUES
<TABLE>
<S>                                  <C>               <C>                <C>                    <C>
                                                                              Number of
                                                                              Securities              Value of
                                                                              Underlying             Unexercised
                                                                             Unexercised            In-The-Money
                                                                          Options at Fiscal       Options at Fiscal
                                                                             Year End (#)           Year End ($)
                                                                          -------------------    --------------------
                                         Units
                                      Acquired on          Value             Exercisable/           Exercisable/
 Name                                Exercise (#)       Realized ($)        Unexercisable           Unexercisable
 -------------------------------     --------------    ---------------    -------------------    --------------------
  James E. Ferrell                         -                 -             120,000/180,000         615,600/923,400
  Patrick J. Chesterman                 66,000            183,780              -/54,000               -/277,020
  Kevin T. Kelly                        48,000            154,220              -/57,000               -/292,410
  Kenneth A. Heinz                      34,400            117,096              -/45,600               -/233,928
</TABLE>

Employee Stock Ownership Plan

     On July 17, 1998,  pursuant to the Ferrell  Companies,  Inc. Employee Stock
Ownership  Plan,  an  employee  stock  ownership  trust  purchased  all  of  the
outstanding common stock of Ferrell Companies. The purpose of the Employee Stock
Ownership Plan is to provide employees of our general partner an opportunity for
ownership in Ferrell Companies,  and indirectly,  in us. Ferrell Companies makes
contributions  to the Employee Stock Ownership  Plan,  which allows a portion of
the shares of Ferrell Companies owned by the Employee Stock Ownership Plan to be
allocated to employees' accounts over time.

Incentive Compensation Plan

     Also  on  July  17,  1998,  the  Ferrell  Companies,  Inc.  1998  Incentive
Compensation Plan was established by Ferrell Companies to allow upper-middle and
senior level managers of our general partner to participate in the equity growth
of Ferrell Companies.  Pursuant to this Incentive  Compensation  Plan,  eligible
participants  may be granted stock options to purchase shares of common stock of
Ferrell Companies.  The shares underlying the stock options are common shares of
Ferrell Companies.

     There  were no grants  of  Incentive  Compensation  Plan  options  to named
executive officers during fiscal 2003.

     The Ferrell  Companies  stock options vest ratably in 5% to 10%  increments
over 12 years or 100% upon a change of  control  of  Ferrell  Companies,  or the
death,  disability  or retirement  at the age of 65 of the  participant.  Vested
options  are  exercisable  in  increments  based on the  timing of the payoff of
Ferrell  Companies  debt,  but in no event  later than 20 years from the date of
issuance.

     The  following  table  lists  information  on our general  partner's  Chief
Executive Officer and other named executive officers'  exercisable/unexercisable
stock options as of July 31, 2003.

                                       59
<PAGE>


  AGGREGATED FERRELL COMPANIES, INC. STOCK OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<S>                        <C>             <C>             <C>                           <C>
                                                                                               Value of
                                                                   Number of                 Unexercised
                                                             Securities Underlying           In-The-Money
                                                              Unexercised Options          Options at Fiscal
                                                            At Fiscal Year End (#)           Year End ($)
                                                           --------------------------    ---------------------
                               Shares      Value
                            Acquired on    Realized              Exercisable/                Exercisable/
Name                        Exercise (#)      ($)                Unexercisable              Unexercisable
-------------------------- --------------- -----------     --------------------------    ---------------------
James E. Ferrell                 -             -                   -/750,000                   -/3,615,000
Patrick J. Chesterman            -             -                   -/250,000                   -/1,498,000
Kevin T. Kelly                   -             -                   -/250,000                   -/1,561,400
Kenneth A. Heinz                 -             -                   -/220,000                   -/1,317,475
</TABLE>


   Profit Sharing Plan

     The Ferrell Companies,  Inc. Profit Sharing and 401(k) Investment Plan is a
qualified  defined  contribution  plan,  which  includes both profit sharing and
matching  contributions.  All full-time employees of Ferrell Companies or any of
its  direct  or  indirect  wholly-owned  subsidiaries  with at least one year of
service  are  eligible  to  participate  in the profit  sharing  plan.  With the
establishment  of the employee  stock  ownership plan in July 1998, we suspended
future contributions to the profit sharing plan beginning with fiscal year 1998.
The plan also has a 401(k) feature allowing all full-time employees to specify a
portion of their pre-tax and/or after-tax  compensation to be contributed to the
plan. The plan also provides for matching contributions under a cash or deferred
arrangement  based upon participant  salaries and employee  contributions to the
plan. Unlike the profit sharing contributions, these matching contributions were
not eliminated with the establishment of the Employee Stock Option Plan.

   Supplemental Savings Plan

     The Ferrell  Companies,  Inc.  Supplemental  Savings  Plan was  established
October 1, 1994 in order to provide  certain  management  or highly  compensated
employees with supplemental  retirement  income which is approximately  equal in
amount to the retirement  income that would have been provided to members of the
select  group of employees  under the terms of the 401(k)  feature of the profit
sharing plan based on such members'  deferral  elections  thereunder,  but which
could not be provided under the 401(k) feature of the profit sharing plan due to
the application of certain IRS rules and regulations.

   Employment Agreements

     In April 2001, the independent  members of the Board of Directors  modified
the amount of  compensation  paid to Mr.  James E.  Ferrell as  Chairman,  Chief
Executive Officer and President of our general partner pursuant to Mr. Ferrell's
existing employment  agreement dated July 17, 1998. Effective September 1, 2002,
Mr. Ferrell's annual salary was increased to $635,000. He is also entitled to an
annual  bonus,  the  amount  to be  determined  in the  sole  discretion  of the
independent   board  members  of  our  general  partner.   In  addition  to  his
compensation,  Mr. Ferrell  participates in our various  employee benefit plans,
with the exception of the employee stock ownership plan.

     Pursuant to the terms of Mr. Ferrell's employment  agreement,  in the event
of a termination without cause,  resignation for cause or a change of control of
Ferrell  Companies  or our general  partner,  Mr.  Ferrell is entitled to a cash
termination benefit equal to three times the greater of 125% of his current base
salary or the average compensation paid to him for the prior three fiscal years.

     Mr.  Ferrell's  agreement  also  contains a  non-compete  provision for the
period of time, following his termination of employment, equal to the greater of
five years or the time in which certain outstanding debt of Ferrell Companies is
paid in full. The non-compete  provision  provides that he shall not directly or
indirectly own, manage, control, or engage in any business with any person whose
business is substantially similar to ours.

                                       60
<PAGE>


     During the first quarter of fiscal 2001, Patrick J. Chesterman and Kevin T.
Kelly each entered into three-year employment  agreements,  which expire on June
13 and July 24, 2004, respectively. The employment agreements state that Messrs.
Chesterman and Kelly will receive an annual salary of not less than $285,000 and
$180,000,  respectively.  In addition to  receiving an annual  salary,  each are
entitled to a bonus based on our earnings and individual performance.

     Pursuant  to the  terms of each  employment  agreement,  in the  event of a
termination without cause or resignation for cause, Messrs. Chesterman and Kelly
are entitled to a cash amount equal to two times their current base salary. If a
change of control of Ferrell  Companies or Ferrellgas,  Inc.  occurs,  each will
receive a cash termination  benefit equal to two and a half times the greater of
125% of his current base salary or the average  compensation paid to him for the
prior three fiscal years.

     Messrs.   Chesterman  and  Kelly's  agreements  also  contain   non-compete
provisions for a period of two years following their  termination of employment.
The  non-compete  provisions  provide that they shall not directly or indirectly
own, manage,  control,  or engage in any business with any person whose business
is substantially similar to ours.

   Compensation of Directors

     Our  general  partner  does  not pay  any  additional  remuneration  to its
employees  for serving as  directors.  Directors  who are not  employees  of our
general partner receive an annual retainer of $36,000 to $41,000.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
               AND RELATED STOCKHOLDER MATTERS.

     The  following  table sets forth  certain  information  as of September 30,
2003,  regarding  the  beneficial  ownership of our common  units by  beneficial
owners that are directors and named executive officers of Ferrellgas,  Inc., and
all directors and executive officers of Ferrellgas, Inc. as a group. Ferrellgas,
Inc.  knows of no other  person  beneficially  owning more than 5% of the common
units.  The senior units currently are not voting  securities of the Partnership
and therefore are not presented in the table below.

                                       61
<PAGE>


Ferrellgas Partners, L.P.
<TABLE>
<S>                    <C>                                                   <C>                <C>
                                                                                Units
                                                                             Beneficially        Percentage of
Title of Class         Name and Address of Beneficial Owner                     Owned                Class
---------------------  ---------------------------------------------------------------------    -----------------
Common Units           Employee Stock Ownership Trust                            17,855,087                 47.2
                       James E. Ferrell                                             135,000                    *
                       Patrick J. Chesterman                                            200                    *
                       Kenneth A. Heinz                                                 300                    *
                       Kevin T. Kelly                                                   700                    *
                       William K. Hoskins                                                 -                    *
                       A. Andrew Levison                                             35,300                    *
                       John R. Lowden                                                     -                    *
                       Michael F. Morrissey                                             775                    *
                       Elizabeth T. Solberg                                           8,431                    *
                       All Directors and Executive Officers as a Group              180,706                    *
</TABLE>
*    Less than one percent

     Beneficial  ownership for the purposes of the foregoing table is defined by
Rule 13d-3  under the  Exchange  Act.  Under that  rule,  a person is  generally
considered  to be the  beneficial  owner of a  security  if he has or shares the
power  to vote or  direct  the  voting  thereof  or to  dispose  or  direct  the
disposition thereof or has the right to acquire either of those powers within 60
days.  See the  "Executive  Compensation  -  Aggregated  Ferrellgas  Unit Option
Exercises In Last Fiscal Year And Fiscal Year End Option Values" table above for
the  number of common  units  that could be  acquired  by each  named  executive
officer through exercising common unit options.

     The  address  for  LaSalle  National  Bank,  the  trustee  for the  Ferrell
Companies,  Inc.  Employee Stock Ownership Trust is 125 S. LaSalle Street,  17th
Floor,  Chicago,  Illinois,  60603. The common units owned by the Employee Stock
Ownership  Trust  includes  17,803,883  common units owned by Ferrell  Companies
which is 100% owned by the  Employee  Stock  Ownership  Trust and 51,204  common
units owned by Ferrell Propane,  Inc., a wholly-owned  subsidiary of our general
partner.

Equity Plan Compensation Information

     The table below provides  information about our Second Amended and Restated
Ferrellgas  Unit  Option Plan as of July 31,  2003.  The plan is our only equity
compensation plan that grants equity of Ferrellgas Partners to its participants.
In addition to the  information  set forth  below,  see Note N - Unit options of
Ferrellgas and stock options of Ferrell  Companies,  Inc. - to our  consolidated
financial statements for additional information about the plan.

                                       62
<PAGE>

<TABLE>
<S>                            <C>                         <C>                         <C>
                                                                                            Number of common units
                                Number of common units                                  remaining available for future
                                   to be issued upon           Weighted-average             issuance under equity
                                exercise of outstanding        exercise price of         compensation plans (excluding
                                 options, warrants and       outstanding options,         securities reflected in the
Plan category                           rights                warrants and rights                first column)
-------------                  --------------------------  -------------------------  ---------------------------------
Equity compensation plans
 approved by security
 holders                                   -                         -                              -


Equity compensation plans
 not approved by security
 holders (1)                           704,100                     $18.20                        645,900 (2)
                               --------------------------    ----------------------    ---------------------------------
Total                                  704,100                     $18.20                        645,900
                               ==========================    ======================    =================================
<FN>
     (1) The  Ferrellgas  Unit  Option  Plan  did not  require  approval  by the
     security holders.

     (2) This number may be increased upon the occurrence of particular  events.
     See narrative below.
</FN>
</TABLE>


     The Second Amended and Restated  Ferrellgas  Unit Option Plan was initially
adopted by the Board of Directors of our general partner and became effective in
August 1994 and was  subsequently  amended  effective March 1995 and April 2001.
The plan is intended  to meet the  requirements  of the New York Stock  Exchange
equity  holder  approval  policy for  option  plans not  approved  by the equity
holders of a company,  and thus  approval of the plan by our common  unitholders
was not required.

     The purpose of the plan is to encourage  selected  employees of our general
partner to:

o    develop a proprietary interest in our growth and performance;

o    generate an increased  incentive to  contribute  to our future  success and
     prosperity,  thus  enhancing  our  value  for  the  benefit  of our  common
     unitholders; and

o    enhance our ability to attract and retain key individuals who are essential
     to our progress, growth and profitability,  by giving these individuals the
     opportunity to acquire our common units.

     The plan is to be administered  either by an option  committee of the Board
of our general  partner that is composed of not less than two  directors who are
"non-employee directors" within the meaning of Rule 16b-3 of the Exchange Act or
by  the  Board  itself.  The  Board,  which  currently  has  five  "non-employee
directors,"  has not yet  designated  such an  option  committee  and  therefore
currently  administers  the plan.  The Board has however  designated an employee
committee to recommend to it at various times  throughout the year the number of
unit options to be granted and to whom such unit options should be granted.  The
Board then votes upon such recommendations.

     Subject to the terms of the plan and applicable law, the  administrator  of
the plan has the sole power, authority and discretion to:

o    designate the employees who are to be participants in the plan;

o    determine the number of unit options to be granted to an employee;

o    determine the terms and conditions of any unit option;

                                       63
<PAGE>

o    interpret, construe and administer the plan and any instrument or agreement
     relating to a unit option granted under the plan;

o    establish,  amend, suspend, or waive such rules and regulations and appoint
     such agents as it deems  appropriate for the proper  administration  of the
     plan;

o    make a  determination  as to the right of any person to receive  payment of
     (or with respect to) a unit option; and

o    make  any  other  determinations  and  take  any  other  actions  that  the
     administrator  deems necessary or desirable for the  administration  of the
     plan.

     Generally,  all of the  directors,  officers,  and other  employees  of our
general  partner,  or an  affiliate  of our general  partner,  are  eligible for
participation  in the  plan.  Grants  to a member  of the  Board  or the  option
committee are permitted  provided that the grantee  recuses  themselves from the
vote relating to such unit option grant. Grants may be made to the same employee
on more than one  occasion  and the terms and  provisions  of grants to the same
employee or to different employees need not be the same. The plan allows for the
granting of only  non-qualified  unit  options and in no event shall the term of
any unit  option  exceed a period of ten years from the date of its grant.  Unit
options,  to the extent vested as of the date the holder thereof ceases to be an
employee  of our  general  partner  or one of its  affiliates,  will  remain the
property of the holder  until the unit  options are  exercised  or expire.  Unit
options,  to the extent  not  vested as of the date the  holder  ceases to be an
employee, are automatically  canceled. Unit options or rights thereunder are not
assignable,  alienable,  saleable or transferable by a holder  otherwise than by
will or by the laws of descent and  distribution.  It is intended  that the plan
and any unit option  granted to a person  subject to Section 16 of the  Exchange
Act meet all of the requirements of Rule 16b-3 of the Exchange Act.

     To comply with the rules of the New York Stock Exchange,  no single officer
or director  may  acquire  under the plan more than  314,895  common  units.  In
addition, all common units available for issuance under this plan, together with
any common units  available for issuance under any other employee  benefit plan,
of which there are currently none, shall not exceed 1,574,475 common units.

     Although the number of unit options currently  available for issuance under
the plan is limited to  1,350,000,  under  particular  circumstances  that would
result in a significant  dilution of the rights of the participants in the plan,
the  administrator of the plan may make  appropriate  adjustments in the maximum
number of common  units  issuable  under the plan to reflect  the effect of such
circumstance and may make appropriate  adjustments to the number of common units
subject to, and/or the exercise price of, each outstanding unit option.

     The  administrator  of the plan has the discretion to cancel all or part of
any outstanding unit options at any time. Upon any such cancellation we will pay
to the holder with respect to each cancelled unit option an amount in cash equal
to the excess,  if any, of (i) the fair market  value of a common  unit,  at the
effective date of such  cancellation,  over (ii) the unit option exercise price.
In addition,  the  administrator has the right to alter or amend the plan or any
part thereof from time to time;  provided,  however,  that no change in any unit
option  already  granted may be made which would impair the rights of the holder
thereof  without the consent of the holder.  The  administrator  may also in its
discretion  terminate  the plan at any time with respect to any common units for
which a unit  option  has not yet  been  granted.  There is  currently  no fixed
termination date for the plan. If a plan for our complete dissolution is adopted
or our  unitholders  approve an agreement for our sale or  disposition of all or
substantially  all of our assets,  then upon such  adoption or approval all or a
portion, in the sole discretion of the administrator, of a holder's unit options
outstanding as of the date of that adoption or approval shall be immediately and
fully vested and exercisable and may be exercised  within one year from the date
of that adoption or approval.

                                       64
<PAGE>


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Set  forth  below  is  a  discussion  of  certain   relationships   and  related
transactions among our affiliates.

     We have no employees and are managed and controlled by our general partner.
Pursuant to our partnership agreement, our general partner is reimbursed for all
direct and indirect  expenses  incurred or payments made on our behalf,  and all
other necessary or appropriate  expenses allocable to us or otherwise reasonably
incurred by our general partner in connection with operating our business. These
costs,  which totaled $201.3  million for the year ended July 31, 2003,  include
compensation  and benefits paid to employees of our general  partner who perform
services  on our  behalf  and  related  general  and  administrative  costs.  In
addition, the conveyance of the net assets of our general partner to us upon our
formation  included the assumption of specific  liabilities  related to employee
benefit and incentive plans for the benefit of the officers and employees of our
general partner who perform  services on our behalf,  as well as related general
and administrative costs.

     The Chairman, Chief Executive Officer and President of our general partner,
James E. Ferrell,  beneficially owns all of our outstanding senior units at July
31,  2003.  During  fiscal  2003,  we paid JEF  Capital  Management,  an  entity
beneficially  owned by Mr.  Ferrell,  $31.5 million to redeem 0.8 million senior
units and $11.6  million in senior unit  distributions.  As of July 31, 2003, we
had recognized a liability for the senior unit distribution of $2.0 million that
was paid to JEF Capital Management on September 12, 2003.

     Ferrell  International  Limited and FI Trading, Inc. are beneficially owned
by James  E.  Ferrell  and thus are our  affiliates.  We  entered  into  certain
forward,  option and swap  contracts  with these  affiliates as  counterparties.
These  contracts are entered into  according to an affiliate  trading  policy as
approved  by the  Board  of  Directors  of our  general  partner.  All of  these
contracts are reviewed for compliance with the policy.  In connection with these
risk  management  transactions,  we  recognized  net  disbursements  from sales,
purchases and commodity  derivative  transactions of $(0.2) million for the year
ended  July  31,  2003.  The  net  sales,  purchases  and  commodity  derivative
transactions with Ferrell International Limited and FI Trading are classified as
cost of product sold. There were no amounts due to or from Ferrell International
Limited or FI Trading at July 31, 2003.

     During fiscal 2003, three of our executive  officers  exercised  Ferrellgas
unit options.  See "Executive  Compensation - Aggregated  Ferrellgas Unit Option
Exercises  in Last Fiscal Year and Fiscal  Year-end  Option  Values" for details
about these transactions.

     During the year ended July 31, 2003,  Ferrellgas  Partners made common unit
distributions  to Ferrell  Companies and Ferrell  Propane of $35.6 million,  and
$0.1 million, respectively. It also made distributions to our general partner of
$0.1 million.

     During the year ended July 31, 2003, the operating partnership made limited
partner distributions to Ferrellgas Partners of $101.2 million and distributions
to our general partner of $1.0 million.

     We believe these related party  transactions  were under terms that were no
less favorable to us than those available with third parties.

     See  Note M -  Transactions  with  related  parties  - to our  consolidated
financial  statements  for  discussion of  transactions  involving  acquisitions
related to Ferrellgas, Inc. and us.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     Principal  Accountant Fees and Services disclosure is effective for filings
related to fiscal  years ending after  December 15, 2003,  and  therefore is not
applicable to this filing.

                                       65
<PAGE>


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
              FORM 8-K.

     (a) 1.   Financial Statements.
              See "Index to Financial Statements" set forth on page F-1.

         2.   Financial Statement Schedules.
              See "Index to Financial Statement Schedules" set forth on page
              S-1.

         3.   Exhibits.
              See "Index to Exhibits" set forth on page E-1.

     (b) Reports on Form 8-K.

We filed three Form 8-K's during the fiscal quarter ended July 31, 2003.

                      Items
Date of Report        Reported      Financial Statements Filed
--------------        --------      --------------------------
May 6, 2003             5, 7        Unaudited interim balance sheets
                                    and footnotes of Ferrellgas, Inc.

June 27, 2003           5, 7        None

July 3, 2003            5, 7        None

We furnished two Form 8-K's during the fiscal quarter ended July 31, 2003.

                      Items
Date of Report        Reported      Financial Statements Filed
--------------        --------      --------------------------
May 21, 2003            9           None
May 29, 2003            7, 9        None

                                       66
<PAGE>



                               INDEX TO EXHIBITS

     The exhibits  listed below are filed as part of this Annual  Report on Form
10-K.  Exhibits  required by Item 601 of Regulation S-K of the  Securities  Act,
which are not listed, are not applicable.

  Exhibit
  Number    Description
  ------    -----------
   3.1      Fourth Amended and Restated Agreement of Limited Partnership of
            Ferrellgas Partners, L.P., dated as of February 18, 2003.
            Incorporated by reference to Exhibit 4.3 to our Current Report on
            Form 8-K filed February 18, 2003.


   3.2      Certificate of Incorporation for Ferrellgas Partners Finance Corp.
            Incorporated by reference to the same numbered Exhibit to our
            Quarterly Report on Form 10-Q filed June 13, 1997.


   3.3      Bylaws of Ferrellgas Partners Finance Corp. Incorporated by
            reference to the same numbered Exhibit to our Quarterly Report on
            Form 10-Q filed June 13, 1997.

   3.4      Second Amended and Restated Agreement of Limited Partnership of
            Ferrellgas, L.P., dated as of October 14, 1998. Incorporated by
            reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed
            March 17, 1999.

   3.5      First Amendment to the Second Amended and Restated Agreement of
            Limited Partnership of Ferrellgas, L.P. Incorporated by reference to
            Exhibit 10.2 to our Quarterly Report on Form 10-Q filed
            June 14, 2000.

   3.6      Certificate of Incorporation of Ferrellgas Finance Corp.
            Incorporated by reference to Exhibit 4.1 to the Current Report on
            Form 8-K of Ferrellgas Partners, L.P. filed February 18, 2003.

   3.7      Bylaws of Ferrellgas Finance Corp.  Incorporated by reference to
            Exhibit 4.2 to the Current Report on Form 8-K of Ferrellgas
            Partners, L.P. filed February 18, 2003.


   4.1      Specimen Certificate evidencing Common Units representing Limited
            Partner Interests (contained in Exhibit 3.1 hereto as Exhibit A
            thereto).


   4.2      Indenture, dated as of September 24, 2002, with form of Note
            attached, among Ferrellgas Partners, L.P., Ferrellgas Partners
            Finance Corp., and U.S. Bank National Association, as trustee,
            relating to 8 3/4% Senior Notes due 2012. Incorporated by reference
            to Exhibit 4.1 to our Current Report on Form 8-K filed
            September 24, 2002.


<PAGE>


  Exhibit
  Number    Description
  -------   -----------
   4.3      Ferrellgas, L.P., Note Purchase Agreement, dated as of July 1, 1998,
            relating to: $109,000,000 6.99% Senior Notes, Series A, due
            August 1, 2005, $37,000,000 7.08% Senior Notes, Series B, due
            August 1, 2006, $52,000,000 7.12% Senior Notes, Series C, due
            August 1, 2008, $82,000,000 7.24% Senior Notes, Series D, due
            August 1, 2010, and $70,000,000 7.42% Senior Notes, Series E, due
            August 1, 2013.  Incorporated by reference to Exhibit 4.4 to our
            Annual Report on Form 10-K filed October 29, 1998.


   4.4      Ferrellgas, L.P., Note Purchase Agreement, dated as of February 28,
            2000, relating to: $21,000,000 8.68% Senior Notes, Series A, due
            August 1, 2006, $70,000,000 8.78% Senior Notes, Series B, due
            August 1, 2007, and $93,000,000 8.87% Senior Notes, Series C, due
            August 1, 2009.  Incorporated by reference to Exhibit 4.2 to our
            Quarterly Report on Form 10-Q filed March 16, 2000.

   4.5      Registration Rights Agreement, dated as of December 17, 1999, by and
            between Ferrellgas Partners, L.P. and Williams Natural Gas Liquids,
            Inc. Incorporated by reference to Exhibit 4.2 to our Current Report
            on Form 8-K filed December 29, 2000.

   4.6      First Amendment to the Registration Rights Agreement, dated as of
            March 14, 2000, by and between Ferrellgas Partners, L.P. and
            Williams Natural Gas Liquids, Inc. Incorporated by reference to
            Exhibit 4.1 to our Quarterly Report on Form 10-Q filed
            March 16, 2000.

   4.7      Second Amendment to the Registration Rights Agreement, dated as of
            April 6, 2001, by and between Ferrellgas Partners, L.P. and The
            Williams Companies, Inc. Incorporated by reference to Exhibit 10.3
            to our Current Report on Form 8-K filed April 6, 2001.

   4.8      Representations Agreement, dated as of December 17, 1999, by and
            among Ferrellgas Partners, L.P., Ferrellgas, Inc., Ferrellgas, L.P.
            and Williams Natural Gas Liquids, Inc. Incorporated by reference to
            Exhibit 2.3 to our Current Report on Form 8-K filed
            December 29, 1999.

   4.9      First Amendment to Representations Agreement, dated as of
            April 6, 2001, by and among Ferrellgas Partners, L.P., Ferrellgas,
            Inc., Ferrellgas, L.P. and The Williams Companies, Inc. Incorporated
            by reference to Exhibit 10.2 to our Current Report on Form 8-K filed
            April 6, 2001.

  10.1      Fourth Amended and Restated Credit Agreement, dated as of
            December 10, 2002, by and among Ferrellgas, L.P., Ferrellgas, Inc.,
            Bank of America National Trust and Savings Association, as agent,
            and the other financial institutions party. Incorporated by
            reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed
            December 11, 2002.

<PAGE>


  Exhibit
  Number    Description
  -------   -----------
  10.2      Receivable Interest Sale Agreement, dated as of September 26, 2000,
            by and between Ferrellgas, L.P., as originator, and Ferrellgas
            Receivables, L.L.C., as buyer.  Incorporated by reference to Exhibit
            10.17 to our Annual Report on Form 10-K filed October 26, 2000.

  10.3      First Amendment to the Receivable Interest Sale Agreement dated as
            of January 17, 2001, by and between Ferrellgas, L.P., as originator,
            and Ferrellgas Receivables, L.L.C., as buyer. Incorporated by
            reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q filed
            March 14, 2001.

  10.4      Receivables Purchase Agreement, dated as of September 26, 2000, by
            and among Ferrellgas Receivables, L.L.C., as seller, Ferrellgas,
            L.P., as servicer, Jupiter Securitization Corporation, the financial
            institutions from time to time party hereto, and Bank One, NA, main
            office Chicago, as agent. Incorporated by reference to Exhibit 10.18
            to our Annual Report on Form 10-K filed October 26, 2000.

  10.5      First Amendment to the Receivables Purchase Agreement, dated as of
            January 17, 2001, by and among Ferrellgas Receivables, L.L.C., as
            seller, Ferrellgas, L.P., as servicer, Jupiter Securitization
            Corporation, the financial institutions from time to time party
            hereto, and Bank One, N.A., main office Chicago, as agent.
            Incorporated by reference to Exhibit 10.4 to our Quarterly Report on
            Form 10-Q filed March 14, 2001.

  10.6      Second Amendment to the Receivables Purchase Agreement dated as of
            September 25, 2001, by and among Ferrellgas Receivables, L.L.C., as
            seller, Ferrellgas, L.P., as servicer, Jupiter Securitization
            Corporation, the financial institutions from time to time party
            hereto, and Bank One, N.A., main office Chicago, as agent.
            Incorporated by reference to Exhibit 10.29 to our Annual Report on
            Form 10-K filed October 25, 2001.

  10.7      Third Amendment to the Receivables Purchase Agreement, dated as of
            September 24, 2002, by and among Ferrellgas Receivables, L.L.C., as
            seller, Ferrellgas, L.P., as servicer, Jupiter Securitization
            Corporation, the financial institutions from time to time party
            hereto, and Bank One, NA, main office Chicago, as agent.


 *10.8      Fourth Amendment to the Receivables Purchase Agreement, dated as of
            September 23, 2003, by and among Ferrellgas Receivables, L.L.C., as
            seller, Ferrellgas, L.P., as servicer, Jupiter Securitization
            Corporation, the financial institutions from time to time party
            hereto, and Bank One, NA, main office Chicago, as agent.

  10.9      Purchase Agreement, dated as of November 7, 1999, by and among
            Ferrellgas Partners, L.P., Ferrellgas, L.P. and Williams Natural Gas
            Liquids, Inc. Incorporated by reference to Exhibit 99.1 to our
            Current Report on Form 8-K filed November 12, 1999.

  10.10     First Amendment to Purchase Agreement, dated as of
            December 17, 1999, by and among Ferrellgas Partners, L.P.,
            Ferrellgas, L.P., and Williams Natural Gas Liquids, Inc.
            Incorporated by reference to Exhibit 2.2 to our Current Report on
            Form 8-K filed December 29, 1999.

<PAGE>


  Exhibit
  Number    Description
  -------   -----------
  10.11     Second Amendment to Purchase Agreement, dated as of March 14, 2000,
            by and among Ferrellgas Partners, L.P., Ferrellgas L.P., and
            Williams Natural Gas Liquids, Inc. Incorporated by reference to
            Exhibit 2.1 to our Quarterly Report on Form 10-Q filed
            March 16, 2000.

  10.12     Third Amendment to Purchase Agreement dated as of April 6, 2001, by
            and among Ferrellgas Partners, L.P., Ferrellgas L.P. and The
            Williams Companies, Inc.  Incorporated by reference to Exhibit 10.1
            to our Current Report on Form 8-K filed April 6, 2001.

 #10.13     Ferrell Companies, Inc. Supplemental Savings Plan, restated
            January 1, 2000.  Incorporated by reference to Exhibit 99.1 to our
            Current Report on Form 8-K filed February 18, 2003.


 #10.14     Second Amended and Restated Ferrellgas Unit Option Plan.
            Incorporated by reference to Exhibit 10.1 to our Current Report on
            Form 8-K filed June 5, 2001.

 #10.15     Ferrell Companies, Inc. 1998 Incentive Compensation Plan -
            Incorporated by reference to Exhibit 10.12 to our Annual Report on
            Form 10-K filed October 29, 1998.

 #10.16     Employment agreement between James E. Ferrell and Ferrellgas, Inc.,
            dated July 31, 1998. Incorporated by reference to Exhibit 10.13 to
            our Annual Report on Form 10-K filed October 29, 1998.


 #10.17     Employment agreement between Patrick Chesterman and Ferrellgas, Inc.
            dated July 31, 2000. Incorporated by reference to Exhibit 10.19 to
            our Annual Report on Form 10-K filed October 26, 2000.


 #10.18     Employment agreement between Kevin Kelly and Ferrellgas, Inc. dated
            July 31, 2000.  Incorporated by reference to Exhibit 10.22 to our
            Annual Report on Form 10-K filed October 26, 2000.


 *21.1      List of subsidiaries of Ferrellgas Partners, L.P. and
            Ferrellgas, L.P..


 *23.1      Consent of Deloitte & Touche, LLP, independent auditors for the
            certain use of its report appearing in the Annual Report on
            Form 10-K of Ferrellgas Partners, L.P. for the year ended July 31,
            2003.

 *23.2      Consent of Deloitte & Touche, LLP, independent auditors for the
            certain use of its report appearing in the Annual Report on
            Form 10-K of Ferrellgas Partners Finance Corp. for the year ended
            July 31, 2003.

 *23.3      Consent of Deloitte & Touche, LLP, independent auditors for the
            certain use of its report appearing in the Annual Report on
            Form 10-K of Ferrellgas, L.P.for the year ended July 31, 2003.

 *23.4      Consent of Deloitte & Touche, LLP, independent auditors for the
            certain use of its report appearing in the Annual Report on
            Form 10-K of Ferrellgas Finance Corp. for the year ended July 31,
            2003.

 *31.1      Certification of Ferrellgas Partners, L.P. pursuant to Rule 13a-14
            (a) or Rule 15d-14(a) of the Exchange Act.

 *31.2      Certification of Ferrellgas Partners Finance Corp. pursuant to Rule
            13a-14(a) or Rule 15d-14(a) of the Exchange Act.

 *31.3      Certification of Ferrellgas, L.P. pursuant to Rule 13a-14(a) or
            Rule 15d-14(a) of the Exchange Act.

<PAGE>


  Exhibit
  Number    Description
  -------   -----------
 *31.4      Certification of Ferrellgas Finance Corp. pursuant to Rule 13a-14(a)
            or Rule 15d-14(a) of the Exchange Act.

 *32.1      Certification of Ferrellgas Partners, L.P. pursuant to 18 U.S.C.
            Section 1350.

 *32.2      Certification of Ferrellgas Partners Finance Corp. pursuant to 18
            U.S.C. Section 1350.

 *32.3      Certification of Ferrellgas, L.P. pursuant to 18 U.S.C. Section
            1350.

 *32.4      Certification of Ferrellgas Finance Corp. pursuant to 18 U.S.C.
            Section 1350.

--------------------------------------------------------------------------------
      *     Filed herewith
      #     Management contracts or compensatory plans.



<PAGE>


                                 SIGNATURES


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


                                          FERRELLGAS PARTNERS, L.P.

                                          By Ferrellgas, Inc. (General Partner)




                                                By /s/ James. E. Ferrell
                                                --------------------------------
                                                James E. Ferrell
                                                Chairman, President and
                                                Chief Executive Officer




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

<TABLE>
<S>                                                  <C>                                           <C>
                  Signature                                   Title                                   Date

/s/ James. E. Ferrell                                Chairman, President and                       10/20/03
--------------------------------------------         Chief Executive Officer
  James E. Ferrell                                   (Principal Executive Officer)


/s/ William K. Hoskins                               Director                                      10/20/03
--------------------------------------------
  William K. Hoskins

/s/ A. Andrew Levison                                Director                                      10/20/03
--------------------------------------------
  A. Andrew Levison

/s/ John R. Lowden                                   Director                                      10/20/03
--------------------------------------------
  John R. Lowden

/s/ Michael F. Morrissey                             Director                                      10/20/03
--------------------------------------------
  Michael F. Morrissey

/s/ Elizabeth T. Solberg                             Director                                      10/20/03
--------------------------------------------
  Elizabeth T. Solberg

/s/ Kevin T. Kelly                                   Senior Vice President and Chief               10/20/03
--------------------------------------------         Financial Officer (Principal
  Kevin T. Kelly                                     Financial and Accounting Officer)

</TABLE>



<PAGE>


                                   SIGNATURES


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


                                           FERRELLGAS PARTNERS FINANCE CORP.




                                           By /s/ James. E. Ferrell
                                           -------------------------------------
                                           James E. Ferrell
                                           President and Chief Executive Officer



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

<TABLE>
<S>                                                  <C>                                           <C>
                  Signature                                   Title                                   Date

/s/ James. E. Ferrell                                President and Chief Executive                 10/20/03
--------------------------------------------         Officer (Principal Executive Officer)
  James E. Ferrell






/s/ Kevin T. Kelly                                   Senior Vice President,                        10/20/03
--------------------------------------------         Chief Financial Officer and
  Kevin T. Kelly                                     sole director(Principal Financial
                                                     and Accounting Officer)
</TABLE>





Supplemental Information to be Furnished With Reports Filed Pursuant to Section
  15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
                            to Section 12 of the Act


     Ferrellgas Partners Finance Corp. has not registered securities pursuant to
Section 12 of the Securities Act and files reports  pursuant to Section 15(d) of
the Securities Act. As of the date of filing of this Annual Report on Form 10-K,
no  annual  report  or  proxy  material  has  been  sent to the  holders  of the
securities of Ferrellgas Partners Finance Corp.,  however, a copy of this Annual
Report will be furnished to the holders of the securities of Ferrellgas Partners
Finance Corp. subsequent to the date of filing of this Annual Report.




<PAGE>



                                   SIGNATURES


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


                                           FERRELLGAS, L.P.

                                           By Ferrellgas, Inc. (General Partner)




                                           By /s/ James. E. Ferrell
                                           -------------------------------------
                                           James E. Ferrell
                                           Chairman, President and
                                           Chief Executive Officer




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

<TABLE>
<S>                                                  <C>                                  <C>
                  Signature                                   Title                                   Date




/s/ James. E. Ferrell                                Chairman, President and                       10/20/03
--------------------------------------------         Chief Executive Officer
  James E. Ferrell                                   (Principal Executive Officer)


/s/ William K. Hoskins                               Director                                      10/20/03
--------------------------------------------
  William K. Hoskins

/s/ A. Andrew Levison                                Director                                      10/20/03
--------------------------------------------
  A. Andrew Levison

/s/ John R. Lowden                                   Director                                      10/20/03
--------------------------------------------
  John R. Lowden

/s/ Michael F. Morrissey                             Director                                      10/20/03
--------------------------------------------
  Michael F. Morrissey

/s/ Elizabeth T. Solberg                             Director                                      10/20/03
--------------------------------------------
  Elizabeth T. Solberg

/s/ Kevin T. Kelly                                   Senior Vice President and Chief               10/20/03
--------------------------------------------         Financial Officer (Principal
  Kevin T. Kelly                                     Financial and Accounting Officer)
</TABLE>




<PAGE>


                                                    SIGNATURES


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


                                           FERRELLGAS FINANCE CORP.




                                           By /s/ James. E. Ferrell
                                           -------------------------------------
                                           James E. Ferrell
                                           President and Chief Executive Officer



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

<TABLE>
<S>                                                  <C>                                           <C>
                  Signature                                   Title                                   Date




/s/ James. E. Ferrell                                President and,                                10/20/03
--------------------------------------------         Chief Executive Officer (Principal
  James E. Ferrell                                   Executive Officer)







/s/ Kevin T. Kelly                                   Senior Vice President,                        10/20/03
--------------------------------------------         Chief Financial Officer and
  Kevin T. Kelly                                     sole director (Principal Financial
                                                     and Accounting Officer)

</TABLE>


<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                          Page
                                                                          ----
Ferrellgas Partners, L.P. and Subsidiaries
   Independent Auditors' Report............................................F-2
   Consolidated Balance Sheets - July 31, 2003 and 2002....................F-3
   Consolidated Statements of Earnings - Years ended
       July 31, 2003, 2002 and 2001........................................F-4
   Consolidated Statements of Partners' Capital - Years
       ended July 31, 2003, 2002 and 2001................................. F-5
   Consolidated Statements of Cash Flows - Years ended
       July 31, 2003, 2002 and 2001........................................F-6
   Notes to Consolidated Financial Statements..............................F-7


Ferrellgas Partners Finance Corp.
   Independent Auditors' Report............................................F-33
   Balance Sheets - July 31, 2003 and 2002.................................F-34
   Statements of Earnings - Years ended July 31, 2003,
       2002 and 2001.......................................................F-35
   Statements of Stockholder's Equity - Years ended
       July 31, 2003, 2002 and 2001........................................F-36
   Statements of Cash Flows - Years ended July 31,
       2003, 2002 and 2001.................................................F-37
   Notes to Financial Statements...........................................F-38



Ferrellgas, L.P. and Subsidiaries
   Independent Auditors' Report............................................F-39
   Consolidated Balance Sheets - July 31, 2003
       and 2002............................................................F-40
   Consolidated Statements of Earnings - Years
       ended July 31, 2003, 2002 and 2001..................................F-41
   Consolidated Statements of Partners' Capital -
       Years ended July 31, 2003, 2002 and 2001........................... F-42
   Consolidated Statements of Cash Flows - Years
       ended July 31, 2003, 2002 and 2001..................................F-43
   Notes to Consolidated Financial Statements..............................F-44


Ferrellgas Finance Corp.
   Independent Auditors' Report............................................F-64
   Balance Sheet - July 31, 2003...........................................F-65
   Statement of Earnings - From inception until
       July 31, 2003.......................................................F-66
   Statement of Stockholder's Equity - From
       inception until July 31, 2003.......................................F-67
   Statement of Cash Flows - From inception until
       July 31, 2003.......................................................F-68
   Notes to Financial Statements...........................................F-69


                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri

We have  audited the  accompanying  consolidated  balance  sheets of  Ferrellgas
Partners,  L.P. and  subsidiaries  (the  "Partnership")  as of July 31, 2003 and
2002, and the related consolidated statements of earnings, partners' capital and
cash flows for each of the three years in the period ended July 31, 2003.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of Ferrellgas  Partners,  L.P. and
subsidiaries  as of July 31, 2003 and 2002, and the results of their  operations
and their  cash flows for each of the three  years in the period  ended July 31,
2003, in conformity with accounting  principles generally accepted in the United
States of America.

As discussed in Notes B(19) and I to the consolidated financial statements,  the
Partnership  changed its method of accounting for asset  retirement  obligations
with the  adoption of  Statement  of  Financial  Accounting  Standards  No. 143,
"Accounting for Asset Retirement Obligations",  in fiscal 2003 and, as discussed
in Notes B(8) and F to the consolidated financial statements, changed its method
of  accounting  for  goodwill and other  intangible  assets with the adoption of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
in fiscal 2002.




DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003






                                      F-2
<PAGE>


                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except unit data)
<TABLE>
<S>                                                                        <C>              <C>
                                                                                       July 31,
                                                                           -------------------------------
ASSETS                                                                          2003             2002
----------------------------------------------------------------------     --------------   --------------

Current assets:
  Cash and cash equivalents                                                  $   11,154       $   19,781
  Accounts and notes receivable (net of
    allowance for doubtful accounts of $2,672 and
    $1,467 in 2003 and 2002, respectively)                                       56,742           74,274
  Inventories                                                                    69,077           48,034
  Prepaid expenses and other current assets                                       8,306           10,724
                                                                           --------------   --------------
Total current assets                                                            145,279          152,813

Property, plant and equipment, net                                              684,917          506,531
Goodwill                                                                        124,190          124,190
Intangible assets, net                                                           98,157           98,170
Other assets                                                                      8,853            3,424
                                                                           --------------   --------------
    Total assets                                                             $1,061,396       $  885,128
                                                                           ==============   ==============




LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------------------------
Current liabilities:
  Accounts payable                                                           $   59,454       $   54,316
  Other current liabilities                                                      89,687           89,061
                                                                           --------------   --------------
    Total current liabilities                                                   149,141          143,377

Long-term debt                                                                  888,226          703,858
Other liabilities                                                                18,747           14,861
Contingencies and commitments (Note N)                                            -                -
Minority interest                                                                 2,363            1,871

Partners' capital:
  Senior unitholder (1,994,146 and 2,782,211 units outstanding
    at 2003 and 2002, respectively - liquidation preference                      79,766          111,288
    $79,766 and $111,288, respectively)
  Common unitholders (37,673,455 and 36,081,203 units
    outstanding in 2003 and 2002, respectively)                                 (15,602)         (28,320)
  General partner (400,683 and 392,556 units outstanding at
   2003 and 2002, respectively)                                                 (59,277)         (59,035)
  Accumulated other comprehensive loss                                           (1,968)          (2,772)
                                                                           --------------   --------------
    Total partners' capital                                                       2,919           21,161
                                                                           --------------   --------------
    Total liabilities and partners' capital                                  $1,061,396       $  885,128
                                                                           ==============   ==============
</TABLE>

                 See notes to consolidated financial statements.

                                       F-3
<PAGE>



                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (in thousands, except per unit data)
<TABLE>
<S>                                                   <C>           <C>           <C>
                                                           For the year ended July 31,
                                                      --------------------------------------
                                                         2003          2002          2001
                                                      ----------    ----------    ----------

Revenues:
  Propane and other gas liquids sales                 $1,136,358    $  953,117    $1,381,940
  Other                                                   85,281        81,679        86,730
                                                      ----------    ----------    ----------
    Total revenues                                     1,221,639     1,034,796     1,468,670

Cost of product sold (exclusive of
  depreciation, shown with amortization below)           690,969       533,437       930,117
                                                      ----------    ----------    ----------

Gross profit                                             530,670       501,359       538,553

Operating expense                                        297,970       279,624       288,258
Depreciation and amortization expense                     40,779        41,937        56,523
General and administrative expense                        28,024        27,157        25,508
Equipment lease expense                                   20,640        24,551        30,986
Employee stock ownership plan compensation charge          6,778         5,218         4,843
Loss on disposal of assets and other                       6,679         3,957         5,744
                                                      ----------    ----------    ----------

Operating income                                         129,800       118,915       126,691

Interest expense                                         (63,665)      (59,608)      (61,544)
Interest income                                            1,291         1,423         3,027
Early extinguishment of debt expense                      (7,052)         -             -
Other charges                                               -             -           (3,277)
                                                      ----------    ----------    ----------

Earnings before minority interest and cumulative
   effect of change in accounting principle               60,374        60,730        64,897

Minority interest                                            871           771           829
                                                      ----------    ----------    ----------

Earnings before cumulative effect of change in
   accounting principle                                   59,503        59,959        64,068

Cumulative effect of change in accounting principle,
   net of minority interest of $28                        (2,754)         -             -
                                                      ----------    ----------    ----------

Net earnings                                              56,749        59,959        64,068

Distribution to senior unitholder                         10,771        11,172        18,013
Net earnings available to general partner                    460           488           461
                                                      ----------    ----------    ----------
Net earnings available to common unitholders          $   45,518    $   48,299    $   45,594
                                                      ==========    ==========    ==========

Basic & diluted earnings per common unit
Net earnings available to common unitholders before
  cumulative effect of change in accounting principle $     1.33    $     1.34    $     1.43
Cumulative effect of change in accounting principle        (0.08)            -             -
                                                      ----------    ----------    ----------
Net earnings available to common unitholders          $     1.25    $     1.34    $     1.43
                                                      ==========    ==========    ==========
</TABLE>



                 See notes to consolidated financial statements.

                                       F-4
<PAGE>



                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (in thousands)
<TABLE>
<S>                      <C>         <C>          <C>         <C>         <C>         <C>         <C>         <C>        <C>
                                                                                                           Accumulated other
                                   Number of units                                                       comprehensive loss
                         -----------------------------------                                      --------------------------------
                                                    General                            General                             Total
                           Senior      Common       partner     Senior      Common     partner      Risk       Pension   partners'
                         unitholder  unitholders  unitholder  unitholder  unitholders unitholder  management  liability   capital
                         ----------  -----------  ----------  ----------  ----------  ----------  ----------  ---------  ---------
August 1, 2000              4,652.7    31,307.1      363.2    $179,786    $(80,931)   $(58,511)    $  -        $  -      $ 40,344

 Accretion of discount
   on senior units            -           -            -         6,321      (6,258)        (63)       -           -          -

 Contribution in connection
  with ESOP compensation
  charge                      -           -            -          -          4,745          48        -           -         4,793

 Common unit cash
  distributions               -           -            -          -        (62,645)       (632)       -           -       (63,277)

 Senior unit paid in kind
  distributions             235.5                      2.4       9,422      (9,328)        (94)       -           -          -

 Senior unit cash and
  accrued distributions       -           -            -           -        (8,535)       (144)       -           -        (8,679)

 Common unit options
  exercised                   -           101.3        1.0         -         1,701          17        -           -         1,718

 Common unit offering, net    -         4,500.0       45.5         -        84,865          -         -           -        84,865

 Redemption of
  senior units             (2,086.6)      -           (21.1)   (83,464)        -            -         -           -       (83,464)

 Comprehensive income:
   Net earnings               -           -            -           -        63,427         641        -           -        64,068
   Other comprehensive income:
     Cumulative effect of
       accounting change      -           -            -           -           -            -        709          -
      Net gains on risk
       management derivatives -           -            -           -           -            -      2,708          -
      Reclassification of net
       gains on derivatives   -           -            -           -           -            -     (2,997)         -
     Reclassification
       adjustments            -           -            -           -           -            -       (709)         -
     Pension liability
       adjustment             -           -            -           -           -            -         -        (2,092)     (2,381)
                                                                                                                         ---------
 Comprehensive income                                                                                                      61,687

                         ----------  -----------  ----------  ----------  ----------  ----------  ----------  ---------  ---------
July 31, 2001               2,801.6    35,908.4      391.0     112,065     (12,959)    (58,738)     (289)      (2,092)     37,987

 Contribution in connection
  with ESOP compensation
  charge                      -           -            -           -         5,114          51        -           -         5,165

 Common unit cash
  distributions-              -           -            -           -       (72,044)       (727)       -           -       (72,771)

 Senior unit cash and
  accrued distributions       -           -            -           -       (11,030)        (253)      -           -       (11,283)

 Redemption of
  senior units              (19.4)        -           (0.2)       (777)        -            -         -           -          (777)

 Common unit options
  exercised                   -         55.3           0.6         -           930           9        -           -           939

 Common units issued in
  connection with
  acquisitions                -        117.5           1.2         -         2,310          23        -           -         2,333

 Comprehensive income:
   Net earnings               -           -            -           -        59,359         600        -           -        59,959
   Other comprehensive income:
     Net losses on risk
       management derivative  -           -            -           -           -            -       (379)         -
     Reclassification of net
       losses on derivatives  -           -            -           -           -            -        515          -
     Pension liability
       adjustment             -           -            -           -           -            -         -         (527)        (391)
                                                                                                                         ---------
    Comprehensive income                                                                                                   59,568

                         ----------  -----------  ----------  ----------  ----------  ----------  ----------  ---------  ---------
July 31, 2002               2,782.2    36,081.2      392.6     111,288     (28,320)    (59,035)     (153)     (2,619)      21,161

 Contribution in connection
  with ESOP compensation
  charge                      -           -            -           -         6,643          67        -           -         6,710

 Common unit cash
  distributions               -           -            -           -       (72,322)       (731)       -           -       (73,053)

 Senior unit cash and
  accrued distributions       -           -            -           -       (10,665)       (215)       -           -       (10,880)

 Redemption of
  senior units              (788.1)       -           (8.0)    (31,522)        -            -         -           -       (31,522)

 Common unit offering, net    -        1,214.6        12.3         -        26,028          -         -           -        26,028

 Common unit options
  exercised                   -          368.9         3.7         -         6,658          67        -           -         6,725

 Common units issued in
   connection with
   acquisitions               -            8.8         0.1         -           195           2        -           -           197

 Comprehensive income:
   Net earnings               -           -            -           -        56,181         568        -           -        56,749
   Other comprehensive income:
     Net gains on risk
      management derivatives  -           -            -           -           -            -       1,081        -
     Reclassification of net
      gains on derivatives    -           -            -           -           -            -        (928)        -
     Pension liability
      adjustment              -           -            -           -           -            -         -          651          804
                                                                                                                         ---------
 Comprehensive income                                                                                                      57,553

                         ----------  -----------  ----------  ----------  ----------  ----------  ----------  ---------  ---------
July 31, 2003             1,994.1      37,673.5     400.7      $ 79,766    $(15,602)   $(59,277)   $   -       $(1,968    $  2,919
                         ==========  ===========  ==========  ==========  ==========  ==========  ==========  =========  =========
</TABLE>




                 See notes to consolidated financial statements.

                                       F-5
<PAGE>


                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<S>                                                           <C>           <C>           <C>

                                                                     For the year ended July 31,
                                                              --------------------------------------
                                                                 2003          2002          2001
                                                              ----------    ----------    ----------

Cash flows from operating activities:
 Net earnings                                                 $ 56,749      $ 59,959      $ 64,068
 Reconciliation of net earnings to net cash provided
   by operating activities:
  Cumulative effect of change in accounting principle            2,754             -             -
  Early extinguishment of debt expense                           1,854             -             -
  Depreciation and amortization expense                         40,779        41,937        56,523
  Employee stock ownership plan compensation charge              6,778         5,218         4,843
  Loss on disposal of assets                                     5,419         3,223         1,459
  Minority interest                                                871           771           829
  Other                                                          6,937         1,072         6,096
  Changes in operating assets and liabilities, net of effects
   from business acquisitions:
    Accounts and notes receivable, net of securitization       (16,308)       19,614        (9,121)
    Inventories                                                (17,097)       17,318        11,333
    Prepaid expenses and other current assets                    1,616         1,661        (2,071)
    Accounts payable                                             4,910        (1,386)      (39,792)
    Accrued interest expense                                     1,181          (434)        1,157
    Other current liabilities                                   (1,180)        1,915         2,233
    Other liabilities                                            1,379         2,057         2,302
  Accounts receivable securitization:
    Proceeds from new accounts receivable securitizations       60,000        30,000       115,000
    Proceeds from collections reinvested in revolving
      period accounts receivable securitizations               562,883       360,677       725,955
    Remittances of amounts collected as servicer of
      accounts receivable securitizations                     (588,883)     (421,677)     (809,955)
                                                              ----------    ----------    ----------
      Net cash provided by operating activities                130,642       121,925       130,859
                                                              ----------    ----------    ----------

Cash flows from investing activities:
 Business acquisitions, net of cash acquired                   (39,138)       (6,294)       (4,668)
 Capital expenditures - tank lease buyout                     (155,600)            -             -
 Capital expenditures - technology initiative                  (21,203)      (23,114)         (100)
 Capital expenditures - other                                  (18,310)      (14,402)      (15,148)
 Other                                                           2,883         4,240         1,652
                                                              ----------    ----------    ----------
      Net cash used in investing activities                   (231,368)      (39,570)      (18,264)
                                                              ----------    ----------    ----------

Cash flows from financing activities:
 Distributions                                                 (84,729)      (84,075)      (69,125)
 Proceeds from issuance of debt                                359,680             -         9,843
 Principal payments on debt                                   (176,367)       (3,069)      (26,205)
 Issuance of common units, net of issuance costs of
  $195 and $500 in 2003 and 2001, respectively                  26,153             -        84,865
 Redemption of senior units                                    (31,522)         (777)      (83,464)
 Net reductions to short-term borrowings                             -             -       (18,342)
 Cash paid for financing costs                                  (7,416)            -           (56)
 Minority interest activity                                     (1,033)         (994)         (848)
 Proceeds from exercise of common unit options                   6,725           939         1,718
 Cash contribution from general partner                            608            16             -
 Other                                                               -             -          (433)
                                                              ----------    ----------    ----------
      Net cash provided by (used in) financing activities       92,099       (87,960)     (102,047)
                                                              -----------    ----------    ----------

Increase (decrease) in cash and cash equivalents                (8,627)       (5,605)       10,548
Cash and cash equivalents - beginning of year                   19,781        25,386        14,838
                                                              ----------    ----------    ----------
Cash and cash equivalents - end of year                       $ 11,154      $ 19,781      $ 25,386
                                                              ==========    ==========    ==========

Cash paid for interest                                        $ 59,844      $ 57,732      $ 57,893
                                                              ==========    ==========    ==========
</TABLE>


                 See notes to consolidated financial statements.

                                       F-6


<PAGE>


                            FERRELLGAS PARTNERS, L.P.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (Dollars in thousands, except per unit data, unless otherwise designated)

A.  Partnership organization and formation

     Ferrellgas  Partners,  L.P.  ("Ferrellgas  Partners")  was formed April 19,
     1994, and is a publicly  traded limited  partnership,  owning a 99% limited
     partner  interest  in  Ferrellgas,   L.P.  (the  "operating  partnership").
     Ferrellgas Partners and the operating partnership, collectively referred to
     as "Ferrellgas," are both Delaware limited partnerships and are governed by
     their respective partnership agreements.  Ferrellgas Partners was formed to
     acquire and hold a limited partner  interest in the operating  partnership.
     The  operating  partnership  was formed to  acquire,  own and  operate  the
     propane  business and assets of Ferrellgas,  Inc.  ("general  partner"),  a
     wholly-owned  subsidiary of Ferrell Companies,  Inc. ("Ferrell Companies").
     Ferrell Companies owns 17.9 million of the outstanding  Ferrellgas Partners
     common  units.  The  general  partner  has  retained a 1%  general  partner
     interest in Ferrellgas  Partners and also holds a 1.0101%  general  partner
     interest in the operating partnership, representing an effective 2% general
     partner interest in Ferrellgas on a combined basis. As general partner,  it
     performs all management functions required by Ferrellgas.

     On July 17, 1998, 100% of the outstanding common stock of Ferrell Companies
     was purchased primarily from Mr. James E. Ferrell and his family by a newly
     established  leveraged employee stock ownership trust ("ESOT")  established
     pursuant to the Ferrell  Companies  Employee Stock Ownership Plan ("ESOP").
     The purpose of the ESOP is to provide  employees of the general  partner an
     opportunity   for  ownership  in  Ferrell   Companies  and   indirectly  in
     Ferrellgas.  As contributions  are made by Ferrell Companies to the ESOT in
     the future,  shares of Ferrell  Companies are  allocated to the  employees'
     ESOP accounts.

     On December  17,  1999,  Ferrellgas  Partners'  partnership  agreement  was
     amended, in connection with an acquisition,  to allow for the issuance of a
     newly created  senior unit.  Generally,  these senior units were to be paid
     quarterly  distributions in additional senior units equal to 10% per annum.
     Also,  the  senior  units  were  structured  to allow for a  redemption  by
     Ferrellgas  Partners at any time, in whole or in part, upon payment in cash
     of the liquidating value of the senior units,  currently $40 per unit, plus
     the  amount of any  accrued  and  unpaid  distributions.  The holder of the
     senior  units  also had the right,  at dates in the  future and  subject to
     certain events and conditions, to convert any outstanding senior units into
     common units.

     On June 5, 2000,  Ferrellgas Partners' partnership agreement was amended to
     allow the general  partner to have an option in maintaining  its 1% general
     partner  interest in Ferrellgas  Partners  concurrent  with the issuance of
     other additional equity.  Prior to this amendment,  the general partner was
     required to make capital  contributions to Ferrellgas  Partners to maintain
     its 1%  general  partner  interest  concurrent  with  the  issuance  of any
     additional Ferrellgas Partners equity. Also as part of this amendment,  the
     general  partner  interest in Ferrellgas  Partners  became  represented by
     newly created general partner units.

     On April 6, 2001, Ferrellgas Partners' partnership agreement was amended to
     reflect  modifications  made to the  senior  units,  previously  issued  on
     December 17, 1999,  and the common  units owned by Ferrell  Companies.  The
     senior units are to be paid quarterly  distributions  in cash equivalent to
     10% per  annum of their  liquidation  value,  or $4 per  senior  unit.  The
     amendment  also granted the holder of the senior units the right to convert
     any outstanding  senior units into common units beginning on the earlier of
     December 31, 2005 or upon the occurrence of a "material event" as such term
     is defined by Ferrellgas  Partners'  partnership  agreement.  The number of
     common  units  issuable  upon  conversion  of a senior unit is equal to the
     senior unit liquidation value,  currently $40 per unit plus any accrued and
     unpaid distributions,  divided by the then current market price of a common
     unit. Generally, a material event includes (1) a change of control; (2) the
     treatment of Ferrellgas Partners as an association taxable as a corporation
     for federal income tax purposes;  (3) Ferrellgas  Partners'  failure to use
     the aggregate cash proceeds from equity issuances,  other than issuances of
     equity  pursuant to an exercise  of any common  unit  options,  to redeem a
     portion of its senior  units other than up to $20 million of cash  proceeds
     from  equity  issuances  used to reduce  Ferrellgas'  indebtedness;  or (4)
     Ferrellgas  Partners'  failure to pay the senior unit  distribution in full
     for any fiscal quarter.  Also as part of the amendment,  Ferrell  Companies
     granted Ferrellgas Partners the ability,  until December 31, 2005, to defer
     future  distributions  on the common  units held by it, up to an  aggregate
     outstanding amount of $36.0 million.

                                      F-7
<PAGE>


B.  Summary of significant accounting policies

     (1) Nature of  operations:  Ferrellgas  Partners  is a holding  entity that
     conducts  no  operations  and has  two  subsidiaries,  Ferrellgas  Partners
     Finance Corp.  and the operating  partnership.  Ferrellgas  Partners owns a
     100% equity interest in Ferrellgas Partners Finance Corp. No operations are
     conducted  by or through  Ferrellgas  Partners  Finance  Corp.,  whose only
     purpose is to act as the  co-issuer  and  co-obligor  of any debt issued by
     Ferrellgas  Partners.  The  operating  partnership  is the  only  operating
     subsidiary of Ferrellgas Partners.

     The operating  partnership is engaged primarily in the retail  distribution
     of propane and related  equipment  and supplies in the United  States.  The
     retail market is seasonal  because propane is used primarily for heating in
     residential and commercial buildings. The operating partnership serves more
     than one million residential, industrial/commercial, agricultural and other
     customers.

     (2)  Accounting  estimates:  The  preparation  of financial  statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of  America  ("GAAP")  requires  management  to make  estimates  and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosures  of  contingent  assets  and  liabilities  at the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reported  period.  Actual  results  could  differ  from  these
     estimates.  Significant  estimates  impacting  the  consolidated  financial
     statements   include  accruals  that  have  been  established  for  product
     liability and other claims,  useful lives of property,  plant and equipment
     assets,  residual  values  of tanks,  amortization  methods  of  intangible
     assets, and valuation methods of derivative commodity contracts.

     (3) Principles of consolidation:  The accompanying  consolidated  financial
     statements  include   Ferrellgas   Partners'  accounts  and  those  of  its
     wholly-owned subsidiary Ferrellgas Partners Finance Corp. and the operating
     partnership,  its  majority-owned  subsidiary,  after  elimination  of  all
     material intercompany accounts and transactions. The accounts of Ferrellgas
     Partners' majority-owned subsidiary are included based on the determination
     that Ferrellgas Partners possesses a controlling financial interest through
     a direct  ownership of a 98.9899%  voting interest and its ability to exert
     control  over the  operating  partnership.  The general  partner's  1.0101%
     general partner interest in the operating partnership is accounted for as a
     minority  interest.  The  wholly-owned  unconsolidated  subsidiary  of  the
     operating partnership, Ferrellgas Receivables, LLC, is a qualifying special
     purpose entity.

                                      F-8
<PAGE>


     (4) Cash and cash equivalents and non-cash activities:  For purposes of the
     consolidated   statements  of  cash  flows,   Ferrellgas   considers   cash
     equivalents to include all highly liquid debt instruments purchased with an
     original maturity of three months or less.  Significant  non-cash investing
     and financing  activities are primarily related to the accounts  receivable
     securitization, transactions with related parties and business combinations
     and are disclosed in Note E - Accounts receivable  securitization, Note M -
     Transactions  with  related  parties  and Note R -  Business  combinations,
     respectively.

     (5)  Inventories:  Inventories  are  stated  at the lower of cost or market
     using  average  cost  and  actual  cost  methods.  Ferrellgas  enters  into
     commodity  derivative  contracts  involving propane and related products to
     hedge, reduce risk and anticipate market movements. The fair value of these
     derivative contracts is classified as inventory.

     (6)  Accounts  receivable  securitization:  Ferrellgas  has  agreements  to
     transfer,  on an ongoing basis,  certain of its trade  accounts  receivable
     through  an  accounts  receivable   securitization   facility  and  retains
     servicing  responsibilities  as well as a  retained  interest  related to a
     portion  of  the  transferred  receivables.  Ferrellgas  accounts  for  the
     securitization  of accounts  receivable  in  accordance  with  Statement of
     Financial  Accounting Standards ("SFAS") No. 140, "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities." As a
     result, the related  receivables are removed from the consolidated  balance
     sheet and a retained  interest  is recorded  for the amount of  receivables
     sold in excess of cash received. Retained interest is included in "Accounts
     and notes receivable" in the consolidated balance sheets.

     Ferrellgas determines the fair value of its retained interests based on the
     present  value of  future  expected  cash  flows  using  management's  best
     estimates of various factors, including credit loss experience and discount
     rates  commensurate with the risks involved.  These assumptions are updated
     periodically  based on actual results,  thus the estimated  credit loss and
     discount  rates  utilized  are  materially   consistent   with   historical
     performance. Due to the short-term nature of Ferrellgas' trade receivables,
     variations in the credit and discount  assumptions  would not significantly
     impact the fair value of the retained interests.  Costs associated with the
     sale of receivables  are included in "Loss on disposal of assets and other"
     in  the  consolidated  statements  of  earnings.  See  Note  E  -  Accounts
     receivable securitization - for further discussion of these transactions.

     (7) Property, plant and equipment: Property, plant and equipment are stated
     at cost less  accumulated  depreciation.  Expenditures  for maintenance and
     routine repairs are expensed as incurred.  Ferrellgas capitalizes equipment
     replacement  and  betterment  expenditures  that  are (i)  greater  than $1
     thousand,  (ii)  upgrade,  replace or completely  rebuild major  mechanical
     components  and (iii)  extend  the  original  book  life of the  equipment.
     Depreciation  is  calculated  using the  straight-line  method based on the
     estimated  useful  lives  of the  assets  ranging  from  two  to 30  years.
     Ferrellgas,  using its best estimates  based on reasonable and  supportable
     assumptions  and  projections,  reviews  long-lived  assets for  impairment
     whenever  events or changes in  circumstances  indicate  that the  carrying
     amount of its assets might not be  recoverable.  See Note D -  Supplemental
     financial statement information - for further discussion of property, plant
     and equipment.

     (8)  Goodwill:  Goodwill  is not  amortized  and  is  tested  annually  for
     impairment.  Beginning  in the first  quarter  of fiscal  2002,  Ferrellgas
     adopted SFAS No. 142 which modified the financial  accounting and reporting
     for  acquired   goodwill  and  other  intangible   assets,   including  the
     requirement  that  goodwill  and  some  intangible   assets  no  longer  be
     amortized.  Ferrellgas  tested  goodwill  for  impairment  at the  time the
     statement  was adopted and  continues to do so each January 31 on an annual
     basis.  Ferrellgas did not recognize any  impairment  losses as a result of
     these tests.

                                      F-9
<PAGE>


     (9) Intangible assets:  Intangible assets, consisting primarily of customer
     lists  and  noncompete  notes,  are  stated  at cost,  net of  amortization
     calculated using either  straight-line or accelerated  methods over periods
     ranging from two to 15 years.  Ferrellgas reviews identifiable  intangibles
     for impairment in a similar manner as with long-lived  assets.  Ferrellgas,
     using its best estimates  based on reasonable and  supportable  assumptions
     and projections,  reviews long-lived assets for impairment  whenever events
     or changes in circumstances indicate that the carrying amount of its assets
     might not be recoverable. See Note G - Intangible assets, net - for further
     discussion of intangible assets.

     (10) Accounting for derivative commodity contracts:  Ferrellgas enters into
     commodity  options  involving  propane and related products to specifically
     hedge  certain  product  cost risk.  Any changes in the fair value of these
     specific  cash flow hedge  positions  are  deferred  and  included in other
     comprehensive  income  and  recognized  as an  adjustment  to  the  overall
     purchase  price of product in the month the  purchase  contract is settled.
     Ferrellgas   also   enters  into  other   commodity   forward  and  futures
     purchase/sale  agreements and commodity swaps and options involving propane
     and related  products,  which are not specific  hedges to a certain product
     cost risk, but are used for risk  management  purposes.  To the extent such
     contracts are entered into at fixed prices and thereby  subject  Ferrellgas
     to market  risk,  the  contracts  are  accounted  for using the fair  value
     method.  Under  this  valuation  method,  derivatives  are  carried  on the
     consolidated  balance  sheets at fair  value  with  changes  in that  value
     recognized  in earnings.  Ferrellgas  classifies  all gains and losses from
     these  derivative   commodity  contracts  entered  into  for  product  risk
     management purposes as cost of product sold in the consolidated  statements
     of earnings.  See Note L - Derivatives - for further discussion about these
     transactions.

     (11) Revenue recognition:  Sales of propane are recognized by Ferrellgas at
     the time product is delivered  to its  customers.  Revenue from the sale of
     propane  appliances  and equipment is recognized at the time of delivery or
     installation.  Revenues from repairs and  maintenance  are recognized  upon
     completion  of the  service.  Ferrellgas  recognizes  shipping and handling
     revenues and expenses for sales of propane, appliances and equipment at the
     time of  delivery or  installation.  Shipping  and  handling  revenues  are
     included  in the  price  of  propane  charged  to  customers,  and thus are
     classified as revenue.

     (12) Shipping and handling expenses: Shipping and handling expenses related
     to delivery personnel, vehicle repair and maintenance and general liability
     expenses  are  classified  within  operating  expense on the  statement  of
     earnings.  Depreciation  expenses on delivery vehicles  Ferrellgas owns are
     classified within depreciation and amortization expense.  Lease expenses on
     delivery  vehicles  Ferrellgas leases are classified within equipment lease
     expense.  See Note D - Supplemental  financial statement  information - for
     the financial statement presentation of shipping and handling expenses.

     (13) Cost of product  sold:  Cost of  product  sold  includes  all costs to
     acquire propane, other gas liquids and non-gas items, including the results
     from  all  risk  management   activities  and  the  costs  of  storing  and
     transporting inventory to Ferrellgas' retail districts prior to delivery to
     its customers.

     (14)  Operating   expenses:   Operating   expenses  primarily  include  the
     personnel,  vehicle, delivery, handling, plant, office, selling, marketing,
     credit  and   collections   and  other  expenses   related  to  the  retail
     distribution of propane and related equipment and supplies.

     (15)  Income  taxes:  Ferrellgas  Partners is a limited  partnership.  As a
     result,  Ferrellgas  Partners'  earnings or losses for  Federal  income tax
     purposes  are  included  in the tax  returns  of the  individual  partners,
     Ferrellgas  Partners'  unitholders.  Accordingly,  no recognition  has been
     given to income taxes in the accompanying consolidated financial statements
     of  Ferrellgas.  Net earnings for financial  statement  purposes may differ
     significantly  from  taxable  income  reportable  to  Ferrellgas   Partners
     unitholders as a result of differences  between the tax basis and financial
     reporting basis of assets and liabilities and the taxable income allocation
     requirements under Ferrellgas Partners' partnership agreement.

                                      F-10
<PAGE>


     (16) Net earnings per common unit: Net earnings per common unit is computed
     by dividing net earnings, after deducting the general partner's 1% interest
     and accrued and paid senior unit  distributions,  by the  weighted  average
     number of  outstanding  common  units and the dilutive  effect,  if any, of
     outstanding  unit  options.  There  was a less  than  $0.01  effect  on the
     dilutive  earnings per unit calculation when making the assumption that all
     outstanding  unit options were  exercised  into common units.  See Note S -
     Earnings per common unit - for further discussion about these calculations.

     (17)  Unit  and  stock-based  compensation:  Ferrellgas  accounts  for  the
     Ferrellgas  Unit  Option  Plan and the Ferrell  Companies,  Inc.  Incentive
     Compensation  Plan  ("ICP")  using the  intrinsic  value  method  under the
     provisions of Accounting  Principles Board ("APB") No. 25,  "Accounting for
     Stock Issued to  Employees,"  for all periods  presented and makes the fair
     value method pro forma  disclosures  required  under the provisions of SFAS
     No. 123, "Accounting for Stock-Based  Compensation," as amended by SFAS No.
     148 "Accounting for Stock-Based  Compensation - Transition and Disclosure."
     Accordingly,  no compensation  cost has been recognized for the unit option
     plan, or for the ICP. Had compensation cost for these plans been determined
     based upon the fair value at the grant date for awards  under these  plans,
     consistent with the methodology  prescribed under SFAS No. 123, Ferrellgas'
     net earnings and earnings per unit would have been adjusted as noted in the
     table below:
<TABLE>
<S>                                                            <C>              <C>              <C>
                                                                   2003             2002             2001
                                                               -------------    -------------    -------------
       Net earnings available to common unitholders,
         as reported                                              $45,518          $48,299          $45,594

       Deduct: Total stock-based employee
         compensation expenses determined under fair
           value based method for all awards                         (942)            (982)            (972)
                                                               -------------    -------------    -------------
       Pro forma net earnings available to
         common unitholders                                       $44,576          $47,317          $44,622
                                                               =============    =============    =============

       Basic and diluted earnings per common unit:

       Net earnings available to common unitholders
         before cumulative effect of change in
         accounting principle, as reported                        $1.33            $1.34            $1.43

       Net earnings available to common unitholders, as
         reported                                                  1.25             1.34             1.43

       Net earnings available to common unitholders before
         cumulative effect of change in accounting
         principle, pro forma                                      1.30             1.31             1.39

       Net earnings available to common unitholders,
         pro forma                                                 1.22             1.31             1.39
</TABLE>

                                      F-11
<PAGE>


     The  fair  value  of the  unit  options  granted  during  fiscal  2001  was
     determined  using a binomial  option  valuation  model  with the  following
     assumptions:  a) distribution  amount of $0.50 per common unit per quarter,
     b) average common unit price volatility of 23.2%, c) the risk-free interest
     rate used was 4.4%,  and d) the  expected  life of the option used was five
     years.  The fair value of the ICP stock  options  granted  during the 2003,
     2002  and  2001  fiscal  years  were  determined  using a  binomial  option
     valuation model with the following assumptions: a) no dividends, b) average
     stock price  volatility  of 18.6%,  19.2% and 13.2% used in 2003,  2002 and
     2001, respectively,  c) the risk-free interest rate used was 4.0%, 4.3% and
     5.2% in 2003,  2002 and  2001,  respectively  and d)  expected  life of the
     options between five and 12 years.

     See Note P - Unit  options  of  Ferrellgas  Partners  and stock  options of
     Ferrell  Companies - for further  discussion  and disclosure of stock-based
     compensation.

     (18)  Segment  information:  Ferrellgas  is a single  reportable  operating
     segment  engaging  in  the  retail  distribution  of  propane  and  related
     equipment and supplies.

     (19)  Adoption  of  new  accounting  standards:  The  Financial  Accounting
     Standards Board ("FASB") recently issued SFAS No. 143 "Accounting for Asset
     Retirement  Obligations",  SFAS No. 144  "Accounting  for the Impairment or
     Disposal of Long-lived Assets", SFAS No. 145 "Rescission of FASB Statements
     No. 4, 44, and 64,  Amendment  of FASB  Statement  No.  13,  and  Technical
     Corrections",  SFAS No. 146 "Accounting  for Costs  Associated with Exit or
     Disposal Activities," SFAS No. 148 "Accounting for Stock-Based Compensation
     - Transition and  Disclosure,"  SFAS No. 149 "Amendment of Statement 133 on
     Derivative  Instruments and Hedging  Activities,"  SFAS No. 150 "Accounting
     for Certain Financial  Instruments with Characteristics of Both Liabilities
     and Equity," FASB Financial  Interpretation No. 45 "Guarantor's  Accounting
     and Disclosure  Requirements for Guarantees,  Including Indirect Guarantees
     of  Indebtedness  of  Others"  and FASB  Financial  Interpretation  No.  46
     "Consolidation of Variable Interest Entities."

     SFAS No. 143  requires  the  recognition  of a liability if a company has a
     legal or contractual financial obligation in connection with the retirement
     of a  tangible  long-lived  asset.  Ferrellgas  implemented  SFAS  No.  143
     beginning in the fiscal year ending July 31, 2003. This  cumulative  effect
     of a change  in  accounting  principle  resulted  in a  one-time  charge to
     earnings of $2.8 million at the  beginning of the year ended July 31, 2003,
     together with the recognition of a $3.1 million  long-term  liability and a
     $0.3 million  long-term asset. See Note I - Asset retirement  obligations -
     for  further  discussion  of these  obligations.  Ferrellgas  believes  the
     implementation  will not have a material  ongoing  effect on its  financial
     position, results of operations and cash flows.

     SFAS No. 144 modifies the financial accounting and reporting for long-lived
     assets  to be  disposed  of by sale and it  broadens  the  presentation  of
     discontinued  operations to include more disposal transactions.  Ferrellgas
     implemented SFAS No. 144 beginning in the fiscal year ending July 31, 2003,
     with no material  effect on its financial  position,  results of operations
     and cash flows.

     SFAS No. 145  eliminates  the  requirement  that material  gains and losses
     resulting  from  the  early  extinguishment  of  debt be  classified  as an
     extraordinary  item in the  consolidated  statements of earnings.  Instead,
     companies must evaluate whether the transaction  meets both the criteria of
     being unusual in nature and infrequent in occurrence. Other aspects of SFAS
     No. 145 relating to accounting for intangible  assets of motor carriers and
     accounting for lease  modifications  do not currently  apply to Ferrellgas.
     Ferrellgas  implemented  SFAS No. 145  beginning  in the fiscal year ending
     July  31,  2003,  and  began  reporting  expenses   associated  with  early
     extinguishments of debt in income from continuing operations.  For the year
     ended  July 31,  2003,  Ferrellgas  recognized  $7.1  million  of  expenses
     associated  with the early  retirement of $160.0  million of senior secured
     notes.  Prior  to the  adoption  of SFAS No.  145,  Ferrellgas  would  have
     classified this type of expense as an extraordinary item.

                                      F-12
<PAGE>


     SFAS No. 146 modifies the  financial  accounting  and  reporting  for costs
     associated with exit or disposal activities. This statement requires that a
     liability  for a cost  associated  with  an exit or  disposal  activity  be
     recognized  when the  liability is incurred.  Additionally,  the  statement
     requires the  liability  to be  recognized  and measured  initially at fair
     value. Under previous rules,  liabilities for exit costs were recognized at
     the date of the entity's commitment to an exit plan. Ferrellgas adopted and
     implemented  SFAS No.  146 for any exit or  disposal  activities  initiated
     after July 31, 2002.  The  implementation  of this statement did not have a
     material effect on Ferrellgas'  financial  position,  results of operations
     and cash flows.

     SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation"
     to provide  alternative methods of transition for a voluntary change to the
     fair-value   based   method  of   accounting   for   stock-based   employee
     compensation.   This   statement   also  amends  SFAS  No.  123  disclosure
     requirements  for annual and interim  financial  statements to provide more
     prominent  disclosures  about the  method  of  accounting  for  stock-based
     employee  compensation  and the  effect  of the  method  used  on  reported
     results.  This  statement is effective  for the fiscal year ending July 31,
     2003. Ferrellgas implemented the interim disclosure requirements during the
     three  months  ended  April  30,  2003.  See  (17)  Unit  and   stock-based
     compensation-  in this Note for  additional  information  related  to these
     requirements.  Ferrellgas is currently  studying the  voluntary  aspects of
     SFAS No. 148 and the related implications of SFAS No. 123.

     SFAS No. 149 amends SFAS No. 133,  "Accounting  for Derivative  Instruments
     and Hedging  Activities" and clarifies  financial  accounting and reporting
     for  derivative  instruments,   including  certain  derivative  instruments
     embedded in other contracts and for hedging activities.  This statement is,
     in general, effective for contracts entered into or modified after June 30,
     2003,  and for  hedging  relationships  designated  after  June  30,  2003.
     Ferrellgas  has  studied  SFAS  No.  149 and  believes  it will  not have a
     material effect on its financial  position,  results of operations and cash
     flows.

     SFAS  No.  150  establishes  standards  for how an  issuer  classifies  and
     measures  certain  financial   instruments  with  characteristics  of  both
     liabilities  and equity.  It requires  that an issuer  classify a financial
     instrument  that is within  its scope as a  liability  (or an asset in some
     circumstances).  This  statement is  effective  for  financial  instruments
     entered into or modified after May 31, 2003, and otherwise is effective for
     the fiscal year ending July 31, 2004.  Ferrellgas  has studied SFAS No. 150
     and believes it will not have a material effect on its financial  position,
     results of operations and cash flows.

     FASB  Financial  Interpretation  No. 45  expands  the  existing  disclosure
     requirements  for  guarantees  and  requires  that  companies  recognize  a
     liability  for  guarantees  issued  after  December  31,  2002.  Ferrellgas
     implemented this interpretation beginning in the three months ended January
     31, 2003. During the year ended July 31, 2003, the implementation  resulted
     in the  recognition of a liability of $0.2 million,  and a related asset of
     $0.2 million, both of which will be recognized into income over the life of
     the  guarantees.  See Note J -  Guarantees - for further  discussion  about
     these guarantees.

     FASB Financial Interpretation No. 46 clarifies Accounting Research Bulletin
     No. 51, "Consolidated Financial Statements." If certain conditions are met,
     this interpretation requires the primary beneficiary to consolidate certain
     variable   interest   entities   in  which   equity   investors   lack  the
     characteristics  of  a  controlling  financial  interest  or  do  not  have
     sufficient equity investment at risk to permit the variable interest entity
     to finance its activities without additional subordinated financial support
     from other  parties.  This  interpretation  is  effective  immediately  for
     variable  interest entities created or obtained after January 31, 2003. For
     variable   interest   entities   acquired  before  February  1,  2003,  the
     interpretation  is effective  for the first  fiscal year or interim  period
     beginning  after June 15, 2003.  Ferrellgas  believes it does not currently
     have  any  variable  interest  entities  that  would  be  subject  to  this
     interpretation.

                                      F-13
<PAGE>


     Emerging Issues Task Force ("EITF") 02-3 "Issues Involved in Accounting for
     Derivative  Contracts Held for Trading  Purposes and Contracts  Involved in
     Energy  Trading and Risk  Management  Activities"  eliminates any basis for
     recognizing  physical  inventories included in energy trading activities at
     fair value.  This new  accounting  rule applies to all  physical  inventory
     purchased  after October 22, 2002.  Ferrellgas  had  previously  recognized
     physical inventories included in risk management trading activities at fair
     value.

     EITF  No.  00-21,   "Accounting  for  Revenue  Arrangements  with  Multiple
     Deliverables"  addresses how to account for  arrangements  that may involve
     multiple revenue-generating  activities,  i.e., the delivery or performance
     of multiple  products,  services,  and/or rights to use assets. In applying
     this guidance,  separate contracts with the same party,  entered into at or
     near the same time, will be presumed to be a bundled  transaction,  and the
     consideration will be measured and allocated to the separate units based on
     their relative fair values.  This consensus  guidance will be applicable to
     agreements  entered  into  in  quarters  beginning  after  June  15,  2003.
     Ferrellgas will adopt this new accounting pronouncement beginning August 1,
     2003.  Ferrellgas  believes  this  pronouncement  will not have a  material
     impact on its financial  position,  results of  operations  and cash flows,
     because it does not enter into a significant  number of  arrangements  that
     may involve multiple revenue-generating activities.

     (20)  Reclassifications:  Certain  reclassifications  have been made to the
     prior years'  consolidated  financial  statements to conform to the current
     year's consolidated financial statements presentation.

C.  Quarterly distributions of available cash

     Ferrellgas  Partners  makes  quarterly  cash  distributions  of  all of its
     "available cash." Available cash is defined in the partnership agreement of
     Ferrellgas  Partners  as,  generally,  the  sum  of its  consolidated  cash
     receipts less consolidated  cash  disbursements and net changes in reserves
     established by the general  partner for future  requirements.  Reserves are
     retained in order to provide for the proper conduct of Ferrellgas Partners'
     business,  or to provide funds for distributions with respect to any one or
     more of the next four  fiscal  quarters.  Distributions  are made within 45
     days after the end of each fiscal quarter ending January,  April,  July and
     October to holders of record on the applicable record date.

     Distributions  by  Ferrellgas  Partners  in an amount  equal to 100% of its
     available  cash, as defined in its partnership  agreement,  will be made to
     the senior and common  unitholders and the general  partner.  Additionally,
     the  payment  of  incentive  distributions  to  the  holders  of  incentive
     distribution  rights will be made to the extent that certain  target levels
     of  cash  distributions  are  achieved.   The  senior  units  have  certain
     distribution and preference rights over the common units. The publicly held
     common units have certain  distribution  preference  rights over the common
     units held by Ferrell Companies.

     On April  6,  2001,  Ferrellgas  Partners  modified  the  structure  of its
     outstanding  senior units and increased the cash  distribution  coverage to
     its publicly held common unitholders. Among other changes, the senior units
     were  modified to allow the holder to be paid a quarterly  distribution  in
     cash  instead of in  additional  senior  unit  distributions.  See Note A -
     Partnership  organization and formation - for additional  information about
     the modifications to the senior units. In addition,  Ferrell Companies, the
     beneficial owner of 17.9 million common units,  granted Ferrellgas Partners
     the ability to defer future distributions on the common units held by it up
     to an aggregate  outstanding amount of $36.0 million.  The ability to defer
     distributions to Ferrell  Companies  provides  Ferrellgas  Partners' public
     common  unitholders  distribution  support  until  December 31, 2005.  This
     distribution  support is available if Ferrellgas  Partners'  available cash
     for any fiscal quarter is insufficient to pay all of the common unitholders
     their  quarterly  distribution.   Ferrellgas  Partners  will  first  pay  a
     distribution  to the senior units and then will pay a  distribution  out of
     the  remaining  available  cash  to the  publicly-held  common  units.  Any
     remaining  available  cash will then be used to pay a  distribution  on the
     common units held by Ferrell Companies. Any quarterly distribution paid per
     unit to the  publicly-held  common units that is not able to be paid on the
     Ferrell  Companies-owned  common  units will be  deferred,  within  certain
     limits,  and paid to Ferrell  Companies in future  quarters when  available
     cash is  sufficient.  If  insufficient  available  cash should  exist for a


                                      F-14
<PAGE>

     particular quarter  or any  previous  deferred  distributions  to  Ferrell
     Companies remain outstanding, the distribution declared per common unit may
     not be more than the  highest  quarterly  distribution  paid on the  common
     units for any of the  immediately  preceding four fiscal  quarters.  If the
     cumulative amount of deferred quarterly  distributions to Ferrell Companies
     were to reach $36.0  million,  the common  units held by Ferrell  Companies
     will then be paid in the same priority as the  publicly-held  common units.
     After  payment of all required  distributions  for any  subsequent  period,
     Ferrellgas  Partners  will use any remaining  available  cash to reduce any
     amount previously  deferred on the common units held by Ferrell  Companies.
     Reductions in amounts previously  deferred will then again be available for
     future  deferrals  to Ferrell  Companies  through  December  31,  2005.  In
     connection with these transactions,  during fiscal 2001 Ferrellgas Partners
     incurred $3.3 million in banking,  legal and other  professional  fees that
     are classified as other charges in the consolidated statements of earnings.

D.  Supplemental financial statement information

    Inventories consist of:

                                                       2003         2002
                                                    ----------   ----------
       Propane gas and related products              $49,772      $29,169
       Appliances, parts and supplies                 19,305       18,865
                                                    ----------   ----------
                                                     $69,077      $48,034
                                                    ==========   ==========

     In addition to inventories on hand, Ferrellgas enters into contracts to buy
     product  for supply  purposes,  primarily  propane  for supply  procurement
     purposes.  Nearly all of these  contracts  have terms of less than one year
     and most call for payment  based on market  prices at the date of delivery.
     All fixed price  contracts have terms of less than one year. As of July 31,
     2003,  Ferrellgas had committed,  for supply procurement  purposes, to make
     net delivery of approximately 0.3 million gallons at a fixed price.

    Property, plant and equipment consist of:
<TABLE>
       <S>                                               <C>                   <C>           <C>
                                                              Estimated
                                                             useful lives          2003          2002
                                                         --------------------  ------------  ------------
       Land and improvements                                     2-20           $  39,768     $  40,781
       Buildings and improvements                                  20              55,010        54,453
       Vehicles, including transport trailers                    8-20              79,708        77,226
       Furniture and fixtures                                       5               7,630         8,730
       Bulk equipment and district facilities                    5-30              77,717        73,461
       Tanks and customer equipment                              5-30             667,946       493,679
       Computer equipment and software                           2-5               27,311        29,530
       Computer software development in progress                 n/a               44,869        29,904
       Other                                                                        2,240         2,652
                                                                               ------------  ------------
                                                                                1,002,199       810,416
       Less:  accumulated depreciation                                            317,282       303,885
                                                                               ------------  ------------
                                                                                $ 684,917     $ 506,531
                                                                               ============  ============
</TABLE>

                                      F-15
<PAGE>


     Ferrellgas  capitalized  $2.2 million and $0.7 million of interest  expense
     related to the  development  of computer  software for the years ended July
     31, 2003 and 2002, respectively. As of July 31, 2002, Ferrellgas recognized
     payables  totaling $7.0 million  related to the development of new computer
     software that was paid during  fiscal 2003.  Depreciation  expense  totaled
     $28.2 million,  $27.9 million, and $28.3 million for the fiscal years ended
     July 31, 2003, 2002, and 2001, respectively.

     Other current liabilities consist of:

                                                           2003         2002
                                                        ----------   ----------
       Accrued interest                                  $23,563      $22,382
       Accrued payroll                                    22,848       24,068
       Accrued insurance                                   9,535        9,409
       Note payable (pursuant to acquisition -
         see Note R - Business combinations)               9,847          -
       Other                                              23,894       33,202
                                                        ----------   ----------
                                                         $89,687      $89,061
                                                        ==========   ==========
<TABLE>
     <S>                                                                  <C>             <C>            <C>
                                                                          -------------------------------------------
     Loss on disposal of assets and other consist of:                             For the year ended July 31,
                                                                          -------------------------------------------
                                                                             2003            2002            2001
                                                                          ----------      ----------     ------------
        Loss on disposal of assets                                          $5,419          $3,223         $1,459
        Loss on transfer of accounts receivable related to the
          accounts receivable securitization                                 2,224           2,019          5,611
        Service income related to the accounts receivable
          securitization                                                      (964)         (1,285)        (1,326)
                                                                         ----------      ----------     ------------
        Loss on disposal of assets and other                                $6,679          $3,957         $5,744
                                                                         ==========      ==========     ============
</TABLE>
     Shipping and handling expenses are classified in the following consolidated
     statements of earnings line items:
<TABLE>
   <S>                                                                   <C>             <C>             <C>
                                                                         -------------------------------------------
                                                                                  For the year ended July 31,
                                                                         -------------------------------------------
                                                                           2003            2002            2001
                                                                         ----------      ----------     ------------
    Operating expense                                                    $126,452         $123,226       $132,349
    Depreciation and amortization expense                                   5,522            6,930          6,764
    Equipment lease expense                                                11,354           11,479         11,578
                                                                         ----------      ----------     ------------
                                                                         $143,328         $141,635       $150,691
                                                                         ==========      ==========     ============
</TABLE>
E.   Accounts receivable securitization

     On September 26, 2000, the operating  partnership  entered into an accounts
     receivable  securitization  facility  with  Bank  One,  NA. As part of this
     renewable 364-day facility, the operating partnership transfers an interest
     in a pool of its trade accounts receivable to Ferrellgas Receivables,  LLC,
     a wholly-owned  unconsolidated,  special  purpose  entity,  which sells its
     interest  to a  commercial  paper  conduit of Banc One,  NA. The  operating
     partnership  does not  provide  any  guarantee  or  similar  support to the
     collectibility of these receivables.  The operating partnership  structured
     the  facility  using  a  wholly-owned  unconsolidated,  qualifying  special
     purpose entity in order to facilitate  the  transaction as required by Banc
     One,  NA and to  comply  with  Ferrellgas'  various  debt  covenants.  As a
     servicer,  the operating  partnership  remits daily to this special purpose
     entity funds collected on the pool of trade  receivables held by Ferrellgas
     Receivables.  Ferrellgas  renewed the  facility for an  additional  364-day
     commitment on September 23, 2003.

                                      F-16
<PAGE>

     The  operating   partnership   transfers  certain  of  its  trade  accounts
     receivable to Ferrellgas  Receivables  and retains an interest in a portion
     of these  transferred  receivables.  As these  transferred  receivables are
     subsequently  collected  and  the  funding  from  the  accounts  receivable
     securitization  facility is reduced, the operating  partnership's  retained
     interest  in  these  receivables  is  reduced.   In  fiscal  2002,  as  the
     transferred  receivables  were  collected and the funding from the accounts
     receivable  securitization  facility  was  reduced to zero,  the  operating
     partnership's retained interest in the transferred receivables, was reduced
     from $7.2 million at July 31, 2001 to zero at July 31, 2002. As of July 31,
     2003 and 2002, the balance of the retained interest was $8.1 million and $0
     million,  respectively  and was  classified  as accounts  receivable on the
     consolidated  balance  sheets.  At July 31,  2003,  $42.5  million had been
     transferred  compared  with $0  million  at July 31,  2002.  The  operating
     partnership had the ability to transfer, at its option, an additional $19.1
     million of its trade accounts receivable at July 31, 2003. The net non-cash
     activity relating to this retained interest was $1.8 million,  $3.3 million
     and $3.8  million  during the years ended July 31,  2003,  2002,  and 2001,
     respectively.

     These  amounts  reported  in  the   consolidated   statements  of  earnings
     approximate the financing cost of issuing  commercial paper backed by these
     accounts receivable plus an allowance for doubtful accounts associated with
     the  outstanding  receivables  transferred to Ferrellgas  Receivables.  The
     weighted average  discount rate used to value the retained  interest in the
     transferred receivables was 1.6%, 3.6% and 6.5% during the years ended July
     31,  2003,  2002  and  2001,  respectively.  Bad  debt  expense  for  these
     transferred receivables totaled $0.3 million, $0.2 million and $0.4 million
     during the years ended July 31, 2003, 2002 and 2001, respectively.

F.   Goodwill

     Ferrellgas  adopted SFAS No. 142  "Goodwill  and Other  Intangible  Assets"
     beginning in the first  quarter of fiscal  2002.  SFAS No. 142 modified the
     financial   accounting  and  reporting  for  acquired  goodwill  and  other
     intangible  assets,  including  the  requirement  that  goodwill  and  some
     intangible  assets no longer be amortized.  The following  table  discloses
     Ferrellgas' net earnings for the fiscal years ended July 31, 2003, 2002 and
     2001,  adding back the amortization  expense related to goodwill that is no
     longer amortized.
<TABLE>
     <S>                                                              <C>               <C>              <C>
                                                                                For the year ended July 31,
                                                                      -------------------------------------------------
                                                                          2003              2002             2001
                                                                      -------------     -------------    --------------
     Reported net earnings                                               $56,749          $59,959          $64,068
     Add back: Goodwill amortization                                        -                -              11,308
                                                                      -------------     -------------    --------------
     Adjusted net earnings                                               $56,749          $59,959          $75,376
                                                                      =============     =============    ==============

     Basic and diluted earnings per common unit:
                                                                                 For the year ended July 31,
                                                                      -------------------------------------------------
                                                                          2003              2002             2001
                                                                      -------------     -------------    --------------
     Reported net earnings available to common unitholders               $1.33              $1.34            $1.43
     Add back:  Goodwill amortization                                       -                  -              0.32
                                                                      -------------     -------------    --------------
     Adjusted net earnings available to common unitholders               $1.33              $1.34            $1.75
                                                                      =============     =============    ==============
</TABLE>
                                      F-17
<PAGE>



G.   Intangible assets, net

     Intangible assets, net consist of:
<TABLE>
     <S>                          <C>            <C>              <C>           <C>            <C>              <C>
                                                July 31, 2003                                July 31, 2002
                                  -------------------------------------------   -------------------------------------------
                                       Gross                                        Gross
                                     Carrying      Accumulated                     Carrying      Accumulated
                                      Amount       Amortization       Net           Amount       Amortization       Net
                                  -------------- ---------------- -----------   -------------  ---------------- -----------
     Customer lists                    $220,061       $(133,548)     $86,513      $208,662        $(124,860)     $83,802
     Non-compete agreements              64,020         (52,376)      11,644        62,893          (48,525)      14,368
                                  -------------- ---------------- -----------   -------------  ---------------- -----------
       Total                           $284,081       $(185,924)     $98,157      $271,555        $(173,385)     $98,170
                                  ============== ================ ===========   =============  ================ ===========
</TABLE>

     Customer lists have estimated lives of 15 years, while non-compete
     agreements have estimated lives ranging from two to 10 years.

     Aggregate amortization expense:
     -------------------------------
                                        2003             2002              2001
                                        ----             ----              ----
     For the year ended July 31,      $12,539          $14,022           $16,883

     Estimated amortization expense:
     -------------------------------

     For the year ended July 31
     2004     $11,396
     2005      10,876
     2006      10,357
     2007       9,677
     2008       8,748

H.   Long-term debt

     Long-term debt consists of:
<TABLE>
    <S>                                                                                   <C>               <C>
                                                                                              2003             2002
                                                                                          -------------     ------------
    Senior notes:
      Fixed rate, 7.16% due 2005-2013 (1)                                                     $350,000         $350,000
      Fixed rate, 8.75%, due 2012, net of unamortized premium of $1,569 (2)                    219,569                -
      Fixed rate, 9.375%, due 2006 (2)                                                               -          160,000
      Fixed rate, 8.8%, due 2006-2009 (3)                                                      184,000          184,000

    Credit agreement, variable interest rates, expiring 2006                                   126,700                -

    Notes payable, 7.5% and 7.6% weighted average interest rates,
      respectively, due 2004 to 2011                                                            10,108           12,177
                                                                                          -------------     ------------
                                                                                               890,377          706,177
       Less:  current portion, included in other current liabilities on the
         consolidated balance sheets                                                             2,151            2,319
                                                                                          -------------     ------------
                                                                                              $888,226         $703,858
                                                                                          =============     ============
                                      F-18
<PAGE>

<FN>
     (1)  The operating  partnership  fixed rate senior notes,  issued in August
          1998, are general unsecured  obligations of the operating  partnership
          and  rank on an  equal  basis in  right  of  payment  with all  senior
          indebtedness   of  the  operating   partnership   and  senior  to  all
          subordinated   indebtedness   of  the   operating   partnership.   The
          outstanding  principal  amount  of the  series  A, B, C, D and E notes
          shall  be  due  on  August  1,  2005,  2006,  2008,  2010,  and  2013,
          respectively.  In general, the operating partnership does not have the
          option  to  prepay  the  notes  prior to  maturity  without  incurring
          prepayment penalties.

     (2)  On September 24, 2002,  Ferrellgas  redeemed the  Ferrellgas  Partners
          fixed  rate  senior  secured  notes  issued  in April  1996,  with the
          proceeds from $170.0 million of Ferrellgas  Partners fixed rate senior
          notes. Ferrellgas recognized a $7.1 million charge to earnings related
          to the premium  and other costs  incurred to redeem the notes plus the
          write-off of financing  costs related to the original  issuance of the
          Ferrellgas  Partners  senior  secured  notes.  On December  18,  2002,
          Ferrellgas  issued $48.0  million of  Ferrellgas  Partners  fixed rate
          senior  notes  with a debt  premium  of  $1.7  million  that  will  be
          amortized to interest  expense  through 2012. The Ferrellgas  Partners
          senior  notes  bear  interest  from  the  date  of  issuance,  payable
          semi-annually in arrears on June 15 and December 15 of each year.

     (3)  The operating  partnership fixed rate senior notes, issued in February
          2000, are general unsecured  obligations of the operating  partnership
          and  rank on an  equal  basis in  right  of  payment  with all  senior
          indebtedness   of  the  operating   partnership   and  senior  to  all
          subordinated   indebtedness   of  the   operating   partnership.   The
          outstanding principal amount of the series A, B and C notes are due on
          August 1, 2006, 2007 and 2009, respectively. In general, the operating
          partnership  does not have the  option  to prepay  the notes  prior to
          maturity without incurring prepayment penalties.
</FN>
</TABLE>

     On December 10, 2002,  Ferrellgas refinanced its $157.0 million bank credit
     facility with a $307.5 million amended bank credit  facility,  using $155.6
     million of the funds  available  thereunder  to purchase  propane tanks and
     related  assets  that it  previously  leased,  plus  making a $1.2  million
     payment of related  accrued lease  expense.  The  remaining  portion of the
     amended bank credit facility is available for working capital, acquisition,
     capital expenditure and general partnership  purposes and will terminate on
     April 28,  2006,  unless  extended or renewed.  The credit  facility  has a
     letter of credit  sub-facility  with  availability of $80.0 million.  As of
     July 31, 2003,  Ferrellgas had borrowings of $126.7 million,  at a weighted
     average interest rate of 3.2%, under this amended bank credit facility.

     All borrowings  under the amended bank credit  facility bear  interest,  at
     Ferrellgas' option, at a rate equal to either:

     o    the base rate,  which is defined  as the higher of the  federal  funds
          rate plus 0.50% or Bank of America's  prime rate (as of July 31, 2003,
          the federal funds rate and Bank of America's prime rate were 1.04% and
          4.00%, respectively); or

     o    the  Eurodollar  Rate plus a margin varying from 1.75% to 2.75% (as of
          July 31, 2003, the one-month Eurodollar Rate was 1.04%).

     In  addition,  an annual  commitment  fee is  payable  on the daily  unused
     portion of the credit  facility at a per annum rate  varying from 0.375% to
     0.625% (as of July 31, 2003, the commitment fee per annum rate was 0.375%).

     Letters of credit  outstanding,  used primarily to secure obligations under
     certain insurance arrangements,  totaled $44.7 million and $40.6 million at
     July 31, 2003 and 2002,  respectively.  At July 31,  2003,  Ferrellgas  had
     $136.1 million of funding available. Ferrellgas incurred commitment fees of
     $0.5 million,  $0.4 million and $0.5 million in fiscal 2003, 2002 and 2001,
     respectively.

                                      F-19
<PAGE>


     The  senior  notes  and  the  credit  facility  agreement  contain  various
     restrictive  covenants  applicable to Ferrellgas and its subsidiaries,  the
     most  restrictive  relating  to  additional   indebtedness.   In  addition,
     Ferrellgas  Partners is prohibited  from making cash  distributions  of the
     minimum  quarterly  distribution if a default or event of default exists or
     would exist upon making such  distribution,  or if Ferrellgas fails to meet
     certain coverage tests.  Ferrellgas is in compliance with all requirements,
     tests, limitations and covenants related to these debt agreements.

     The scheduled annual principal payments on long-term debt are as follows:

                                                            Scheduled annual
                                                           principal payments
             For the year ended July 31,                  --------------------
               2004                                             $ 2,151
               2005                                               2,146
               2006                                             111,161
               2007                                              38,455
               2008                                              74,105
               Thereafter                                       660,790
                                                          --------------------
               Total                                           $888,808

I.   Asset retirement obligations

     SFAS No. 143 provides  accounting  requirements for retirement  obligations
     associated with tangible long-lived assets,  including the requirement that
     a  liability  be  recognized  if there is a legal or  financial  obligation
     associated with the retirement of the assets.  Ferrellgas  adopted SFAS No.
     143 beginning in the year ending July 31, 2003. This cumulative effect of a
     change in accounting principle resulted in a one-time charge to earnings of
     $2.8  million  during  the year  ended  July 31,  2003,  together  with the
     recognition  of a $3.1  million  long-term  liability  and a  $0.3  million
     long-term asset.  Ferrellgas  believes the  implementation  will not have a
     material  ongoing effect on its financial  position,  results of operations
     and cash flows.  These obligations relate primarily to the estimated future
     expenditures required to retire Ferrellgas' underground storage facilities.
     The  remaining  period  until these  facilities  will  require  closure and
     remediation  expenditures is  approximately  50 years.  The following table
     presents a  reconciliation  of the beginning and ending carrying amounts of
     the asset retirement obligation:

                                                              For the year ended
                                                                   July 31,
                                                                    2003
                                                             -------------------
          Asset retirement obligation as of August 1, 2002        $3,073
          Add: Accretion                                             199
                                                             -------------------
          Asset retirement obligation as of July 31, 2003         $3,272
                                                             ===================

     The related asset carried for the purpose of settling the asset  retirement
     obligation  is $0.3  million  as of July  31,  2003,  and is not a  legally
     restricted  asset.  Assuming  retroactive  application  of  the  change  in
     accounting  principle  as of August 1,  2001,  there  would be no  material
     change in the pro forma net  earnings  for the year  ended  July 31,  2002.
     Other  liabilities,  assuming  retroactive  application  of the  change  in
     accounting  principle  as of August 1, 2001 and July 31,  2002,  would have
     increased $2.9 million and $3.1 million, respectively.

                                      F-20
<PAGE>


J.   Guarantees

     FASB  Financial   Interpretation  No.  45,   "Guarantor's   Accounting  and
     Disclosure  Requirements for Guarantees,  Including Indirect  Guarantees of
     Indebtedness of Others," expands the existing  disclosure  requirements for
     guarantees  and requires  recognition  of a liability for the fair value of
     guarantees  issued after  December 31, 2002. As of July 31, 2003,  the only
     material  guarantees that  Ferrellgas had outstanding  were associated with
     residual value guarantees of operating  leases.  These operating leases are
     related to transportation  equipment with remaining lease periods scheduled
     to expire over the next seven fiscal  years.  Upon  completion of the lease
     period,  Ferrellgas  guarantees  that the fair value of the equipment  will
     equal or exceed the guaranteed  amount,  or Ferrellgas  will pay the lessor
     the difference.  The fair value of these residual value guarantees  entered
     into after December 31, 2002 was $0.2 million as of July 31, 2003. Although
     the fair  values at the end of the lease terms have  historically  exceeded
     these guaranteed amounts,  the maximum potential amount of aggregate future
     payments   Ferrellgas  could  be  required  to  make  under  these  leasing
     arrangements,  assuming the  equipment is worthless at the end of the lease
     term, is $14.5 million.

K.   Partners' capital

     On July 31,  2003,  Ferrellgas'  capital  consisted  of 2.0 million  senior
     units,  37.7 million common units,  and 0.4 million  general  partner units
     which equal a 1% general partner interest. Ferrellgas Partners' partnership
     agreement  contains specific  provisions for the allocation of net earnings
     and loss to each of the partners for  purposes of  maintaining  the partner
     capital accounts.

     In  connection  with an  acquisition  during the fiscal year ended July 31,
     2000,  Ferrellgas  Partners issued 4.4 million senior units to a subsidiary
     of  The  Williams  Companies,   Inc.  ("Williams").   The  general  partner
     contributed  $1.8  million to  Ferrellgas  Partners and $1.8 million to the
     operating  partnership  in order to  maintain  its 1% and  1.0101%  general
     partner  interest in each  respective  entity.  On April 6, 2001, an entity
     owned by James E.  Ferrell,  the  Chairman,  Chief  Executive  Officer  and
     President  of the  general  partner,  purchased  all  senior  units held by
     Williams,  who prior to the transaction agreed to certain  modifications to
     the senior units. See Note A - Partnership organization and formation - for
     more information on the modifications to the senior units.

     Ferrellgas  maintains  shelf  registration  statements  for the issuance of
     common units,  deferred  participation units, warrants and debt securities.
     Ferrellgas  Partners'  partnership  agreement allows the general partner to
     issue an  unlimited  number of  additional  Ferrellgas  general and limited
     interests  and other  equity  securities  of  Ferrellgas  Partners for such
     consideration  and on such terms and  conditions as shall be established by
     the general  partner  without the approval of any  unitholders.  During the
     fourth quarter of fiscal 2003, Ferrellgas Partners recognized $26.0 million
     net of issuance  costs pursuant to the issuance of 1.2 million common units
     to the  public.  Ferrellgas  Partners  then used these  proceeds  and other
     sources of cash to redeem 0.7 million senior units and pay related  accrued
     but unpaid distributions.  These newly issued common units were entitled to
     the same distribution to be paid to the already  outstanding  publicly held
     common  units for the quarter  ended July 31,  2003.  In total,  Ferrellgas
     Partners  made  redemptions  of 0.8  million,  19 thousand  and 2.1 million
     senior  units  during  the  years  ended  July 31,  2003,  2002  and  2001.
     Ferrellgas  Partners issued 0.4 million, 55 thousand and 0.1 million common
     units  during the years ended July 31, 2003,  2002 and 2001,  respectively,
     pursuant to the  Ferrellgas  Unit Option Plan (see Note P - Unit options of
     Ferrellgas  Partners and stock  options of Ferrell  Companies).  Ferrellgas
     Partners  issued 9 thousand  and 0.1  million  common  units as part of the
     purchase price of acquisitions  during the fiscal years ended July 31, 2003
     and 2002 (see Note R - Business combinations).

                                      F-21
<PAGE>


L.   Derivatives

     SFAS  No.  133   "Accounting   for  Derivative   Instruments   and  Hedging
     Activities",  as amended by SFAS No.  137,  SFAS No. 138 and SFAS No.  149,
     requires all derivatives (with certain  exceptions),  whether designated in
     hedging  relationships or not, to be recorded on the  consolidated  balance
     sheets at fair  value.  As a result  of  implementing  SFAS No.  133 at the
     beginning of fiscal 2001,  Ferrellgas  recognized  in its first  quarter of
     fiscal 2001,  gains  totaling $0.7 million and $0.3 million in  accumulated
     other  comprehensive  income and the  consolidated  statements of earnings,
     respectively.  In addition,  beginning in the first quarter of fiscal 2001,
     Ferrellgas  recorded  subsequent  changes  in the fair  value of  positions
     qualifying as cash flow hedges in accumulated  other  comprehensive  income
     and  changes  in the  fair  value of other  positions  in the  consolidated
     statements  of earnings.  Ferrellgas'  overall  objective for entering into
     derivative  contracts  for the  purchase  of product is related to hedging,
     risk reduction and to anticipate  market  movements.  Other derivatives are
     entered into to reduce  interest rate risk  associated  with long term debt
     and  lease  obligations.   Fair  value  hedges  are  derivative   financial
     instruments  that  hedge the  exposure  to  changes in the fair value of an
     asset or a liability or an identified  portion  thereof  attributable  to a
     particular risk. Cash flow hedges are derivative financial instruments that
     hedge  the  exposure  to   variability   in  expected   future  cash  flows
     attributable  to a  particular  risk.  Ferrellgas  uses cash flow hedges to
     manage  exposures to product  purchase  price risk and uses both fair value
     and cash flow hedges to manage exposure to interest rate risks.


     Fluctuations in the wholesale cost of propane expose Ferrellgas to purchase
     price  risk.  Ferrellgas  purchases  propane  at  various  prices  that are
     eventually  sold to its  customers,  exposing  Ferrellgas to future product
     price fluctuations. Also, certain forecasted transactions expose Ferrellgas
     to purchase price risk.  Ferrellgas  monitors its purchase price  exposures
     and  utilizes   product  hedges  to  mitigate  the  risk  of  future  price
     fluctuations.  Propane is the only  product  hedged with the use of product
     hedge positions. Ferrellgas uses derivative contracts to hedge a portion of
     its  forecasted  purchases  for  up  to  one  year  in  the  future.  These
     derivatives are designated as cash flow hedging instruments.  Because these
     derivatives are designated as cash flow hedges,  the effective  portions of
     changes  in the  fair  value  of the  derivatives  are  recorded  in  other
     comprehensive  income  ("OCI")  and  are  recognized  in  the  consolidated
     statements of earnings when the forecasted  transaction  impacts  earnings.
     Ferrellgas did not have any product hedge positions  outstanding as of July
     31, 2003, therefore there was no fair value adjustment classified as OCI on
     the consolidated statements of partners' capital at July 31, 2003. The risk
     management  fair value  adjustments  of $(0.2)  million and $(0.3)  million
     included in OCI at July 31, 2002 and 2001, were  reclassified into earnings
     during  fiscal  2003 and 2002,  respectively.  Changes in the fair value of
     cash flow hedges due to hedge  ineffectiveness,  if any, are  recognized in
     cost of product sold.  During fiscal years ended July 31, 2003,  2002,  and
     2001,  Ferrellgas did not recognize any gain or loss in earnings related to
     hedge  ineffectiveness  and did not exclude any component of the derivative
     contract gain or loss from the assessment of hedge effectiveness related to
     cash flow  hedges.  The fair value of the  derivatives  related to purchase
     price  risk  are   classified  on  the   consolidated   balance  sheets  as
     inventories.


     Through its risk management trading  activities,  Ferrellgas also purchases
     and sells  derivatives  that are not  designated  as  accounting  hedges to
     manage other risks associated with commodity prices. The types of contracts
     utilized in these activities  include energy commodity  forward  contracts,
     options and swaps traded on the  over-the-counter  financial  markets,  and
     futures and options traded on the New York Mercantile Exchange.  Ferrellgas
     utilizes published settlement prices for exchange traded contracts,  quotes
     provided by brokers and estimates of market prices based on daily  contract
     activity to estimate the fair value of these contracts. The changes in fair
     value of these risk  management  trading  activities are recognized as they
     occur in cost of product sold in the  consolidated  statements of earnings.
     During  fiscal  years  ended  July  31,  2003,  2002 and  2001,  Ferrellgas
     recognized  risk management  trading gains (losses)  related to derivatives
     not designated as accounting  hedges of $5.9 million,  $(6.1) million,  and
     $23.3 million, respectively.

                                      F-22
<PAGE>


     Estimates related to our risk management  trading  activities are sensitive
     to uncertainty and volatility  inherent in the energy  commodities  markets
     and  actual  results  could  differ  from  these   estimates.   Assuming  a
     hypothetical  10% adverse  change in prices for the  delivery  month of all
     energy commodities,  the potential loss in future earnings of such a change
     is estimated at $0.9 million for risk management  trading  activities as of
     July 31,  2003.  The  preceding  hypothetical  analysis is limited  because
     changes in prices may or may not equal 10%.

     The following  table  summarizes the change in the unrealized fair value of
     contracts  from risk  management  trading  activities  for the fiscal years
     ended July 31, 2003, 2002 and 2001.
<TABLE>
     <S>                                                                <C>             <C>              <C>
                                                                                For the year ended July 31,
                                                                        ---------------------------------------------
                                                                           2003            2002             2001
                                                                        ------------    ------------     ------------
     Unrealized losses in fair value of contracts outstanding
       at beginning of year                                                $(4,569)       $(12,587)        $    (359)
     Unrealized gains and (losses) recognized at inception of
       a contract                                                              -               -                 -
     Unrealized gains and (losses) recognized as a result of
       changes in valuation techniques or assumptions                          -               -                 -
     Other unrealized gains and (losses) recognized                          5,921          (6,148)           23,320
     Less:  realized gains and (losses) recognized                           3,070         (14,166)           35,548
                                                                        ------------    ------------     ------------
     Unrealized losses in fair value of contracts outstanding
       at end of year                                                      $(1,718)        $(4,569)        $ (12,587)
                                                                        ============    ============     ============
</TABLE>

     The  following  table  summarizes  the maturity of these  contracts for the
     valuation  methodologies  Ferrellgas utilized as of July 31, 2003 and 2002.
     This table summarizes the contracts where settlement had not yet occurred.
<TABLE>
     <S>                                                                <C>                 <C>
                                                                              Fair value of contracts
                                                                                   at period-end
                                                                        -------------------------------------
                                                                                                Maturity
                                                                                             greater than 1
                                                                          Maturity                year
                                                                          less than          and less than
                         Source of fair value                               1 year             18 months
     -------------------------------------------------------------      --------------      -----------------
     Prices actively quoted                                               $       9               $ -
     Prices provided by other external sources                               (1,727)                -
     Prices based on models and other valuation methods                           -                 -
                                                                        --------------      -----------------
     Unrealized  (losses) in fair value of contracts
          outstanding at July 31, 2003                                    $  (1,718)              $ -
                                                                        ==============      =================

     Prices actively quoted                                               $    (328)              $ -
     Prices provided by other external sources                               (4,225)              (16)
     Prices based on models and other valuation methods                           -                 -
                                                                        --------------      -----------------
     Unrealized  (losses) in fair value of contracts  outstanding
          at July 31, 2002                                                $  (4,553)             $(16)
                                                                        ==============      =================
</TABLE>

     The following  table  summarizes the gross  transaction  volumes in barrels
     (one barrel equals 42 gallons) for risk management  trading  contracts that
     were physically settled for the years ended July 31, 2003, 2002 and 2001:

                                      F-23
<PAGE>


     (in thousands)
     For the year ended July 31, 2003                                    13,805
     For the year ended July 31, 2002                                    11,162
     For the year ended July 31, 2001                                    18,539

     Ferrellgas also uses forward contracts, not designated as accounting hedges
     under SFAS No. 133, to help reduce the price risk  related to sales made to
     its propane  customers.  These forward  contracts  meet the  requirement to
     qualify  as normal  purchases  and sales as  defined  in SFAS No.  133,  as
     amended by SFAS No. 137,  SFAS No. 138 and SFAS No.  149,  and thus are not
     adjusted to fair market value.

     As of July 31, 2003, Ferrellgas holds $763.7 million in fixed rate debt and
     $126.7  million in  variable  rate debt.  Fluctuations  in  interest  rates
     subject  Ferrellgas  to interest  rate risk.  Decreases  in interest  rates
     increase the fair value of Ferrellgas'  fixed rate debt, while increases in
     interest rates subject Ferrellgas to the risk of increased interest expense
     related to its variable rate debt.

     Ferrellgas  enters  into fair value and cash flow hedges to help reduce its
     overall  interest  rate  risk.  Interest  rate swaps were used to hedge the
     exposure  to changes in the fair value of fixed rate debt due to changes in
     interest  rates.  The fair  value of  interest  rate  derivatives  that are
     considered  fair value or cash flow hedges are  classified  either as other
     current or long-term assets or as other current or long-term liabilities on
     the  consolidated  balance  sheets.  Changes in the fair value of the fixed
     rate debt and any related fair value hedges are recognized as they occur in
     interest expense in the consolidated statements of earnings.  During fiscal
     years ended July 31, 2003, 2002, and 2001, Ferrellgas did not recognize any
     gain or loss in  earnings  related  to  hedge  ineffectiveness  and did not
     exclude any  component  of the  derivative  contract  gain or loss from the
     assessment of hedge effectiveness  related to fair value hedges. There were
     no such fair value hedges  outstanding at July 31, 2003 and 2002.  Interest
     rate caps are used to hedge the risk  associated with rising interest rates
     and their effect on forecasted  transactions  related to variable rate debt
     and lease  obligations.  These  interest rate caps were  designated as cash
     flow  hedges and were  outstanding  until June 2003.  Thus,  the  effective
     portions of changes in the fair value of the hedges were recorded in OCI at
     interim periods and were recognized as interest expense in the consolidated
     statements of earnings when the forecasted  transaction  impacted earnings.
     During fiscal years ended July 31, 2003, 2002, and 2001, Ferrellgas did not
     recognize any gain or loss in earnings related to hedge ineffectiveness and
     did not exclude any component of the derivative  contract gain or loss from
     the  assessment of hedge  effectiveness  related to cash flow hedges.  Cash
     flow  hedges are  assumed to hedge the risk of changes in cash flows of the
     hedged risk.

M.   Transactions with related parties

     Ferrellgas  has no employees  and is managed and  controlled by its general
     partner.  Pursuant  to  Ferrellgas'  partnership  agreements,  the  general
     partner is entitled to reimbursement  for all direct and indirect  expenses
     incurred  or  payments  it makes on  behalf  of  Ferrellgas,  and all other
     necessary or  appropriate  expenses  allocable to  Ferrellgas  or otherwise
     reasonably  incurred by the general  partner in connection  with  operating
     Ferrellgas'  business.  These costs,  which totaled $201.3 million,  $197.9
     million and $194.5  million for the years ended July 31,  2003,  2002,  and
     2001, respectively,  include compensation and benefits paid to employees of
     the general partner who perform services on Ferrellgas'  behalf, as well as
     general and administrative costs.

     On December 12, 2001,  Ferrellgas  Partners issued 37 thousand common units
     to Ferrell Propane, Inc., a subsidiary of the general partner in connection
     with the  acquisition  of Blue  Flame  Bottle  Gas (see  Note R -  Business
     combinations). The common unit issuance compensated Ferrell Propane for its
     retention of $0.7 million of certain tax liabilities of Blue Flame.

                                      F-24
<PAGE>


     During fiscal 2000,  Williams  became a related party to Ferrellgas  due to
     Ferrellgas  Partners'  issuance of 4.4 million senior units to a subsidiary
     of Williams as part of an acquisition  during the year ended July 31, 2000.
     In a noncash  transaction,  during  fiscal 2001,  Ferrellgas  Partners paid
     quarterly  senior unit  distributions  to Williams of $11.1 million,  using
     additional senior units. In April 2001,  Williams sold all its senior units
     to JEF  Capital  Management,  Inc.,  an entity  owned by James E.  Ferrell,
     Chairman, Chief Executive Officer and President of the general partner, and
     thereafter, ceased to be a related party of Ferrellgas. During fiscal 2001,
     Ferrellgas  recognized  wholesale  sales to  Williams of $0.5  million.  In
     connection  with its  normal  purchasing  and risk  management  activities,
     Ferrellgas entered into, with Williams as a counterparty, certain purchase,
     forward, futures, option and swap contracts.  During fiscal 2001 Ferrellgas
     recognized a net decrease to cost of sales of $4.5 million related to these
     activities.

     On April 6, 2001, Williams approved amendments to the Ferrellgas  Partners'
     partnership  agreement  related  to  certain  terms  of the  senior  units.
     Williams  then sold all of the senior units for a purchase  price of $195.5
     million plus accrued and unpaid  distributions  to JEF Capital  Management.
     The senior units currently have all the same terms and preference rights in
     distributions and liquidation as when the units were owned by Williams.

     During  fiscal 2003,  Ferrellgas  Partners  paid to JEF Capital  Management
     $31.5  million  to  redeem a total of 0.8  million  senior  units and $11.6
     million in senior unit distributions and accrued a senior unit distribution
     of $2.0 million that was paid on September  12, 2003.  During  fiscal 2002,
     Ferrellgas  Partners paid JEF Capital  Management  $0.8 million to redeem a
     total of 19  thousand  senior  units  and  $11.1  million  in  senior  unit
     distributions  and accrued a senior unit  distribution of $2.8 million that
     was paid on September  13, 2002.  During fiscal 2001,  Ferrellgas  Partners
     paid JEF Capital  Management $83.5 million to redeem a total of 2.1 million
     senior units and $5.8 million in senior unit distributions.

     During fiscal 2003,  Ferrellgas  Partners paid common unit distributions of
     $35.6 million and $0.1 million to Ferrell  Companies  and Ferrell  Propane,
     respectively.  During  fiscal 2002,  Ferrellgas  Partners  paid common unit
     distributions  of $35.6  million and $0.1 million to Ferrell  Companies and
     Ferrell  Propane,  Inc.,  respectively.   During  fiscal  2001,  Ferrellgas
     Partners paid common unit  distributions  of $35.6 million and $27 thousand
     to Ferrell Companies and Ferrell Propane, Inc., respectively.

     Ferrell  International  Limited and FI Trading, Inc. are beneficially owned
     by James E.  Ferrell  and thus are  affiliates  of  Ferrellgas.  Ferrellgas
     enters into transactions with Ferrell  International Limited and FI Trading
     in connection  with its risk  management  activities  and does so at market
     prices in  accordance  with an  affiliate  trading  policy  approved by the
     general partner's Board of Directors.  These transactions  include forward,
     option and swap  contracts  and are all  reviewed for  compliance  with the
     policy.  During  fiscal  2003,  2002 and 2001,  Ferrellgas  recognized  net
     receipts  (disbursements)  from purchases,  sales and commodity  derivative
     transactions  of  $(0.2)  million,  $10.7  million,  and  $(28.1)  million,
     respectively.   These  net  purchases,   sales  and  commodity   derivative
     transactions with Ferrell  International  Limited and FI Trading,  Inc. are
     classified  as cost of product  sold.  There were no amounts due to or from
     Ferrell  International  Limited at July 31,  2003.  Amounts due to and from
     Ferrell  International  Limited at July 31, 2002 were $0.3 million and $0.4
     million, respectively.

     During fiscal 2003,  2002 and 2001,  Ferrell  International  Limited and FI
     Trading,  Inc.  paid  Ferrellgas  a total of $40  thousand in each year for
     accounting and administration services.

                                      F-25
<PAGE>


     Ferrellgas  also  leased  propane  tanks  from  Ferrell  Propane,  Inc.,  a
     subsidiary of the general partner from October 1998 until February 2002, at
     which time,  Ferrell  Propane  sold all its tanks to an  unrelated  entity.
     Ferrellgas  recognized  $0.3  million,  and $0.5  million of lease  expense
     during fiscal years 2002 and 2001.

N.   Contingencies and commitments

     Ferrellgas is threatened  with or named as a defendant in various  lawsuits
     that,  among other items,  claim damages for product  liability.  It is not
     possible to determine the ultimate  disposition of these matters;  however,
     management  is of the opinion that there are no known claims or  contingent
     claims that will have a material adverse effect on the financial condition,
     results of operations and cash flows of Ferrellgas.  Currently,  Ferrellgas
     is not a party to any legal  proceedings  other  than  various  claims  and
     lawsuits arising in the ordinary course of business.

     The 2.0  million  senior  units  outstanding  as of July  31,  2003  have a
     liquidating  value of $40 per unit or $79.8  million.  The senior units are
     redeemable  by Ferrellgas  Partners at any time, in whole or in part,  upon
     payment in cash of the liquidating value of the senior units, currently $40
     per unit,  plus the amount of any  accrued  and unpaid  distributions.  The
     holder of the  senior  units has the right,  subject to certain  events and
     conditions,  to convert any  outstanding  senior units into common units at
     the earlier of December 31, 2005 or upon the occurrence of a material event
     as defined by Ferrellgas Partners' partnership  agreement.  Such conversion
     rights are contingent  upon  Ferrellgas  Partners not previously  redeeming
     such securities.

     Certain  property and  equipment is leased  under  noncancelable  operating
     leases,  which require fixed  monthly  rental  payments and which expire at
     various dates through 2021. Rental expense under these leases totaled $30.0
     million,  $37.0  million,  and $42.4  million  for the years ended July 31,
     2003, 2002, and 2001, respectively.

     The following table summarizes  Ferrellgas'  future minimum rental payments
     and amounts currently anticipated to exercise purchase buyout options as of
     July 31, 2003:
<TABLE>
    <S>                          <C>           <C>          <C>          <C>            <C>           <C>
                                               Future minimum rental and buyout amounts by fiscal year
                                 ------------------------------------------------------------------------------------
                                     2004         2005         2006          2007           2008        Thereafter
                                 ------------- ------------ ------------ -------------- ------------- ---------------
    Operating lease rental
      payments                      $20,161      $14,840      $12,226      $ 8,253        $ 4,862       $ 4,748
    Operating lease buyouts           6,061        5,316        2,077        6,319          2,343         3,279
</TABLE>

O.   Employee benefits

     Ferrellgas  has no employees  and is managed and  controlled by its general
     partner.  Ferrellgas  assumes  all  liabilities,   which  include  specific
     liabilities related to the following employee benefit plans for the benefit
     of the officers and employees of the general partner.

     Ferrell  Companies makes  contributions to the ESOT, which causes a portion
     of the shares of Ferrell  Companies  owned by the ESOT to be  allocated  to
     employees'  accounts over time. The allocation of Ferrell Companies' shares
     to employee accounts causes a non-cash  compensation  charge to be incurred
     by Ferrellgas,  equivalent to the fair value of such shares allocated. This
     non-cash   compensation   charge  is  reported  separately  in  Ferrellgas'
     consolidated  statements of earnings and thus  excluded from  operating and
     general and  administrative  expenses.  The  non-cash  compensation  charge
     increased  during fiscal 2003 and 2002 primarily due to the increase in the
     fair  value  of  the  Ferrell  Companies  shares  allocated  to  employees.
     Ferrellgas is not obligated to fund or make contributions to the ESOT.

                                      F-26
<PAGE>


     The  general  partner  and its parent,  Ferrell  Companies,  have a defined
     contribution  profit-sharing  plan which  includes both profit  sharing and
     matching  contributions.  The plan covers  substantially all employees with
     more than one year of service.  With the  establishment of the ESOP in July
     1998,  Ferrellgas suspended future contributions to the profit sharing plan
     beginning with fiscal year 1998. The plan,  which  qualifies  under section
     401(k)  of  the  Internal   Revenue   Code,   also  provides  for  matching
     contributions  under a cash or deferred  arrangement based upon participant
     salaries and employee  contributions to the plan. Unlike the profit sharing
     contributions,  these matching  contributions  were not eliminated with the
     establishment of the ESOP. Contributions for the years ended July 31, 2003,
     2002,  and  2001,  were  $2.9  million,  $2.8  million,  and $3.2  million,
     respectively, under the 401(k) provisions.

     The general partner has a defined  benefit plan that provides  participants
     who were  covered  under a  previously  terminated  plan with a  guaranteed
     retirement  benefit at least equal to the benefit they would have  received
     under  the  terminated  plan.  Until  July 31,  1999,  benefits  under  the
     terminated  plan were  determined  by years of credited  service and salary
     levels.  As of July 31, 1999,  years of credited  service and salary levels
     were  frozen.  The  general  partner's  funding  policy for this plan is to
     contribute  amounts  deductible  for Federal income tax purposes and invest
     the plan assets  primarily in  corporate  stocks and bonds,  U.S.  Treasury
     bonds and short-term cash  investments.  During fiscal years 2003, 2002 and
     2001,  other  comprehensive  income and other  liabilities were adjusted by
     $(0.7) million,  $0.5 million and $2.1 million,  respectively,  because the
     accumulated benefit obligation of this plan exceeded the fair value of plan
     assets.


P.   Unit options of Ferrellgas Partners and stock options of Ferrell Companies

     Prior to April 19, 2001,  the Second Amended and Restated  Ferrellgas  Unit
     Option Plan (the "unit  option  plan")  authorized  the issuance of options
     (the "unit  options")  covering up to 850,000 of the  Ferrellgas  Partners'
     common  units  to  employees  of the  general  partner  or its  affiliates.
     Effective April 19, 2001, the unit option plan was amended to authorize the
     issuance of options  covering an additional  500,000 common units. The unit
     option  plan is  intended  to meet the  requirements  of the New York Stock
     Exchange equity holder approval policy for option plans not approved by the
     equity  holders  of a  company,  and thus  approval  of the  plan  from the
     unitholders of Ferrellgas Partners was not required. The Board of Directors
     of the general partner administers the unit option plan,  authorizes grants
     of unit options thereunder and sets the unit option price and vesting terms
     of unit options in  accordance  with the terms of the unit option plan.  No
     single  officer or director of the  general  partner may acquire  more than
     314,895  common  units  under  the  unit  option  plan.  The  unit  options
     outstanding as of July 31, 2003, are exercisable at exercise prices ranging
     from  $16.80 to $21.67 per unit,  which was an  estimate of the fair market
     value of the  units at the  time of the  grant.  In  general,  the  options
     currently  outstanding  under the unit  option  plan vest over a  five-year
     period, and expire on the tenth anniversary of the date of the grant.

                                      F-27
<PAGE>

<TABLE>
          <S>                                                   <C>               <C>                  <C>
                                                                                                        Weighted
                                                                                                       average fair
                                                                                                       value of the
                                                                     Number        Weighted average     options at
                                                                       of           exercise price      grant date
                                                                     units
                                                                ----------------- -------------------- --------------
          Outstanding, August 1, 2000                                 721,525            $18.13
          Granted                                                     651,000             17.90            $2.56
          Exercised                                                  (101,250)            16.80
          Forfeited                                                   (42,075)            19.27
                                                                -----------------
          Outstanding, July 31, 2001                                1,229,200             18.08
          Exercised                                                   (55,350)            16.80
          Forfeited                                                   (98,450)            18.04
                                                                -----------------
          Outstanding, July 31, 2002                                1,075,400             18.15
          Exercised                                                  (368,900)            18.05
          Forfeited                                                    (2,400)            18.80
                                                                -----------------
          Outstanding, July 31, 2003                                  704,100             18.20
                                                                -----------------
          Options exercisable, July 31, 2003                          364,300             18.43
                                                                -----------------
          Options exercisable, July 31, 2002                          594,725             18.25
                                                                -----------------
          Options exercisable, July 31, 2001                           503,543            18.06
                                                                -----------------
</TABLE>

<TABLE>
          <S>                                                   <C>
                                                                        Options outstanding at July 31, 2003
                                                                -----------------------------------------------------
          Range of option prices at end of year                                    $16.80-$21.67
          Weighted average remaining contractual life                                6.1 Years
</TABLE>


     The  Ferrell  Companies   Incentive   Compensation  Plan  (the  "ICP")  was
     established  by Ferrell  Companies  to allow upper  middle and senior level
     managers  of the general  partner to  participate  in the equity  growth of
     Ferrell  Companies.  The shares  underlying  the stock  options  are common
     shares of Ferrell Companies,  therefore,  there is no potential dilution of
     Ferrellgas. The ICP stock options vest ratably in 5% to 10% increments over
     12 years or 100% upon a change of  control  of  Ferrell  Companies,  or the
     death, disability or retirement at the age of 65 of the participant. Vested
     options are exercisable in increments  based on the timing of the payoff of
     Ferrell  Companies' debt, but in no event later than 20 years from the date
     of issuance.

Q.   Disclosures about fair value of financial instruments

     The carrying amount of short-term financial  instruments  approximates fair
     value because of the short maturity of the instruments.  The estimated fair
     value of  Ferrellgas'  long-term debt was $921.0 million and $710.2 million
     as of July 31,  2003 and 2002,  respectively.  The fair value is  estimated
     based on quoted market prices.

     Interest rate collar, cap and swap agreements. Ferrellgas from time to time
     has entered into various  interest  rate  collar,  cap and swap  agreements
     involving,  among  others,  the  exchange  of fixed and  floating  interest
     payment  obligations  without  the  exchange  of the  underlying  principal
     amounts.  During  the  year  ended  July 31,  2003,  an  interest  rate cap
     agreement with a large  financial  institution  expired.  The fair value of
     this agreement was de minimus at July 31, 2002.

                                      F-28
<PAGE>


R.   Business combinations

     During the year ended July 31,  2003,  Ferrellgas  acquired  the  following
     retail propane businesses with an aggregate value at $49.2 million:

     o    ProAm,  Inc., based primarily in Georgia and Texas,  acquired December
          2002;

     o    a branch  of  Cenex  Propane  Partners  Co.,  based in Iowa,  acquired
          November 2002;

     o    Northstar Propane, based in Nevada, acquired November 2002;

     o    Pettit Oil Company, Inc., based in Washington, acquired May 2003; and

     o    Wheeler's Bottled Gas, Inc., based in Ohio, acquired July 2003.

     These purchases were funded by $39.1 million in cash payments, the issuance
     of 9 thousand common units valued at an aggregate of $0.2 million, and $9.9
     million in the issuance of a short-term  non-interest  bearing note payable
     at an imputed  interest  rate of 4.25% to the  seller  and other  costs and
     consideration.

     The  aggregate   value  of  these  five  retail   propane   businesses  was
     preliminarily  allocated  as  follows:  $28.5  million  for assets  such as
     customer   tanks,   buildings  and  land,   $1.1  million  for  non-compete
     agreements,  $11.7  million for  customer  lists,  and $7.9 million for net
     working  capital.  Net working  capital was  comprised  of $8.7  million of
     current assets and $0.8 million of current liabilities.  The estimated fair
     values  and  useful  lives of assets  acquired  are based on a  preliminary
     valuation  and are  subject  to  final  valuation  adjustments.  Ferrellgas
     intends  to  continue  its  analysis  of the net  assets of these  acquired
     businesses to determine the final allocation of the total purchase price to
     the various assets acquired.  The weighted average  amortization period for
     non-compete   agreements   and  customer  lists  are  five  and  15  years,
     respectively.

     During the year ended July 31,  2002,  Ferrellgas  acquired  the  following
     retail propane businesses with an aggregate value at $10.8 million:

     o    Blue Flame Bottle Gas, based in Arizona, acquired December 2001;

     o    Alabama Butane Co., based in Alabama, acquired November 2001; and

     o    Alma Farmers Union Co-op, based in Wisconsin, acquired September 2001.

     The purchases were funded by $6.3 million of cash payments and the issuance
     of 0.1 million  common units valued at an  aggregate of $2.3  million,  and
     $2.2  million  of notes  payable to the  seller.  The  aggregate  value was
     allocated  as follows:  $7.1  million  for assets  such as customer  tanks,
     buildings and land, $2.7 million for non-compete  agreements,  $1.2 million
     for customer  lists,  $32 thousand for other assets and $(0.2)  million for
     net working  capital.  Net working capital was comprised of $0.6 million of
     current  assets  and $0.7  million  of current  liabilities.  The  weighted
     average  amortization period for non-compete  agreements and customer lists
     are five and 15 years, respectively.

     During  the  fiscal  year  ended July 31,  2001,  Ferrellgas  acquired  the
     following  retail  propane  businesses  with  an  aggregate  value  of $0.4
     million:

     o    Stone Petroleum, based in Florida, acquired September 2000;

     o    Jordan's Gas Service, based in Ohio, acquired May 2001; and

     o    Wilson Oil, based in Kentucky, acquired May 2001.

     These  purchases  were  funded by $0.2  million  of cash  payments  and the
     issuance of $0.2 million of notes payable to the seller. These acquisitions
     do not include a $4.6 million  adjustment made in the second fiscal quarter
     of fiscal 2001 to working capital  related to a final valuation  adjustment
     to record a fiscal 2000 acquisition.

                                      F-29
<PAGE>


     The results of  operations  of all  acquisitions  have been included in the
     consolidated financial statements from their dates of acquisition.  The pro
     forma  effect of these  transactions  was not  material  to the  results of
     operations.

S.   Earnings per common unit

     In  fiscal  2003 and  2002,  90  thousand  and 71  thousand  unit  options,
     respectively,  were considered  dilutive,  however,  these additional units
     caused less than a $0.01 change between the basic and dilutive earnings per
     common unit. In fiscal 2001, the unit options were antidilutive. Below is a
     calculation  of the basic  and  diluted  earnings  per  common  unit in the
     consolidated statements of earnings for the periods indicated.  For diluted
     earnings per common unit  purposes,  the senior units were excluded as they
     are considered  contingently  issuable common units for which all necessary
     conditions  for their issuance have not been satisfied as of the end of the
     reporting  period.  In order to compute the basic and diluted  earnings per
     common unit,  the  distributions  on senior units are  subtracted  from net
     earnings to compute net earnings available to common unitholders.
<TABLE>
     <S>                                                <C>                  <C>                   <C>
                                                                        For the year ended July 31,
                                                        ------------------------------------------------------------
                                                              2003                 2002                  2001
                                                        -----------------    -----------------     -----------------
      Net earnings available to common unitholders
       before cumulative effect of change in
       accounting principle                                  $48,244              $48,299               $45,594

     Cumulative effect of change in accounting
       principle, net of minority interest and
       general partner interest of $56                        (2,726)                 -                     -
                                                        -----------------    -----------------     -----------------

     Net earnings available to common unitholders
                                                             $45,518              $48,299               $45,594
                                                        =================    =================     =================

     ---------------------------------------------------------------------------------------------------------------
     Weighted average common units outstanding (in
       thousands)                                            36,300.5             36,022.3              31,987.3
                                                        =================    =================     =================

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

     Basic and diluted earnings per common unit:
     -------------------------------------------
     Net earnings available to common unitholders
       before cumulative change in accounting
       principle                                             $    1.33            $    1.34             $    1.43

     Cumulative effect of change in accounting
       principle, net of minority interest and
       general partner interest of $56                           (0.08)                  -                     -
                                                        -----------------    -----------------     -----------------
     Net earnings available to common unitholders
                                                             $    1.25            $    1.34             $    1.43
                                                        =================    =================     =================
</TABLE>

                                      F-30
<PAGE>

T.   Quarterly data (unaudited)

     The following  summarized unaudited quarterly data includes all adjustments
     (consisting  only  of  normal  recurring   adjustments)   which  Ferrellgas
     considers necessary for a fair presentation.  Due to the seasonality of the
     retail  distribution of propane,  first and fourth quarter revenues,  gross
     profit and net  earnings  are  consistently  less than the second and third
     quarter results.  Other factors affecting the results of operations include
     competitive  conditions,   demand  for  product,  timing  of  acquisitions,
     variations in the weather and  fluctuations in propane  prices.  The sum of
     net  earnings  (loss)  per  common  unit by  quarter  may not equal the net
     earnings  (loss)  per  common  unit for the year due to  variations  in the
     weighted average units outstanding used in computing such amounts.

Fiscal year ended July 31, 2003
<TABLE>
<S>                                      <C>                   <C>                   <C>                   <C>
                                          First quarter         Second quarter        Third quarter          Fourth quarter
                                         -----------------     -----------------     -----------------     -----------------

Revenues                                         $216,314              $464,466              $369,365               $171,494
Gross profit                                       92,642               209,748               161,431                 66,849
Net earnings (loss) available
  to common unitholders
  before cumulative effect of
  change in accounting
  principle                                      (24,744)                83,516                36,232               (46,759)
Net earnings (loss) available
  to common unitholders
  before cumulative effect of
  change in accounting
  principle per basic and
    diluted common unit                            (0.69)                  2.31                  1.00                 (1.27)

Net earnings (loss)                              (24,966)                87,102                39,373               (44,760)
</TABLE>

                                      F-31
<PAGE>

<TABLE>
<S>                                      <C>                   <C>                   <C>                   <C>
Fiscal year ended July 31, 2002
                                          First quarter         Second quarter        Third quarter         Fourth quarter
                                         -----------------     -----------------     -----------------     ------------------

Revenues                                     $245,243              $355,738              $287,161               $146,654
Gross profit                                   95,296               179,147               152,521                 74,395
Net earnings (loss) available
  to common unitholders                       (16,141)               64,732                33,511                (33,803)
Net earnings (loss) available
  to common unitholders:
     per basic common unit                      (0.45)                 1.80                  0.93                  (0.94)
     per diluted common unit                    (0.45)                 1.80                  0.93                  (0.93)
Net earnings (loss)                           (13,502)               68,188                36,635                (31,362)
</TABLE>


                                      F-32
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Ferrellgas Partners Finance Corp.
Liberty, Missouri

We have audited the accompanying  balance sheets of Ferrellgas  Partners Finance
Corp. (a wholly-owned  subsidiary of Ferrellgas Partners,  L.P.), as of July 31,
2003, and 2002, and the related statements of earnings, stockholder's equity and
cash flows for each of the three years in the period ended July 31, 2003.  These
financial  statements are the responsibility of the Ferrellgas  Partners Finance
Corp.'s  management.  Our  responsibility  is to  express  an  opinion  on these
financial statements based on our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the financial position of Ferrellgas Partners Finance Corp. as of July
31, 2003 and 2002, and the results of its operations and its cash flows for each
of the  three  years in the  period  ended  July  31,  2003 in  conformity  with
accounting principles generally accepted in the United States of America.





DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003





                                      F-33
<PAGE>


                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                                 BALANCE SHEETS


<TABLE>
<S>                                                                 <C>              <C>
                                                                             July 31,
                                                                    ------------------------------
ASSETS                                                                  2003              2002
------------------------------------------------------------------  -------------    -------------

Cash                                                                      $1,000           $1,000
                                                                    -------------    -------------
Total assets                                                              $1,000           $1,000
                                                                    =============    =============

STOCKHOLDER'S EQUITY
------------------------------------------------------------------

Common stock, $1.00 par value; 2,000 shares
authorized; 1,000 shares issued and outstanding                           $1,000           $1,000

Additional paid in capital                                                 2,463            2,061

Accumulated deficit                                                       (2,463)          (2,061)
                                                                    -------------    -------------
Total stockholder's equity                                                $1,000           $1,000
                                                                    =============    =============

</TABLE>
                       See notes to financial statements.

                                      F-34
<PAGE>


                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                             STATEMENTS OF EARNINGS





                                                 For the year ended July 31,
                                             -----------------------------------
                                                2003         2002        2001
                                             ----------   ----------  ----------
Revenues                                        $ -          $ -         $ -

General and administrative expense               402          399         425
                                             ----------   ----------  ----------

Net loss                                       $(402)      $ (399)     $ (425)
                                             ==========   ==========  ==========


                       See notes to financial statements.

                                      F-35
<PAGE>


                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                       STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<S>                             <C>         <C>        <C>         <C>            <C>
                                    Common stock        Additional                    Total
                                ----------------------   paid in     Accumulated   stockholder's
                                  Shares     Dollars     capital      deficit         equity
                                ----------- ---------- ----------- -------------- ----------------

August 1, 2000                    1,000      $1,000      $1,237        ($1,237)       $1,000

Capital contribution                -           -           425            -             425

Net loss                            -           -           -             (425)         (425)
                                ----------- ---------- ----------- -------------- ----------------
July 31, 2001                     1,000       1,000       1,662         (1,662)        1,000

Capital contribution                -           -           399            -             399

Net loss                            -           -           -             (399)         (399)
                                ----------- ---------- ----------- -------------- ----------------
July 31, 2002                     1,000      $1,000       2,061         (2,061)        1,000

Capital contribution                -           -           402            -             402

Net loss                            -           -           -             (402)         (402)
                                ----------- ---------- ----------- -------------- ----------------
July 31, 2003                     1,000      $1,000      $2,463       $ (2,463)       $1,000
                                =========== ========== =========== ============== ================
</TABLE>



                       See notes to financial statements.

                                      F-36
<PAGE>




                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                            STATEMENTS OF CASH FLOWS





                                                   For the year ended July 31,
                                               ---------------------------------
                                                 2003         2002        2001
                                               --------     --------    --------
Cash flows from operating activities:
  Net loss                                     $ (402)      $ (399)     $ (425)
                                               --------     --------    --------
      Cash used by operating activities          (402)        (399)       (425)
                                               --------     --------    --------


Cash flows from financing activities:
  Capital contribution                            402          399         425
                                               --------     --------    --------
      Cash provided by financing activities       402          399         425
                                               --------     --------    --------

Change in cash                                      -            -          -
Cash - beginning of year                        1,000        1,000       1,000
                                               --------     --------    --------
Cash - end of year                             $1,000       $1,000      $1,000
                                               ========     ========    ========

                       See notes to financial statements.


                                      F-37
<PAGE>

                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                          NOTES TO FINANCIAL STATEMENTS



A.   Formation

     Ferrellgas  Partners  Finance  Corp.  (the  "Finance  Corp."),  a  Delaware
     corporation,  was formed on March 28, 1996 and is a wholly-owned subsidiary
     of Ferrellgas Partners, L.P. (the "Partnership").

     The Partnership contributed $1,000 to the Finance Corp. on April 8, 1996 in
     exchange for 1,000 shares of common stock.

B.   Commitment


     On April 26, 1996, the  Partnership  issued $160.0 million of 9 3/8% senior
     secured  notes due 2006 (the  "senior  notes").  The  senior  notes  became
     redeemable  at the option of the  Partnership,  in whole or in part, at any
     time on or after June 15, 2001.  On September  24,  2002,  the  Partnership
     redeemed the Senior Notes with the proceeds  from $170.0  million of 8 3/4%
     senior  notes due 2012.  On December 18, 2002,  the  Partnership  issued an
     additional $48.0 million of 8 3/4% senior notes due 2012.

     Effective  April 27, 2000,  the  Partnership  entered into an interest rate
     swap  agreement  ("Swap  Agreement")  with Bank of America,  related to the
     semi-annual  interest  payment due on the Senior Notes. The Swap Agreement,
     which was terminated by Bank of America on June 15, 2001,  required Bank of
     America to pay the stated fixed interest rate (annual rate 9 3/8%) pursuant
     to the Senior Notes equaling  $7,500,000  every six months due on each June
     15 and  December  15. In  exchange,  the  Partnership  was required to make
     quarterly  floating  interest  rate  payments  on the 15th of March,  June,
     September  and  December  based on an annual  interest  rate equal to the 3
     month LIBOR interest rate plus 1.655%  applied to the same notional  amount
     of $160.0 million. The Partnership resumed paying the stated fixed interest
     rate effective June 16, 2001.

     The Finance Corp. serves as a co-obligor for the senior notes.

C.   Income taxes

     Income taxes have been computed as though the Finance  Corp.  files its own
     income  tax  return.  Deferred  income  taxes are  provided  as a result of
     temporary  differences  between  financial  and  tax  reporting  using  the
     asset/liability  method.  Deferred  income taxes are recognized for the tax
     consequences  of  temporary  differences  between the  financial  statement
     carrying amounts and tax basis of existing assets and liabilities.

     Due to the  inability  of the Finance  Corp.  to utilize the  deferred  tax
     benefit  of $977  associated  with  the  current  year net  operating  loss
     carryforward  of $2,511,  which  expire at various  dates  through July 31,
     2023,  a valuation  allowance  has been  provided on the full amount of the
     deferred tax asset.  Accordingly,  there is no net deferred tax benefit for
     the years ended July 31, 2003,  2002 or 2001,  and there is no net deferred
     tax asset as of July 31, 2003 and 2002.


                                      F-38
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

To the Partners of
Ferrellgas, L.P. and Subsidiaries
Liberty, Missouri

We have audited the accompanying consolidated balance sheets of Ferrellgas, L.P.
and  subsidiaries  (the  "Partnership")  as of July 31,  2003 and 2002,  and the
related  consolidated  statements of earnings,  partners' capital and cash flows
for each of the three years in the period ended July 31, 2003.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Ferrellgas,  L.P. and subsidiaries
as of July 31, 2003 and 2002, and the results of their operations and their cash
flows  for each of the  three  years in the  period  ended  July  31,  2003,  in
conformity with accounting principles generally accepted in the United States of
America.

As  discussed  in Notes  B(18)  and I, the  Partnership  changed  its  method of
accounting for asset  retirement  obligations  with the adoption of Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations",  in  fiscal  2003 and,  as  discussed  in Notes  B(8) and F to the
consolidated financial statements, changed its method of accounting for goodwill
and other intangible assets with the adoption of Financial  Accounting Standards
No. 142, "Goodwill and Other Intangible Assets", in fiscal 2002.





DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003





                                      F-39
<PAGE>


                        FERRELLGAS, L.P. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<S>                                                        <C>             <C>
                                                                      July 31,
                                                           ----------------------------
ASSETS                                                         2003           2002
-----------------------------------------------------      -------------   ------------

Current assets:
  Cash and cash equivalents                                  $  10,816       $ 19,388
  Accounts and notes receivable (net of
    allowance for doubtful accounts of $2,672 and
    $1,467 in 2003 and 2002, respectively)                      56,742         74,274
  Inventories                                                   69,077         48,034
  Prepaid expenses and other current assets                      7,629          8,645
                                                           -------------   ------------
    Total current assets                                       144,264        150,341

  Property, plant and equipment, net                           684,917        506,531
  Goodwill                                                     124,190        124,190
  Intangible assets, net                                        98,157         98,170
  Other assets, net                                              4,163          3,001
                                                           -------------   ------------
    Total assets                                            $1,055,691       $882,233
                                                           =============   ============



LIABILITIES AND PARTNERS' CAPITAL
--------------------------------------------------

Current liabilities:
  Accounts payable                                          $   59,261       $ 54,316
  Other current liabilities                                     77,211         86,926
                                                           -------------   ------------
    Total current liabilities                                  136,472        141,242

  Long-term debt                                               668,657        543,858
  Other liabilities                                             18,747         14,861
  Contingencies and commitments (Note M)                          -              -

Partners' capital
  Limited partner                                              231,420        183,173
  General partner                                                2,363          1,871
  Accumulated other comprehensive loss                          (1,968)        (2,772)
                                                           -------------   ------------
    Total partners' capital                                    231,815        182,272
                                                           -------------   ------------
    Total liabilities and partners' capital                 $1,055,691       $882,233
                                                           =============   ============
</TABLE>


                 See notes to consolidated financial statements.

                                      F-40
<PAGE>


                        FERRELLGAS, L.P. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS
                                 (in thousands)
<TABLE>
<S>                                                         <C>             <C>              <C>
                                                                    For the year ended July 31,
                                                            -------------------------------------------
                                                               2003            2002             2001
                                                            ----------      ----------       ----------

Revenues:
  Propane and other gas liquids sales                       $1,136,358      $  953,117       $1,381,940
  Other                                                         85,281          81,679           86,730
                                                            ----------      ----------       ----------
    Total revenues                                           1,221,639       1,034,796        1,468,670

Cost of product sold (exclusive of
  depreciation, shown with amortization below)                 690,969         533,437          930,117
                                                            ----------      ----------       ----------

Gross profit                                                   530,670         501,359          538,553

Operating expense                                              297,535         279,622          288,258
Depreciation and amortization expense                           40,779          41,937           56,523
General and administrative expense                              28,024          27,157           25,508
Equipment lease expense                                         20,640          24,551           30,986
Employee stock ownership plan compensation charge                6,778           5,218            4,843
Loss on disposal of assets and other                             6,679           3,957            5,744
                                                            ----------      ----------       ----------

Operating income                                               130,235         118,917          126,691

Interest expense                                               (45,318)        (43,972)         (47,686)
Interest income                                                  1,281           1,414            3,027
                                                            ----------      ----------       ----------

Earnings before cumulative effect of change
  in accounting principle                                       86,198          76,359           82,032

Cumulative effect of change in accounting principle             (2,782)             -              -
                                                            ----------      ----------       ----------

Net earnings                                                $   83,416      $   76,359       $   82,032
                                                            ==========      ==========       ==========
</TABLE>

                           See notes to consolidated financial statements.

                                                 F-41
<PAGE>


                        FERRELLGAS, L.P. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (in thousands)

<TABLE>
<S>                                                    <C>            <C>            <C>              <C>              <C>
                                                                                           Accumulated other
                                                                                           comprehensive loss
                                                                                     ------------------------------
                                                                                                                         Total
                                                         Limited        General          Risk            Pension        partners'
                                                         partner        partner        management       liability        capital
                                                       -----------    -----------    -------------    -------------    -----------

August 1, 2000                                          $199,086        $2,032         $   -            $  -            $201,118

Contributions in connection with
  ESOP compensation charge                                 4,793            50             -               -               4,843

Quarterly cash and accrued distributions                 (85,964)         (877)            -               -             (86,841)

Comprehensive income:
  Net earnings                                            81,203           829             -               -              82,032
  Other comprehensive income (loss):
    Cumulative effect of accounting change                  -             -               709              -
    Net loss on risk management derivatives                 -             -              (289)             -
    Reclassification adjustments                            -             -              (709)             -
    Pension liability adjustment                            -             -                -            (2,092)           (2,381)
                                                                                                                       -----------
Comprehensive income                                                                                                      79,651

                                                       -----------    -----------    -------------    -------------    -----------
July 31, 2001                                            199,118         2,034           (289)          (2,092)          198,771

Contributions in connection with
  ESOP compensation charge                                 5,165            53             -               -               5,218

Quarterly cash and accrued distributions                 (99,031)       (1,011)            -               -            (100,042)

Net assets contributed by Ferrellgas Partners and
  the general partner in connection with acquisitions      2,333            24             -               -               2,357

Comprehensive income:
  Net earnings                                            75,588           771             -               -              76,359
  Other comprehensive income (loss):
    Net losses on risk management derivatives               -             -              (153)             -
    Reclassification of net losses on
      derivatives                                           -             -               289              -
    Pension liability adjustment                            -             -                -              (527)             (391)
                                                                                                                       -----------
Comprehensive income                                                                                                     75,968

                                                       -----------    -----------    -------------    -------------    -----------
July 31, 2002                                            183,173         1,871           (153)          (2,619)          182,272

Contributions in connection with
  ESOP compensation charge                                 6,710            68             -               -               6,778

Quarterly cash and accrued distributions                (100,404)       (1,025)            -               -            (101,429)

Cash contributed by Ferrellgas Partners and
   the general partner                                    17,576           179             -               -              17,755

Net assets contributed by Ferrellgas Partners and
   the general partner in connection with acquisitions    41,792           427             -               -              42,219

Comprehensive income:
  Net earnings                                            82,573           843             -               -              83,416
  Other comprehensive income:
    Reclassification of net gains on
      derivatives                                           -             -               153              -
    Pension liability adjustment                            -             -                -               651               804
                                                                                                                        -----------
Comprehensive income                                                                                                     84,220

                                                       -----------    -----------    -------------    -------------    -----------
July 31, 2003                                           $231,420        $2,363         $   -           $(1,968)         $231,815
                                                       ===========    ===========    =============    =============    ===========
</TABLE>

                 See notes to consolidated financial statements.

                                      F-42
<PAGE>


                        FERRELLGAS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<S>                                                           <C>         <C>          <C>
                                                                   For the year ended July 31,
                                                              -----------------------------------
                                                                 2003        2002         2001
                                                              ----------  ----------   ----------

Cash flows from operating activities:
 Net earnings                                                   $83,416     $76,359      $82,032
 Reconciliation of net earnings to net cash provided
   by operating activities:
 Cumulative effect of change in accounting principle              2,782           -            -
  Depreciation and amortization                                  40,779      41,937       56,523
  Employee stock ownership compensation charge                    6,778       5,218        4,843
  Loss on disposal of assets                                      5,419       3,223        1,459
  Other                                                           6,134         482        5,447
  Changes in operating assets and liabilities, net of effects
     from business acquisitions:
    Accounts and notes receivable, net of securitization        (16,308)     19,614       (9,121)
    Inventories                                                 (17,097)     17,318       11,333
    Prepaid expenses and other current assets                     1,616       1,661       (2,071)
    Accounts payable                                              4,910      (1,385)     (39,792)
    Accrued interest expense                                        661        (511)       1,009
    Other current liabilities                                    (1,202)      1,915        2,233
    Other liabilities                                             1,379       2,057        2,302
  Accounts receivable securitization:
    Proceeds from new accounts receivable securitizations        60,000      30,000      115,000
    Proceeds from collections reinvested in revolving
      period accounts receivable securitizations                562,883     360,677      725,955
    Remittances of amounts collected as servicer of
      accounts receivable securitizations                      (588,883)   (421,677)    (809,955)
                                                              ----------  ----------   ----------
      Net cash provided by operating activities                 153,267     136,888      147,197
                                                              ----------  ----------   ----------

Cash flows from investing activities:
 Business acquisitions, net of cash acquired                     (7,139)     (6,294)      (4,668)
 Capital expenditures - tank lease buyout                      (155,600)          0            0
 Capital expenditures - technology initiative                   (21,203)    (23,114)        (100)
 Capital expenditures - other                                   (18,310)    (14,402)     (15,148)
 Other                                                            2,905       4,237        1,652
                                                              ----------  ----------   ----------
      Net cash used in investing activities                    (199,347)    (39,573)     (18,264)
                                                              ----------  ----------   ----------

Cash flows from financing activities:
 Distributions                                                 (102,233)   (100,062)     (83,981)
 Proceeds from issuance of debt                                 140,000           0        9,843
 Principal payments on debt                                     (16,367)     (3,069)     (26,205)
 Net reductions to short-term borrowings                              0           0      (18,342)
 Cash paid for financing costs                                   (2,074)          0          (56)
 Contributions from partners                                     18,182          33            -
 Advance to Ferrellgas Partners, L.P.                                 -           -          142
                                                              ----------  ----------   ----------
      Net cash provided by (used in) financing activities        37,508    (103,098)    (118,599)
                                                              ----------  ----------   ----------

Increase (decrease) in cash and cash equivalents                 (8,572)     (5,783)      10,334
Cash and cash equivalents - beginning of period                  19,388      25,171       14,837
                                                              ----------  ----------   ----------
Cash and cash equivalents - end of period                       $10,816     $19,388      $25,171
                                                              ==========  ==========   ==========

Cash paid for interest                                          $42,843     $42,732      $44,706
                                                              ==========  ==========   ==========
</TABLE>

                 See notes to consolidated financial statements.

                                      F-43
<PAGE>


                                FERRELLGAS, L.P.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (Dollars in thousands, unless otherwise designated)

A.   Partnership organization and formation

     Ferrellgas,  L.P.  was formed  April 22,  1994,  and is a Delaware  limited
     partnership.  Ferrellgas,  L.P. was formed to acquire,  own and operate the
     propane  business and assets of Ferrellgas,  Inc.  ("general  partner"),  a
     wholly-owned  subsidiary of Ferrell Companies,  Inc. ("Ferrell Companies").
     The general  partner holds an  approximate 1% general  partner  interest in
     Ferrellgas,   L.P.  and  performs  all  management  functions.   Ferrellgas
     Partners, L.P., a publicly traded limited partnership, holds an approximate
     99% interest in and consolidates Ferrellgas, L.P. Ferrellgas Partners, L.P.
     and  Ferrellgas,   L.P.  are  governed  by  their  respective   partnership
     agreements. These agreements contain specific provisions for the allocation
     of  net  earnings  and  loss  to  each  of the  partners  for  purposes  of
     maintaining the partner capital accounts.

     On July 17, 1998, 100% of the outstanding common stock of Ferrell Companies
     was purchased primarily from Mr. James E. Ferrell and his family by a newly
     established  leveraged employee stock ownership trust ("ESOT")  established
     pursuant to the Ferrell  Companies  Employee Stock Ownership Plan ("ESOP").
     The purpose of the ESOP is to provide  employees of the general  partner an
     opportunity   for  ownership  in  Ferrell   Companies  and   indirectly  in
     Ferrellgas, L.P. As contributions are made by Ferrell Companies to the ESOT
     in the future,  shares of Ferrell Companies are allocated to the employees'
     ESOP accounts.

     On June 5, 2000,  Ferrellgas,  L.P.'s partnership  agreement was amended to
     allow the  general  partner to have an option in  maintaining  its  1.0101%
     general partner interest in Ferrellgas,  L.P.  concurrent with the issuance
     of other additional  equity.  Prior to this amendment,  the general partner
     was required to make capital contributions to Ferrellgas,  L.P. in order to
     maintain its 1.0101% general partner interest  concurrent with the issuance
     of any additional equity.

B.   Summary of significant accounting policies

     (1) Nature of  operations:  Ferrellgas,  L.P. is engaged  primarily  in the
     retail  distribution  of propane and related  equipment and supplies in the
     United  States.  The  retail  market is  seasonal  because  propane is used
     primarily for heating in residential and commercial buildings.  Ferrellgas,
     L.P.  serves  more  than one  million  residential,  industrial/commercial,
     agricultural and other customers.

     (2)  Accounting  estimates:  The  preparation  of financial  statements  in
     conformity  with  accounting  principles  generally  accepted in the United
     States of  America  ("GAAP")  requires  management  to make  estimates  and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosures  of  contingent  assets  and  liabilities  at the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reported  period.  Actual  results  could  differ  from  these
     estimates.  Significant  estimates  impacting  the  consolidated  financial
     statements   include  accruals  that  have  been  established  for  product
     liability and other claims,  useful lives of property,  plant and equipment
     assets,  residual  values  of tanks,  amortization  methods  of  intangible
     assets, and valuation methods of derivative commodity contracts.

     (3) Principles of consolidation:  The accompanying  consolidated  financial
     statements  present  the  consolidated   financial  position,   results  of
     operations and cash flows of Ferrellgas,  L.P. and its  subsidiaries  after
     elimination  of  all  material   intercompany  accounts  and  transactions.
     Ferrellgas Receivables, LLC, a wholly owned unconsolidated subsidiary, is a
     qualifying special purpose entity.

                                      F-44
<PAGE>


     (4) Cash and cash equivalents and non-cash activities:  For purposes of the
     consolidated  statements of cash flows,  Ferrellgas,  L.P.  considers  cash
     equivalents to include all highly liquid debt instruments purchased with an
     original maturity of three months or less.  Significant  non-cash investing
     and financing  activities are primarily related to the accounts  receivable
     securitization, transactions with related parties and business combinations
     and are disclosed in Note E - Accounts receivable securitization,  Note L -
     Transactions  with  related  parties  and Note Q -  Business  combinations,
     respectively.

     (5)  Inventories:  Inventories  are  stated  at the lower of cost or market
     using average cost and actual cost methods.  Ferrellgas,  L.P.  enters into
     commodity  derivative  contracts  involving propane and related products to
     hedge, reduce risk and anticipate market movements. The fair value of these
     derivative contracts is classified as inventory.

     (6) Accounts receivable securitization:  Ferrellgas, L.P. has agreements to
     transfer,  on an ongoing basis,  certain of its trade  accounts  receivable
     through  an  accounts  receivable   securitization   facility  and  retains
     servicing  responsibilities  as well as a  retained  interest  related to a
     portion of the transferred receivables.  Ferrellgas,  L.P. accounts for the
     securitization  of accounts  receivable  in  accordance  with  Statement of
     Financial  Accounting Standards ("SFAS") No. 140, "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities." As a
     result, the related  receivables are removed from the consolidated  balance
     sheet and a retained  interest  is recorded  for the amount of  receivables
     sold in excess of cash received. Retained interest is included in "Accounts
     and notes receivable" in the consolidated balance sheets.

     Ferrellgas,  L.P. determines the fair value of its retained interests based
     on the present value of future expected cash flows using  management's best
     estimates of various factors, including credit loss experience and discount
     rates  commensurate with the risks involved.  These assumptions are updated
     periodically  based on actual results,  thus the estimated  credit loss and
     discount  rates  utilized  are  materially   consistent   with   historical
     performance.  Due to the  short-term  nature  of  Ferrellgas  L.P.'s  trade
     receivables,  variations in the credit and discount  assumptions  would not
     significantly  impact  the fair  value  of the  retained  interests.  Costs
     associated  with the sale of receivables  are included in "Loss on disposal
     of assets and other" in the consolidated statements of earnings. See Note E
     - Accounts  receivable  securitization  - for further  discussion  of these
     transactions.

     (7) Property, plant and equipment: Property, plant and equipment are stated
     at cost less  accumulated  depreciation.  Expenditures  for maintenance and
     routine  repairs are expensed as  incurred.  Ferrellgas,  L.P.  capitalizes
     equipment replacement and betterment expenditures that are (i) greater than
     $1 thousand,  (ii) upgrade,  replace or completely rebuild major mechanical
     components  and (iii)  extend  the  original  book  life of the  equipment.
     Depreciation  is  calculated  using the  straight-line  method based on the
     estimated  useful  lives  of the  assets  ranging  from  two  to 30  years.
     Ferrellgas   L.P.,  using  its  best  estimates  based  on  reasonable  and
     supportable  assumptions and  projections,  reviews  long-lived  assets for
     impairment  whenever events or changes in  circumstances  indicate that the
     carrying  amount  of its  assets  might  not be  recoverable.  See Note D -
     Supplemental  financial  statement  information - for further discussion of
     property, plant and equipment.

     (8)  Goodwill:  Goodwill  is not  amortized  and  is  tested  annually  for
     impairment. Beginning in the first quarter of fiscal 2002, Ferrellgas, L.P.
     adopted SFAS No. 142 which modified the financial  accounting and reporting
     for  acquired   goodwill  and  other  intangible   assets,   including  the
     requirement  that  goodwill  and  some  intangible   assets  no  longer  be
     amortized.  Ferrellgas, L.P. tested goodwill for impairment at the time the
     statement  was adopted and  continues to do so each January 31 on an annual
     basis. Ferrellgas, L.P. did not recognize any impairment losses as a result
     of these tests.

                                      F-45
<PAGE>


     (9) Intangible assets:  Intangible assets, consisting primarily of customer
     lists  and  noncompete  notes,  are  stated  at cost,  net of  amortization
     calculated using either  straight-line or accelerated  methods over periods
     ranging  from  two  to 15  years.  Ferrellgas,  L.P.  reviews  identifiable
     intangibles for impairment in a similar manner as with  long-lived  assets.
     Ferrellgas,  L.P.,  using  its  best  estimates  based  on  reasonable  and
     supportable  assumptions and  projections,  reviews  long-lived  assets for
     impairment  whenever events or changes in  circumstances  indicate that the
     carrying  amount  of its  assets  might  not be  recoverable.  See Note G -
     Intangible assets, net - for further discussion of intangible assets.

     (10) Accounting for derivative commodity contracts: Ferrellgas, L.P. enters
     into  commodity   options   involving   propane  and  related  products  to
     specifically hedge certain product cost risk. Any changes in the fair value
     of these  specific  cash flow hedge  positions are deferred and included in
     other  comprehensive  income and recognized as an adjustment to the overall
     purchase  price of product in the month the  purchase  contract is settled.
     Ferrellgas,  L.P.  also  enters  into other  commodity  forward and futures
     purchase/sale  agreements and commodity swaps and options involving propane
     and related  products,  which are not specific  hedges to a certain product
     cost risk, but are used for risk  management  purposes.  To the extent such
     contracts are entered into at fixed prices and thereby subject  Ferrellgas,
     L.P. to market risk,  the  contracts are accounted for using the fair value
     method.  Under  this  valuation  method,  derivatives  are  carried  on the
     consolidated  balance  sheets at fair  value  with  changes  in that  value
     recognized in earnings.  Ferrellgas,  L.P.  classifies all gains and losses
     from these  derivative  commodity  contracts  entered into for product risk
     management purposes as cost of product sold in the consolidated  statements
     of earnings. See Note K - Derivatives - for further discussion.

     (11) Revenue  recognition:  Sales of propane are  recognized by Ferrellgas,
     L.P. at the time product is delivered  to its  customers.  Revenue from the
     sale of propane  appliances  and  equipment  is  recognized  at the time of
     delivery  or  installation.  Revenues  from  repairs  and  maintenance  are
     recognized  upon  completion of the service.  Ferrellgas,  L.P.  recognizes
     shipping  and  handling   revenues  and  expenses  for  sales  of  propane,
     appliances and equipment at the time of delivery or installation.  Shipping
     and  handling  revenues  are  included  in the price of propane  charged to
     customers, and thus are classified as revenue.

     (12) Shipping and handling expenses: Shipping and handling expenses related
     to delivery personnel, vehicle repair and maintenance and general liability
     expenses  are  classified  within  operating  expense on the  statement  of
     earnings.  Depreciation expenses on delivery vehicles Ferrellgas, L.P. owns
     are classified within depreciation and amortization expense. Lease expenses
     on  delivery  vehicles  Ferrellgas,   L.P.  leases  are  classified  within
     equipment  lease  expense.  See Note D - Supplemental  financial  statement
     information  - for the  financial  statement  presentation  of shipping and
     handling expenses.

     (13) Cost of product  sold:  Cost of  product  sold  includes  all costs to
     acquire propane, other gas liquids and non-gas items, including the results
     from  all  risk  management   activities  and  the  costs  of  storing  and
     transporting  inventory to  Ferrellgas  L.P.'s  retail  districts  prior to
     delivery to its customers.

     (14)  Operating   expenses:   Operating   expenses  primarily  include  the
     personnel,  vehicle, delivery, handling, plant, office, selling, marketing,
     credit  and   collections   and  other  expenses   related  to  the  retail
     distribution of propane and related equipment and supplies.

     (15) Income taxes: Ferrellgas,  L.P. is a limited partnership. As a result,
     Ferrellgas,  L.P.'s  earnings or losses for Federal income tax purposes are
     included in the tax returns of the  individual  partners.  Accordingly,  no
     recognition has been given to income taxes in the accompanying consolidated
     financial  statements  of  Ferrellgas,  L.P.  Net  earnings  for  financial
     statement purposes may differ  significantly from taxable income reportable
     to partners as a result of differences  between the tax basis and financial
     reporting basis of assets and liabilities and the taxable income allocation
     requirements under Ferrellgas, L.P.'s partnership agreement.

                                      F-46
<PAGE>


     (16) Unit and stock-based compensation:  Ferrellgas,  L.P. accounts for the
     Ferrellgas  Partners  Unit  Option  Plan and the  Ferrell  Companies,  Inc.
     Incentive  Compensation Plan ("ICP") using the intrinsic value method under
     the provisions of Accounting  Principles Board ("APB") No. 25,  "Accounting
     for Stock Issued to  Employees,"  for all periods  presented  and makes the
     fair value method pro forma  disclosures  required  under the provisions of
     SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
     No.  148  "Accounting   for  Stock-Based   Compensation  -  Transition  and
     Disclosure." Accordingly,  no compensation cost has been recognized for the
     unit option  plan,  or for the ICP. Had  compensation  cost for these plans
     been  determined  based  upon the fair  value at the grant  date for awards
     under these plans,  consistent with the methodology  prescribed  under SFAS
     No. 123,  Ferrellgas,  L.P.'s net earnings and earnings per unit would have
     been adjusted as noted in the table below:
<TABLE>
       <S>                                                     <C>              <C>              <C>
                                                                   2003             2002             2001
                                                               -------------    -------------    -------------
       Net earnings as reported                                     $83,416          $76,359          $82,032

       Deduct: Total stock-based employee
         compensation expenses determined under fair
         value based method for all awards                             (952)            (992)            (982)
                                                               -------------    -------------    -------------

       Pro forma net earnings                                       $82,464          $75,367          $81,050
                                                               =============    =============    =============
</TABLE>

     The  fair  value  of the  unit  options  granted  during  fiscal  2001  was
     determined  using a binomial  option  valuation  model  with the  following
     assumptions:  a) distribution  amount of $0.50 per common unit per quarter,
     b) average common unit price volatility of 23.2%, c) the risk-free interest
     rate used was 4.4%,  and d) the  expected  life of the option used was five
     years.  The fair value of the ICP stock  options  granted  during the 2003,
     2002  and  2001  fiscal  years  were  determined  using a  binomial  option
     valuation model with the following assumptions: a) no dividends, b) average
     stock price  volatility  of 18.6%,  19.2% and 13.2% used in 2003,  2002 and
     2001, respectively,  c) the risk-free interest rate used was 4.0%, 4.3% and
     5.2% in 2003,  2002 and  2001,  respectively  and d)  expected  life of the
     options between five and 12 years.

     See Note O - Unit options of Ferrellgas Partners, L.P. and stock options of
     Ferrell  Companies - for further  discussion  and disclosure of stock-based
     compensation.

     (17) Segment information: Ferrellgas, L.P. is a single reportable operating
     segment  engaging  in  the  retail  distribution  of  propane  and  related
     equipment and supplies.

     (18)  Adoption  of  new  accounting  standards:  The  Financial  Accounting
     Standards Board ("FASB") recently issued SFAS No. 143 "Accounting for Asset
     Retirement  Obligations",  SFAS No. 144  "Accounting  for the Impairment or
     Disposal of Long-lived Assets", SFAS No. 145 "Rescission of FASB Statements
     No. 4, 44, and 64,  Amendment  of FASB  Statement  No.  13,  and  Technical
     Corrections",  SFAS No. 146 "Accounting  for Costs  Associated with Exit or
     Disposal Activities," SFAS No. 148 "Accounting for Stock-Based Compensation
     - Transition and  Disclosure,"  SFAS No. 149 "Amendment of Statement 133 on
     Derivative  Instruments and Hedging  Activities,"  SFAS No. 150 "Accounting
     for Certain Financial  Instruments with Characteristics of Both Liabilities
     and Equity," FASB Financial  Interpretation No. 45 "Guarantor's  Accounting
     and Disclosure  Requirements for Guarantees,  Including Indirect Guarantees
     of  Indebtedness  of  Others"  and FASB  Financial  Interpretation  No.  46
     "Consolidation of Variable Interest Entities."

                                      F-47
<PAGE>


     SFAS No. 143  requires  the  recognition  of a liability if a company has a
     legal or contractual financial obligation in connection with the retirement
     of a tangible long-lived asset.  Ferrellgas,  L.P. implemented SFAS No. 143
     beginning in the fiscal year ending July 31, 2003. This  cumulative  effect
     of a change  in  accounting  principle  resulted  in a  one-time  charge to
     earnings of $2.8 million at the  beginning of the year ended July 31, 2003,
     together with the recognition of a $3.1 million  long-term  liability and a
     $0.3 million  long-term asset. See Note I - Asset retirement  obligations -
     for further discussion of these obligations.  Ferrellgas, L.P. believes the
     implementation  will not have a material  ongoing  effect on its  financial
     position, results of operations and cash flows.

     SFAS No. 144 modifies the financial accounting and reporting for long-lived
     assets  to be  disposed  of by sale and it  broadens  the  presentation  of
     discontinued operations to include more disposal transactions.  Ferrellgas,
     L.P.  implemented SFAS No. 144 beginning in the fiscal year ending July 31,
     2003,  with no  material  effect  on its  financial  position,  results  of
     operations and cash flows.

     SFAS No. 145  eliminates  the  requirement  that material  gains and losses
     resulting  from  the  early  extinguishment  of  debt be  classified  as an
     extraordinary  item in the  consolidated  statements of earnings.  Instead,
     companies must evaluate whether the transaction  meets both the criteria of
     being unusual in nature and infrequent in occurrence. Other aspects of SFAS
     No. 145 relating to accounting for intangible  assets of motor carriers and
     accounting for lease  modifications  do not currently  apply to Ferrellgas,
     L.P. Ferrellgas, L.P. implemented SFAS No. 145 beginning in the fiscal year
     ending  July 31,  2003,  and will  report  expenses  associated  with early
     extinguishments of debt in income from continuing operations.

     SFAS No. 146 modifies the  financial  accounting  and  reporting  for costs
     associated with exit or disposal activities. This statement requires that a
     liability  for a cost  associated  with  an exit or  disposal  activity  be
     recognized  when the  liability is incurred.  Additionally,  the  statement
     requires the  liability  to be  recognized  and measured  initially at fair
     value. Under previous rules,  liabilities for exit costs were recognized at
     the date of the  entity's  commitment  to an exit  plan.  Ferrellgas,  L.P.
     adopted and  implemented  SFAS No. 146 for any exit or disposal  activities
     initiated after July 31, 2002. The implementation of this statement did not
     have a material effect on Ferrellgas L.P.'s financial position,  results of
     operations and cash flows.

     SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation"
     to provide  alternative methods of transition for a voluntary change to the
     fair-value   based   method  of   accounting   for   stock-based   employee
     compensation.   This   statement   also  amends  SFAS  No.  123  disclosure
     requirements  for annual and interim  financial  statements to provide more
     prominent  disclosures  about the  method  of  accounting  for  stock-based
     employee  compensation  and the  effect  of the  method  used  on  reported
     results.  This  statement is effective  for the fiscal year ending July 31,
     2003.  Ferrellgas,  L.P.  implemented the interim  disclosure  requirements
     during the three months ended April 30, 2003. See (16) Unit and stock-based
     compensation  - in this Note for  additional  information  related to these
     requirements.  Ferrellgas, L.P. is currently studying the voluntary aspects
     of SFAS No. 148 and the related implications of SFAS No. 123.

     SFAS No. 149 amends SFAS No. 133,  "Accounting  for Derivative  Instruments
     and Hedging  Activities" and clarifies  financial  accounting and reporting
     for  derivative  instruments,   including  certain  derivative  instruments
     embedded in other contracts and for hedging activities.  This statement is,
     in general, effective for contracts entered into or modified after June 30,
     2003,  and for  hedging  relationships  designated  after  June  30,  2003.
     Ferrellgas,  L.P.  has studied SFAS No. 149 and believes it will not have a
     material effect on its financial  position,  results of operations and cash
     flows.

     SFAS  No.  150  establishes  standards  for how an  issuer  classifies  and
     measures  certain  financial   instruments  with  characteristics  of  both
     liabilities  and equity.  It requires  that an issuer  classify a financial
     instrument  that is within  its scope as a  liability  (or an asset in some
     circumstances).  This  statement is  effective  for  financial  instruments
     entered into or modified after May 31, 2003, and otherwise is effective for
     the fiscal year ending July 31, 2004. Ferrellgas, L.P. has studied SFAS No.
     150 and  believes  it will  not have a  material  effect  on its  financial
     position, results of operations and cash flows.

                                      F-48
<PAGE>


     FASB  Financial  Interpretation  No. 45  expands  the  existing  disclosure
     requirements  for  guarantees  and  requires  that  companies  recognize  a
     liability for guarantees issued after December 31, 2002.  Ferrellgas,  L.P.
     implemented this interpretation beginning in the three months ended January
     31, 2003. During the year ended July 31, 2003, the implementation  resulted
     in the  recognition of a liability of $0.2 million,  and a related asset of
     $0.2 million, both of which will be recognized into income over the life of
     the  guarantees.  See Note J -  Guarantees - for further  discussion  about
     these guarantees.

     FASB Financial Interpretation No. 46 clarifies Accounting Research Bulletin
     No. 51, "Consolidated Financial Statements." If certain conditions are met,
     this interpretation requires the primary beneficiary to consolidate certain
     variable   interest   entities   in  which   equity   investors   lack  the
     characteristics  of  a  controlling  financial  interest  or  do  not  have
     sufficient equity investment at risk to permit the variable interest entity
     to finance its activities without additional subordinated financial support
     from other  parties.  This  interpretation  is  effective  immediately  for
     variable  interest entities created or obtained after January 31, 2003. For
     variable   interest   entities   acquired  before  February  1,  2003,  the
     interpretation  is effective  for the first  fiscal year or interim  period
     beginning  after  June 15,  2003.  Ferrellgas,  L.P.  believes  it does not
     currently have any variable interest entities that would be subject to this
     interpretation.

     Emerging Issues Task Force ("EITF") 02-3 "Issues Involved in Accounting for
     Derivative  Contracts Held for Trading  Purposes and Contracts  Involved in
     Energy  Trading and Risk  Management  Activities"  eliminates any basis for
     recognizing  physical  inventories included in energy trading activities at
     fair value.  This new  accounting  rule applies to all  physical  inventory
     purchased  after  October  22,  2002.   Ferrellgas,   L.P.  had  previously
     recognized  physical   inventories  included  in  risk  management  trading
     activities at fair value.

     EITF  No.  00-21,   "Accounting  for  Revenue  Arrangements  with  Multiple
     Deliverables"  addresses how to account for  arrangements  that may involve
     multiple revenue-generating  activities,  i.e., the delivery or performance
     of multiple  products,  services,  and/or rights to use assets. In applying
     this guidance,  separate contracts with the same party,  entered into at or
     near the same time, will be presumed to be a bundled  transaction,  and the
     consideration will be measured and allocated to the separate units based on
     their relative fair values.  This consensus  guidance will be applicable to
     agreements  entered  into  in  quarters  beginning  after  June  15,  2003.
     Ferrellgas,  L.P. will adopt this new  accounting  pronouncement  August 1,
     2003. Ferrellgas, L.P. believes this pronouncement will not have a material
     impact on its financial  position,  results of  operations  and cash flows,
     because it does not enter into a significant  number of  arrangements  that
     may involve multiple revenue-generating activities.

     (19)  Reclassifications:  Certain  reclassifications  have been made to the
     prior years'  consolidated  financial  statements to conform to the current
     year's consolidated financial statements presentation.

C.   Quarterly distributions of available cash

     Ferrellgas,   L.P.  makes  quarterly  cash  distributions  of  all  of  its
     "available cash." Available cash is defined in the partnership agreement of
     Ferrellgas,  L.P. as, generally,  the sum of its consolidated cash receipts
     less   consolidated   cash   disbursements  and  net  changes  in  reserves
     established by the general  partner for future  requirements.  Reserves are
     retained in order to provide for the proper conduct of  Ferrellgas,  L.P.'s
     business,  or to provide funds for distributions with respect to any one or
     more of the next four  fiscal  quarters.  Distributions  are made within 45
     days after the end of each fiscal quarter ending January,  April,  July and
     October.

                                      F-49
<PAGE>


     Distributions  by  Ferrellgas,  L.P.  in an  amount  equal  to  100% of its
     available cash, as defined in its partnership agreement, will be made as an
     approximate 99% to Ferrellgas  Partners,  L.P. and an approximate 1% to the
     general partner.

D.  Supplemental financial statement information

    Inventories consist of:

                                                     2003              2002
                                                 --------------   --------------
       Propane gas and related products            $49,772           $29,169
       Appliances, parts and supplies               19,305            18,865
                                                 --------------   --------------
                                                   $69,077           $48,034
                                                 ==============   ==============

     In addition to inventories on hand, Ferrellgas,  L.P. enters into contracts
     to buy  product for supply  purposes.  Nearly all of these  contracts  have
     terms of less  than one year and  most  call for  payment  based on  market
     prices at the date of  delivery.  All fixed price  contracts  have terms of
     less than one year.  As of July 31, 2003,  in addition to the  inventory on
     hand, Ferrellgas,  L.P. had committed to make net delivery of approximately
     0.3 million gallons at a fixed price.

    Property, plant and equipment consist of:
<TABLE>
       <S>                                               <C>                      <C>              <C>
                                                              Estimated
                                                             useful lives             2003             2002
                                                         ---------------------    ------------     ------------
       Land and improvements                                     2-20               $ 39,768          $40,781
       Buildings and improvements                                  20                 55,010           54,453
       Vehicles, including transport trailers                    8-20                 79,708           77,226
       Furniture and fixtures                                       5                  7,630            8,730
       Bulk equipment and district facilities                    5-30                 77,717           73,461
       Tanks and customer equipment                              5-30                667,946          493,679
       Computer equipment and software                           2-5                  27,311           29,530
       Computer software development in progress                 n/a                  44,869           29,904
       Other                                                                           2,240            2,652
                                                                                  ------------     ------------
                                                                                   1,002,199          810,416
       Less:  accumulated depreciation                                               317,282          303,885
                                                                                  ------------     ------------
                                                                                    $684,917         $506,531
                                                                                  ============     ============
</TABLE>

     Ferrellgas,  L.P.  capitalized  $2.2  million and $0.7  million of interest
     expense related to the development of computer software for the years ended
     July 31, 2003 and 2002, respectively. As of July 31, 2002, Ferrellgas, L.P.
     recognized payables totaling $7.0 million related to the development of new
     computer software which were paid during fiscal 2003.  Depreciation expense
     totaled  $28.2  million,  $27.9  million,  and $28.3 million for the fiscal
     years ended July 31, 2003, 2002, and 2001, respectively.



                                      F-50
<PAGE>


 Other current liabilities consist of:

                                                       2003             2002
                                                  --------------   -------------
       Accrued interest                               $21,126         $20,465
       Accrued payroll                                 22,848          24,068
       Accrued insurance                                9,535           9,409
       Other                                           23,702          32,984
                                                  --------------   -------------
                                                      $77,211         $86,926
                                                  ==============   =============



     Loss on disposal of assets and other consist of:
<TABLE>
        <S>                                                              <C>             <C>              <C>
                                                                                  For the year ended July 31,
                                                                         -------------------------------------------
                                                                            2003            2002             2001
                                                                         ----------      ----------       ----------
        Loss on disposal of assets                                         $5,419          $3,223           $1,459
        Loss on transfer of accounts receivable related to the
          accounts receivable securitization                                2,224           2,019            5,611
        Service income related to the accounts receivable
          securitization                                                     (964)         (1,285)          (1,326)
                                                                         ----------      ----------       ----------
        Loss on disposal of assets and other                               $6,679          $3,957           $5,744
                                                                         ==========      ==========       ==========
</TABLE>
     Shipping and handling expenses are classified in the following consolidated
     statements of earnings line items:
<TABLE>
    <S>                                                                  <C>             <C>              <C>
                                                                                  For the year ended July 31,
                                                                         -------------------------------------------
                                                                            2003            2002             2001
                                                                         ----------      ----------       ----------
    Operating expense                                                     $126,452        $123,226         $132,349
    Depreciation and amortization expense                                    5,522           6,930            6,764
    Equipment lease expense                                                 11,354          11,479           11,578
                                                                        ----------      ----------       ----------
                                                                          $143,328        $141,635         $150,691
                                                                        ==========      ==========       ==========
</TABLE>

E.   Accounts receivable securitization

     On September 26, 2000, Ferrellgas, L.P. entered into an accounts receivable
     securitization  facility  with  Bank  One,  NA.  As part of this  renewable
     364-day facility,  Ferrellgas,  L.P. transfers an interest in a pool of its
     trade accounts  receivable to Ferrellgas  Receivables,  LLC, a wholly-owned
     unconsolidated,  special  purpose  entity,  which  sells its  interest to a
     commercial paper conduit of Banc One, NA. Ferrellgas, L.P. does not provide
     any  guarantee  or  similar   support  to  the   collectibility   of  these
     receivables.  Ferrellgas, L.P. structured the facility using a wholly-owned
     unconsolidated,  qualifying  special  purpose entity in order to facilitate
     the  transaction as required by Banc One, NA and to comply with  Ferrellgas
     L.P.'s various debt covenants. As a servicer, Ferrellgas, L.P. remits daily
     to this  special  purpose  entity  funds  collected  on the  pool of  trade
     receivables held by Ferrellgas  Receivables.  Ferrellgas,  L.P. renewed the
     facility for an additional 364-day commitment on September 23, 2003.

     Ferrellgas,  L.P.  transfers  certain of its trade  accounts  receivable to
     Ferrellgas  Receivables  and  retains  an  interest  in a portion  of these
     transferred receivables.  As these transferred receivables are subsequently
     collected  and the  funding  from the  accounts  receivable  securitization
     facility  is  reduced,  Ferrellgas,   L.P.'s  retained  interest  in  these
     receivables is reduced. In fiscal 2002, as the transferred receivables were
     collected  and the  funding  from the  accounts  receivable  securitization
     facility was reduced to zero,  Ferrellgas,  L.P.'s retained interest in the
     transferred receivables,  was reduced from $7.2 million at July 31, 2001 to
     zero at July 31,  2002.  As of July 31,  2003 and 2002,  the balance of the
     retained  interest  was $8.1 million and $0 million,  respectively  and was
     classified as accounts  receivable on the consolidated  balance sheets.  At
     July 31, 2003, $42.5 million had been transferred  compared with $0 million
     at July 31, 2002.  Ferrellgas,  L.P.  had the ability to  transfer,  at its
     option,  an additional  $19.1 million of its trade  accounts  receivable at
     July 31, 2003. The net non-cash activity relating to this retained interest
     was $1.8 million, $3.3 million and $3.8 million during the years ended July
     31, 2003, 2002, and 2001, respectively.

                                      F-51
<PAGE>


     These  amounts  reported  in  the   consolidated   statements  of  earnings
     approximate the financing cost of issuing  commercial paper backed by these
     accounts receivable plus an allowance for doubtful accounts associated with
     the  outstanding  receivables  transferred to Ferrellgas  Receivables.  The
     weighted average  discount rate used to value the retained  interest in the
     transferred receivables was 1.6%, 3.6% and 6.5% during the years ended July
     31,  2003,  2002  and  2001,  respectively.  Bad  debt  expense  for  these
     transferred receivables totaled $0.3 million, $0.2 million and $0.4 million
     during the years ended July 31, 2003, 2002 and 2001, respectively.

F.   Goodwill

     Ferrellgas,  L.P.  adopted  SFAS No.  142  "Goodwill  and Other  Intangible
     Assets"  beginning  in the first  quarter  of  fiscal  2002.  SFAS No.  142
     modified the financial  accounting and reporting for acquired  goodwill and
     other intangible  assets,  including the requirement that goodwill and some
     intangible  assets no longer be amortized.  The following  table  discloses
     Ferrellgas  L.P.'s net  earnings  for the fiscal years ended July 31, 2003,
     2002 and 2001,  adding back the  amortization  expense  related to goodwill
     that is no longer amortized.

                                              For the year ended July 31,
                                    --------------------------------------------
                                       2003             2002             2001
                                    ----------       ----------       ----------
     Reported net earnings             $83,416         $76,359         $82,032
     Add back: Goodwill amortization      -               -             11,308
                                    ----------       -----------      ----------
     Adjusted net earnings             $83,416         $76,359         $93,340
                                    ==========       ===========      ==========

G.   Intangible assets, net

     Intangible assets, net consist of:
<TABLE>
     <S>                            <C>         <C>              <C>            <C>         <C>              <C>
                                                  July 31, 2003                              July 31, 2002
                                    ----------------------------------------    ----------------------------------------
                                       Gross                                       Gross
                                      Carrying    Accumulated                     Carrying     Accumulated
                                       Amount     Amortization       Net           Amount     Amortization       Net
                                    ----------- ---------------- -----------    ----------- ---------------- -----------
     Customer lists                   $220,061     $(133,548)      $86,513        $208,662     $(124,860)      $83,802
     Non-compete agreements             64,020       (52,376)       11,644          62,893       (48,525)       14,368
                                    ----------- ---------------- -----------    ----------- ---------------- -----------
       Total                          $284,081     $(185,924)      $98,157        $271,555     $(173,385)      $98,170
                                    =========== ================ ===========    =========== ================ ============
</TABLE>



     Customer  lists  have  estimated  lives  of  15  years,  while  non-compete
     agreements have estimated lives ranging from two to 10 years.

     Aggregate amortization expense:
                                            2003           2002           2001
                                            ----           ----           ----
     For the year ended July 31,          $12,539        $14,022         $16,883

                                      F-52
<PAGE>


     Estimated amortization expense:

     For the year ended July 31
     2004     $11,396
     2005      10,876
     2006      10,357
     2007       9,677
     2008       8,748

H.   Long-term debt

     Long-term debt consists of:
<TABLE>
    <S>                                                                                   <C>               <C>
                                                                                              2003             2002
                                                                                          -------------     ------------
    Senior notes:
      Fixed rate, 7.16% due 2005-2013 (1)                                                    $350,000          $350,000
      Fixed rate, 8.8%, due 2006-2009 (2)                                                     184,000           184,000

    Credit agreement, variable interest rates, expiring 2006                                  126,700                -

    Notes payable, 7.5% and 7.6% weighted average interest rates,
      respectively, due 2004 to 2011                                                           10,108            12,177
                                                                                          -------------     ------------
                                                                                              670,808           546,177
    Less:  current portion, included in other current liabilities on the consolidated
       balance sheets                                                                           2,151             2,319
                                                                                          -------------     ------------
                                                                                             $668,657          $543,858
                                                                                          =============     ============
<FN>
     (1)  Ferrellgas,  L.P. fixed rate senior notes,  issued in August 1998, are
          general unsecured obligations of Ferrellgas, L.P. and rank on an equal
          basis in right of payment with all senior  indebtedness of Ferrellgas,
          L.P. and senior to all subordinated  indebtedness of Ferrellgas,  L.P.
          The outstanding  principal amount of the series A, B, C, D and E notes
          shall  be  due  on  August  1,  2005,  2006,  2008,  2010,  and  2013,
          respectively. In general, Ferrellgas, L.P. does not have the option to
          prepay  the  notes  prior to  maturity  without  incurring  prepayment
          penalties.

     (2)  Ferrellgas, L.P. fixed rate senior notes, issued in February 2000, are
          general unsecured obligations of Ferrellgas, L.P. and rank on an equal
          basis in right of payment with all senior  indebtedness of Ferrellgas,
          L.P. and senior to all subordinated  indebtedness of Ferrellgas,  L.P.
          The  outstanding  principal  amount of the series A, B and C notes are
          due on  August  1,  2006,  2007 and 2009,  respectively.  In  general,
          Ferrellgas, L.P. does not have the option to prepay the notes prior to
          maturity without incurring prepayment penalties.
</FN>
</TABLE>

     On December 10, 2002,  Ferrellgas,  L.P. refinanced its $157.0 million bank
     credit facility with a $307.5 million amended bank credit  facility,  using
     $155.6 million of the funds available  thereunder to purchase propane tanks
     and related  assets that it previously  leased,  plus making a $1.2 million
     payment of related  accrued lease  expense.  The  remaining  portion of the
     amended bank credit facility is available for working capital, acquisition,
     capital expenditure and general partnership  purposes and will terminate on
     April 28,  2006,  unless  extended or renewed.  The credit  facility  has a
     letter of credit  sub-facility  with  availability of $80.0 million.  As of
     July 31, 2003,  Ferrellgas,  L.P. had  borrowings of $126.7  million,  at a
     weighted  average  interest  rate of 3.2%,  under this  amended bank credit
     facility.

                                      F-53
<PAGE>


     All borrowings  under the amended bank credit  facility bear  interest,  at
     Ferrellgas L.P.'s option, at a rate equal to either:

     o    the base rate,  which is defined  as the higher of the  federal  funds
          rate plus 0.50% or Bank of America's  prime rate (as of July 31, 2003,
          the federal funds rate and Bank of America's prime rate were 1.04% and
          4.00%, respectively); or

     o    the  Eurodollar  Rate plus a margin varying from 1.75% to 2.75% (as of
          July 31, 2003, the one-month Eurodollar Rate was 1.04%).

     In  addition,  an annual  commitment  fee is  payable  on the daily  unused
     portion of the credit  facility at a per annum rate  varying from 0.375% to
     0.625% (as of July 31, 2003, the commitment fee per annum rate was 0.375%).

     Letters of credit  outstanding,  used primarily to secure obligations under
     certain insurance arrangements,  totaled $44.7 million and $40.6 million at
     July 31, 2003 and 2002,  respectively.  At July 31, 2003, Ferrellgas,  L.P.
     had  $136.1  million  of  funding  available.   Ferrellgas,  L.P.  incurred
     commitment  fees of $0.5  million,  $0.4 million and $0.5 million in fiscal
     2003, 2002 and 2001, respectively.

     The  senior  notes  and  the  credit  facility  agreement  contain  various
     restrictive covenants applicable to Ferrellgas,  L.P. and its subsidiaries,
     the most  restrictive  relating to  additional  indebtedness.  In addition,
     Ferrellgas,  L.P. is prohibited from making cash distributions if a default
     or event of default exists or would exist upon making such distribution, or
     if Ferrellgas,  L.P. fails to meet certain coverage tests. Ferrellgas, L.P.
     is in compliance with all  requirements,  tests,  limitations and covenants
     related to these debt agreements.

     The scheduled annual principal payments on long-term debt are as follows:

                                                              Scheduled annual
                                                             principal payments
             For the year ended July 31,
                                                             ------------------
               2004                                              $  2,151
               2005                                                 2,146
               2006                                               111,161
               2007                                                38,455
               2008                                                74,105
               Thereafter                                         442,790
                                                             ------------------
               Total                                             $670,808

I.   Asset retirement obligations

     SFAS No. 143 provides  accounting  requirements for retirement  obligations
     associated with tangible long-lived assets,  including the requirement that
     a  liability  be  recognized  if there is a legal or  financial  obligation
     associated with the retirement of the assets. Ferrellgas, L.P. adopted SFAS
     No. 143 beginning in the year ending July 31, 2003. This cumulative  effect
     of a change  in  accounting  principle  resulted  in a  one-time  charge to
     earnings of $2.8 million during the year ended July 31, 2003, together with
     the  recognition of a $3.1 million  long-term  liability and a $0.3 million
     long-term asset. Ferrellgas, L.P. believes the implementation will not have
     a material ongoing effect on its financial position,  results of operations
     and cash flows.  These obligations relate primarily to the estimated future
     expenditures  required to retire  Ferrellgas,  L.P.'s  underground  storage
     facilities.  The  remaining  period  until these  facilities  will  require
     closure  and  remediation  expenditures  is  approximately  50  years.  The
     following  table  presents a  reconciliation  of the  beginning  and ending
     carrying amounts of the asset retirement obligation:

                                      F-54
<PAGE>


                                                                     Year ended
                                                                   July 31, 2003
                                                                   -------------
          Asset retirement obligation as of August 1, 2002            $3,073
          Add: Accretion                                                 199
                                                                   -------------
          Asset retirement obligation as of July 31, 2003             $3,272
                                                                   =============

     The related asset carried for the purpose of settling the asset  retirement
     obligation  is $0.3  million  as of July  31,  2003,  and is not a  legally
     restricted  asset.  Assuming  retroactive  application  of  the  change  in
     accounting  principle  as of August 1,  2001,  there  would be no  material
     change in the pro forma net  earnings  for the year  ended  July 31,  2002.
     Other  liabilities,  assuming  retroactive  application  of the  change  in
     accounting  principle  as of August 1, 2001 and July 31,  2002,  would have
     increased $2.9 million and $3.1 million, respectively.

J.   Guarantees

     FASB  Financial   Interpretation  No.  45,   "Guarantor's   Accounting  and
     Disclosure  Requirements for Guarantees,  Including Indirect  Guarantees of
     Indebtedness of Others," expands the existing  disclosure  requirements for
     guarantees  and requires  recognition  of a liability for the fair value of
     guarantees  issued after  December 31, 2002. As of July 31, 2003,  the only
     material  guarantees that Ferrellgas,  L.P. had outstanding were associated
     with residual value guarantees of operating leases.  These operating leases
     are  related to  transportation  equipment  with  remaining  lease  periods
     scheduled to expire over the next seven fiscal  years.  Upon  completion of
     the lease period,  Ferrellgas,  L.P.  guarantees that the fair value of the
     equipment will equal or exceed the guaranteed  amount, or Ferrellgas,  L.P.
     will pay the lessor the difference.  The fair value of these residual value
     guarantees entered into after December 31, 2002 was $0.2 million as of July
     31,  2003.  Although  the fair  values at the end of the lease  terms  have
     historically  exceeded  these  guaranteed  amounts,  the maximum  potential
     amount of aggregate future payments  Ferrellgas,  L.P. could be required to
     make under these leasing arrangements,  assuming the equipment is worthless
     at the end of the lease term, is $14.5 million.

K.   Derivatives

     SFAS  No.  133   "Accounting   for  Derivative   Instruments   and  Hedging
     Activities",  as amended by SFAS No.  137,  SFAS No. 138 and SFAS No.  149,
     requires all derivatives (with certain  exceptions),  whether designated in
     hedging  relationships or not, to be recorded on the  consolidated  balance
     sheets at fair  value.  As a result  of  implementing  SFAS No.  133 at the
     beginning of fiscal 2001, Ferrellgas,  L.P. recognized in its first quarter
     of fiscal 2001, gains totaling $0.7 million and $0.3 million in accumulated
     other  comprehensive  income and the  consolidated  statements of earnings,
     respectively.  In addition,  beginning in the first quarter of fiscal 2001,
     Ferrellgas, L.P. recorded subsequent changes in the fair value of positions
     qualifying as cash flow hedges in accumulated  other  comprehensive  income
     and  changes  in the  fair  value of other  positions  in the  consolidated
     statements of earnings.  Ferrellgas  L.P.'s overall  objective for entering
     into  derivative  contracts  for the  purchase  of  product  is  related to
     hedging,   risk  reduction  and  to  anticipate  market  movements.   Other
     derivatives  are entered into to reduce  interest rate risk associated with
     long term debt and lease  obligations.  Fair value  hedges  are  derivative
     financial  instruments that hedge the exposure to changes in the fair value
     of an asset or a liability or an identified portion thereof attributable to
     a particular  risk. Cash flow hedges are derivative  financial  instruments
     that hedge the  exposure  to  variability  in  expected  future  cash flows
     attributable to a particular risk.  Ferrellgas,  L.P. uses cash flow hedges
     to manage exposures to product purchase price risk and uses both fair value
     and cash flow hedges to manage exposure to interest rate risks.

                                      F-55
<PAGE>


     Fluctuations  in the wholesale cost of propane expose  Ferrellgas,  L.P. to
     purchase price risk.  Ferrellgas,  L.P. purchases propane at various prices
     that are eventually  sold to its customers,  exposing  Ferrellgas,  L.P. to
     future product price  fluctuations.  Also, certain forecasted  transactions
     expose Ferrellgas,  L.P. to purchase price risk. Ferrellgas,  L.P. monitors
     its purchase  price  exposures and utilizes  product hedges to mitigate the
     risk of future price fluctuations.  Propane is the only product hedged with
     the use of  product  hedge  positions.  Ferrellgas,  L.P.  uses  derivative
     contracts to hedge a portion of its forecasted purchases for up to one year
     in the  future.  These  derivatives  are  designated  as cash flow  hedging
     instruments.  Because these derivatives are designated as cash flow hedges,
     the effective  portions of changes in the fair value of the derivatives are
     recorded in other  comprehensive  income  ("OCI") and are recognized in the
     consolidated statements of earnings when the forecasted transaction impacts
     earnings.  Ferrellgas,  L.P.  did not  have  any  product  hedge  positions
     outstanding  as of  July  31,  2003,  therefore  there  was no  fair  value
     adjustment  classified as OCI on the  consolidated  statements of partners'
     capital at July 31, 2003.  The risk  management  fair value  adjustments of
     $(0.2)  million  and $(0.3)  million  included  in OCI at July 31, 2002 and
     2001,  were  reclassified  into  earnings  during  fiscal  2003  and  2002,
     respectively.  Changes in the fair  value of cash flow  hedges due to hedge
     ineffectiveness,  if any, are  recognized in cost of product  sold.  During
     fiscal years ended July 31, 2003, 2002, and 2001, Ferrellgas,  L.P, did not
     recognize any gain or loss in earnings related to hedge ineffectiveness and
     did not exclude any component of the derivative  contract gain or loss from
     the assessment of hedge effectiveness related to cash flow hedges. The fair
     value of the  derivatives  related to purchase price risk are classified on
     the consolidated balance sheets as inventories.


     Through its risk  management  trading  activities,  Ferrellgas,  L.P,  also
     purchases  and sells  derivatives  that are not  designated  as  accounting
     hedges to manage other risks associated with commodity prices. The types of
     contracts  utilized in these activities  include energy  commodity  forward
     contracts,  options  and  swaps  traded on the  over-the-counter  financial
     markets,  and  futures  and  options  traded  on the  New  York  Mercantile
     Exchange.   Ferrellgas,  L.P,  utilizes  published  settlement  prices  for
     exchange  traded  contracts,  quotes  provided by brokers and  estimates of
     market prices based on daily  contract  activity to estimate the fair value
     of these  contracts.  The  changes in fair  value of these risk  management
     trading  activities are recognized as they occur in cost of product sold in
     the consolidated statements of earnings. During fiscal years ended July 31,
     2003, 2002 and 2001,  Ferrellgas,  L.P,  recognized risk management trading
     gains (losses)  related to derivatives not designated as accounting  hedges
     of $5.9 million, $(6.1) million, and $23.3 million, respectively.

     Estimates related to our risk management  trading  activities are sensitive
     to uncertainty and volatility  inherent in the energy  commodities  markets
     and  actual  results  could  differ  from  these   estimates.   Assuming  a
     hypothetical  10% adverse  change in prices for the  delivery  month of all
     energy commodities,  the potential loss in future earnings of such a change
     is estimated at $0.9 million for risk management  trading  activities as of
     July 31,  2003.  The  preceding  hypothetical  analysis is limited  because
     changes in prices may or may not equal 10%.

                                      F-56
<PAGE>


     The following  table  summarizes the change in the unrealized fair value of
     contracts  from risk  management  trading  activities  for the fiscal years
     ended July 31, 2003, 2002 and 2001.
<TABLE>
     <S>                                                                <C>             <C>              <C>
                                                                                For the year ended July 31,
                                                                        ---------------------------------------------
                                                                           2003            2002             2001
                                                                        ------------    ------------     ------------
     Unrealized losses in fair value of contracts outstanding
       at beginning of year                                              $(4,569)        $(12,587)          $(359)
     Unrealized gains and (losses) recognized at inception of
       a contract                                                            -                -               -
     Unrealized gains and (losses) recognized as a result of
       changes in valuation techniques or assumptions                         -                -               -
     Other unrealized gains and (losses) recognized                        5,921           (6,148)         23,320
     Less:  realized gains and (losses) recognized                         3,070          (14,166)         35,548
                                                                        ------------    ------------     ------------
     Unrealized losses in fair value of contracts outstanding
       at end of year                                                    $(1,718)         $(4,569)       $(12,587)
                                                                        ============    ============     ============
</TABLE>


     The  following  table  summarizes  the maturity of these  contracts for the
     valuation methodologies  Ferrellgas,  L.P. utilized as of July 31, 2003 and
     2002.  This table  summarizes  the contracts  where  settlement had not yet
     occurred.
<TABLE>
     <S>                                                                <C>                 <C>
                                                                              Fair value of contracts
                                                                                   at period-end
                                                                        -------------------------------------
                                                                                                Maturity
                                                                          Maturity           greater than 1
                                                                          less than          year and less
                         Source of fair value                               1 year           than 18 months
     -------------------------------------------------------------      --------------      -----------------

     Prices actively quoted                                              $     9                 $ -
     Prices provided by other external sources                            (1,727)                  -
     Prices based on models and other valuation methods                        -                   -
                                                                        --------------      -----------------
     Unrealized  (losses) in fair value of contracts  outstanding
          at July 31, 2003                                               $(1,718)                $ -
                                                                        ==============      =================

     Prices actively quoted                                              $  (328)                $ -
     Prices provided by other external sources                            (4,225)                (16)
     Prices based on models and other valuation methods                        -                   -
                                                                        --------------      -----------------
     Unrealized  (losses) in fair value of contracts  outstanding
          at July 31, 2002                                               $(4,553)                $(16)
                                                                        ==============      =================
</TABLE>

     The following  table  summarizes the gross  transaction  volumes in barrels
     (one barrel equals 42 gallons) for risk management  trading  contracts that
     were physically settled for the years ended July 31, 2003, 2002 and 2001:


     (in thousands)
     For the year ended July 31, 2003                                 13,805
     For the year ended July 31, 2002                                 11,162
     For the year ended July 31, 2001                                 18,539

                                      F-57
<PAGE>


     Ferrellgas,  L.P. also uses forward contracts, not designated as accounting
     hedges  under SFAS No. 133, to help reduce the price risk  related to sales
     made to its propane customers. These forward contracts meet the requirement
     to qualify as normal  purchases  and sales as defined in SFAS No.  133,  as
     amended by SFAS No. 137,  SFAS No. 138 and SFAS No.  149,  and thus are not
     adjusted to fair market value.

     As of July 31, 2003,  Ferrellgas,  L.P.  holds $544.1 million in fixed rate
     debt and $126.7  million in variable  rate debt.  Fluctuations  in interest
     rates subject Ferrellgas, L.P. to interest rate risk. Decreases in interest
     rates increase the fair value of Ferrellgas,  L.P.'s fixed rate debt, while
     increases  in  interest  rates  subject  Ferrellgas,  L.P.  to the  risk of
     increased interest expense related to its variable rate debt.

     Ferrellgas,  L.P.  enters  into cash flow hedges to help reduce its overall
     interest  rate  risk.  Interest  rate  caps  were  used to  hedge  the risk
     associated  with  rising  interest  rates  and their  effect on  forecasted
     transactions  related to variable  rate debt and lease  obligations.  These
     interest rate caps were designated as cash flow hedges and were outstanding
     until June 2003. Thus, the effective  portions of changes in the fair value
     of the hedges were recorded in OCI at interim  periods and were  recognized
     as interest  expense in the  consolidated  statements  of earnings when the
     forecasted  transaction  impacted earnings.  During fiscal years ended July
     31, 2003,  2002, and 2001,  Ferrellgas,  L.P. did not recognize any gain or
     loss in earnings related to hedge  ineffectiveness  and did not exclude any
     component of the  derivative  contract gain or loss from the  assessment of
     hedge  effectiveness  related  to cash flow  hedges.  Cash flow  hedges are
     assumed to hedge the risk of changes in cash flows of the hedged risk.

L.   Transactions with related parties

     Ferrellgas,  L.P. has no  employees  and is managed and  controlled  by its
     general partner. Pursuant to Ferrellgas,  L.P.'s partnership agreement, the
     general  partner is entitled to  reimbursement  for all direct and indirect
     expenses  incurred or payments it makes on behalf of Ferrellgas,  L.P., and
     all other necessary or appropriate  expenses allocable to Ferrellgas,  L.P.
     or otherwise  reasonably incurred by the general partner in connection with
     operating  Ferrellgas,  L.P.'s business.  These costs, which totaled $201.3
     million,  $197.9  million  and $194.5  million for the years ended July 31,
     2003, 2002, and 2001, respectively,  include compensation and benefits paid
     to employees  of the general  partner who perform  services on  Ferrellgas,
     L.P.'s behalf, as well as general and administrative  costs. The amount due
     to Ferrellgas Partners, L.P. at July 31, 2003 and 2002 was $2.0 million and
     $2.8  million,  respectively,  included  the  funds  to  enable  Ferrellgas
     Partners, L.P. to pay its senior unit distribution on September 12, 2003.

     During fiscal 2000,  The Williams  Companies,  Inc.  ("Williams")  became a
     related  party  to  Ferrellgas,  L.P.  due to  Ferrellgas  Partners  L.P.'s
     issuance of 4.4 million senior units to a subsidiary of Williams as part of
     an acquisition during the year ended July 31, 2000. In April 2001, Williams
     sold all its senior units to JEF Capital Management,  Inc., an entity owned
     by James E. Ferrell, Chairman, Chief Executive Officer and President of the
     general  partner,  and  thereafter,   ceased  to  be  a  related  party  of
     Ferrellgas,  L.P. During fiscal 2001, Ferrellgas, L.P, recognized wholesale
     sales to Williams of $0.5 million. In connection with its normal purchasing
     and  risk  management  activities,  Ferrellgas,  L.P.  entered  into,  with
     Williams as a counterparty,  certain purchase, forward, futures, option and
     swap  contracts.  During  fiscal 2001  Ferrellgas,  L.P.  recognized  a net
     decrease to cost of sales of $4.5 million related to these activities.

                                      F-58
<PAGE>


     Ferrell  International  Limited and FI Trading, Inc. are beneficially owned
     by James E. Ferrell and thus are affiliates of Ferrellgas, L.P. Ferrellgas,
     L.P. enters into  transactions  with Ferrell  International  Limited and FI
     Trading in connection  with its risk  management  activities and does so at
     market prices in accordance  with an affiliate  trading policy  approved by
     the  general  partner's  Board of  Directors.  These  transactions  include
     forward, option and swap contracts and are all reviewed for compliance with
     the policy. During fiscal 2003, 2002 and 2001, Ferrellgas,  L.P. recognized
     net receipts (disbursements) from purchases, sales and commodity derivative
     transactions  of  $(0.2)  million,  $10.7  million,  and  $(28.1)  million,
     respectively.   These  net  purchases,   sales  and  commodity   derivative
     transactions with Ferrell  International  Limited and FI Trading,  Inc. are
     classified  as cost of product  sold.  There were no amounts due to or from
     Ferrell  International  Limited at July 31,  2003.  Amounts due to and from
     Ferrell  International  Limited at July 31, 2002 were $0.3 million and $0.4
     million, respectively.

     During fiscal 2003, 2002 and 2001,  Ferrellgas,  L.P. paid distributions to
     Ferrellgas  Partners of $101.2  million,  $99.1 million and $83.1  million,
     respectively.

     During fiscal 2003, Ferrellgas,  L.P. received a cash contribution of $17.8
     million  and a net asset  contribution  of $42.2  million  from  Ferrellgas
     Partners and the general partner. See Note Q - Business  combinations - for
     further  discussion  of the net  asset  transaction.  During  fiscal  2002,
     Ferrellgas,  L.P.  received a net asset  contribution  of $2.4 million from
     Ferrellgas Partners and the general partner.

     During fiscal 2003,  2002 and 2001,  Ferrell  International  Limited and FI
     Trading,  Inc. paid  Ferrellgas,  L.P. a total of $40 thousand in each year
     for accounting and administration services.

     Ferrellgas,  L.P. also leased propane tanks from Ferrell  Propane,  Inc., a
     subsidiary of the general partner from October 1998 until February 2002, at
     which time,  Ferrell  Propane  sold all its tanks to an  unrelated  entity.
     Ferrellgas, L.P. recognized $0.3 million, and $0.5 million of lease expense
     during fiscal years 2002 and 2001.

M.   Contingencies and commitments

     Ferrellgas,  L.P. is  threatened  with or named as a  defendant  in various
     lawsuits that, among other items, claim damages for product  liability.  It
     is not possible to determine  the ultimate  disposition  of these  matters;
     however,  management  is of the opinion  that there are no known  claims or
     contingent claims that will have a material adverse effect on the financial
     condition,  results  of  operations  and  cash  flows of  Ferrellgas,  L.P.
     Currently,  Ferrellgas,  L.P. is not a party to any legal proceedings other
     than  various  claims  and  lawsuits  arising  in the  ordinary  course  of
     business.

     Certain  property and  equipment is leased  under  noncancelable  operating
     leases,  which require fixed  monthly  rental  payments and which expire at
     various dates through 2021. Rental expense under these leases totaled $30.0
     million,  $37.0  million,  and $42.4  million  for the years ended July 31,
     2003, 2002, and 2001, respectively.

     The following  table  summarizes  Ferrellgas,  L.P.'s future minimum rental
     payments and amounts currently anticipated to exercise buyout options as of
     July 31, 2003:
<TABLE>
    <S>                          <C>           <C>            <C>           <C>           <C>            <C>
                                               Future minimum rental and buyout amounts by fiscal year
                                 ----------------------------------------------------------------------------------
                                    2004          2005           2006          2007          2008        Thereafter
                                 ----------    ----------     ----------    ----------    ----------     ----------
    Operating lease rental
      payments                    $20,161       $14,840        $12,226       $8,253         $4,862         $4,748
    Operating lease buyouts         6,061         5,316          2,077        6,319          2,343          3,279
</TABLE>
                                      F-59
<PAGE>


N.   Employee benefits

     Ferrellgas,  L.P. has no  employees  and is managed and  controlled  by its
     partners.  Ferrellgas, L.P. assumes all liabilities, which include specific
     liabilities related to the following employee benefit plans for the benefit
     of the officers and employees of the general partner.

     Ferrell  Companies makes  contributions to the ESOT, which causes a portion
     of the shares of Ferrell  Companies  owned by the ESOT to be  allocated  to
     employees'  accounts over time. The allocation of Ferrell Companies' shares
     to employee accounts causes a non-cash  compensation  charge to be incurred
     by Ferrellgas, L.P., equivalent to the fair value of such shares allocated.
     This non-cash  compensation  charge is reported  separately in  Ferrellgas,
     L.P.'s consolidated statements of earnings and thus excluded from operating
     and general and administrative  expenses.  The non-cash compensation charge
     increased  during fiscal 2003 and 2002 primarily due to the increase in the
     fair  value  of  the  Ferrell  Companies  shares  allocated  to  employees.
     Ferrellgas,  L.P. is not  obligated  to fund or make  contributions  to the
     ESOT.

     The  general  partner  and its parent,  Ferrell  Companies,  have a defined
     contribution  profit-sharing  plan which  includes both profit  sharing and
     matching  contributions.  The plan covers  substantially all employees with
     more than one year of service.  With the  establishment of the ESOP in July
     1998, Ferrellgas, L.P. suspended future contributions to the profit sharing
     plan  beginning  with fiscal year 1998.  The plan,  which  qualifies  under
     section  401(k) of the Internal  Revenue  Code,  also provides for matching
     contributions  under a cash or deferred  arrangement based upon participant
     salaries and employee  contributions to the plan. Unlike the profit sharing
     contributions,  these matching  contributions  were not eliminated with the
     establishment of the ESOP. Contributions for the years ended July 31, 2003,
     2002,  and  2001,  were  $2.9  million,  $2.8  million,  and $3.2  million,
     respectively, under the 401(k) provisions.

     The general partner has a defined  benefit plan that provides  participants
     who were  covered  under a  previously  terminated  plan with a  guaranteed
     retirement  benefit at least equal to the benefit they would have  received
     under  the  terminated  plan.  Until  July 31,  1999,  benefits  under  the
     terminated  plan were  determined  by years of credited  service and salary
     levels.  As of July 31, 1999,  years of credited  service and salary levels
     were  frozen.  The  general  partner's  funding  policy for this plan is to
     contribute  amounts  deductible  for Federal income tax purposes and invest
     the plan assets  primarily in  corporate  stocks and bonds,  U.S.  Treasury
     bonds and short-term cash investments.  As of July 31, 2003 and 2002, other
     comprehensive  income and other  liabilities  were  adjusted,  because  the
     accumulated benefit obligation of this plan exceeded the fair value of plan
     assets.

O.   Unit options of  Ferrellgas  Partners,  L.P.  and stock  options of Ferrell
     Companies

     Prior to April 19, 2001,  the Second Amended and Restated  Ferrellgas  Unit
     Option Plan (the "unit  option  plan")  authorized  the issuance of options
     (the  "unit  options")  covering  Ferrellgas   Partners'  common  units  to
     employees of the general  partner.  or its affiliates.  Effective April 19,
     2001, the unit option plan was amended to authorize the issuance of options
     covering  an  additional  500,000  common  units.  The unit  option plan is
     intended to meet the  requirements  of the New York Stock  Exchange  equity
     holder  approval policy for option plans not approved by the equity holders
     of a  company,  and thus  approval  of the plan  from  the  unitholders  of
     Ferrellgas Partners,  L.P. was not required.  The Board of Directors of the
     general partner administers the unit option plan, authorizes grants of unit
     options thereunder and sets the unit option price and vesting terms of unit
     options in  accordance  with the terms of the unit option  plan.  No single
     officer or director of the general  partner may acquire  more than  314,895
     common units under the unit option plan. The unit options outstanding as of
     July 31, 2003, are  exercisable  at exercise  prices ranging from $16.80 to
     $21.67 per unit,  which was an  estimate  of the fair  market  value of the
     units  at  the  time  of the  grant.  In  general,  the  options  currently
     outstanding  under the unit option plan vest over a five-year  period,  and
     expire on the tenth anniversary of the date of the grant.

                                      F-60
<PAGE>

<TABLE>
          <S>                                                   <C>               <C>                 <C>

                                                                                                        Weighted
                                                                                                      average fair
                                                                     Number                           value of the
                                                                       of          Weighted average     option at
                                                                     units          exercise price      grant date
                                                                ----------------- ------------------  --------------
          Outstanding, August 1, 2000                               721,525           $18.13
          Granted                                                   651,000            17.90              $2.56
          Exercised                                                (101,250)           16.80
          Forfeited                                                 (42,075)           19.27
                                                                -----------------
          Outstanding, July 31, 2001                              1,229,200            18.08
          Exercised                                                 (55,350)           16.80
          Forfeited                                                 (98,450)           18.04
                                                                -----------------
          Outstanding, July 31, 2002                              1,075,400            18.15
          Exercised                                                (368,900)           18.05
          Forfeited                                                  (2,400)           18.80
                                                                -----------------
          Outstanding, July 31, 2003                                704,100            18.20
                                                                -----------------

          Options exercisable, July 31, 2003                        364,300            18.43
                                                                -----------------
          Options exercisable, July 31, 2002                        594,725            18.25
                                                                -----------------
          Options exercisable, July 31, 2001                        503,543            18.06
                                                                -----------------
</TABLE>
<TABLE>
          <S>                                              <C>
                                                             Options outstanding at July 31, 2003
                                                           ----------------------------------------
          Range of option prices at end of year                        $16.80-$21.67
          Weighted average remaining contractual life                    6.1 Years
</TABLE>

     The  Ferrell  Companies   Incentive   Compensation  Plan  (the  "ICP")  was
     established  by Ferrell  Companies  to allow upper  middle and senior level
     managers  of the general  partner to  participate  in the equity  growth of
     Ferrell  Companies.  The  ICP  stock  options  vest  ratably  in 5% to  10%
     increments  over 12  years or 100%  upon a change  of  control  of  Ferrell
     Companies,  or the death,  disability or retirement at the age of 65 of the
     participant.  Vested  options are  exercisable  in increments  based on the
     timing of the payoff of Ferrell Companies' debt, but in no event later than
     20 years from the date of issuance.

P.   Disclosures about fair value of financial instruments

     The carrying amount of short-term financial  instruments  approximates fair
     value because of the short maturity of the instruments.  The estimated fair
     value of Ferrellgas,  L.P.'s  long-term debt instruments was $685.6 million
     and $545.4  million as of July 31,  2003 and 2002,  respectively.  The fair
     value is estimated based on quoted market prices.

     Interest rate collar, cap and swap agreements.  Ferrellgas,  L.P. from time
     to time has entered into various  interest  rate collar and cap  agreements
     involving,  among  others,  the  exchange  of fixed and  floating  interest
     payment  obligations  without  the  exchange  of the  underlying  principal
     amounts.  During  the  year  ended  July 31,  2003,  an  interest  rate cap
     agreement with a large  financial  institution  expired.  The fair value of
     this agreement was de minimus at July 31, 2002.

                                      F-61
<PAGE>



Q.   Business combinations

     During the year ended July 31,  2003,  Ferrellgas,  L.P.  acquired,  or had
     contributed  to  it,  the  following  retail  propane  businesses  with  an
     aggregate value at $49.2 million:

     o    ProAm,  Inc., based primarily in Georgia and Texas,  acquired December
          2002;

     o    a branch  of  Cenex  Propane  Partners  Co.,  based in Iowa,  acquired
          November 2002;

     o    Northstar Propane, based in Nevada, acquired November 2002;

     o    Pettit Oil Company, Inc., based in Washington, acquired May 2003; and

     o    Wheeler's Bottled Gas, Inc., based in Ohio, acquired July 2003.

     These  purchases  were  funded  by  $7.1  million  of  cash  payments,  the
     contribution of net assets of $41.6 million from  Ferrellgas  Partners L.P.
     and $0.5 million in the  issuance of notes  payable to the seller and other
     costs and consideration.

     The  aggregate   value  of  these  five  retail   propane   businesses  was
     preliminarily  allocated  as  follows:  $28.5  million  for assets  such as
     customer   tanks,   buildings  and  land,   $1.1  million  for  non-compete
     agreements,  $11.7  million  for  customer  lists and $7.9  million for net
     working  capital.  Net working  capital was  comprised  of $8.7  million of
     current assets and $0.8 million of current liabilities.  The estimated fair
     values  and  useful  lives of assets  acquired  are based on a  preliminary
     valuation and are subject to final valuation adjustments.  Ferrellgas, L.P.
     intends  to  continue  its  analysis  of the net  assets of these  acquired
     businesses to determine the final allocation of the total purchase price to
     the various assets acquired.  The weighted average  amortization period for
     non-compete   agreements   and  customer  lists  are  five  and  15  years,
     respectively.

     During  the year  ended  July  31,  2002,  Ferrellgas,  L.P.  acquired  the
     following  retail  propane  businesses  with an  aggregate  value  at $10.8
     million:

     o    Blue Flame Bottle Gas, based in southern  Arizona,  acquired  December
          2001;

     o    Alabama  Butane  Co.,  based in central  and south  Alabama,  acquired
          November 2001; and

     o    Alma  Farmers  Union  Co-op,  based  in  western  Wisconsin,  acquired
          September 2001.

     The purchases were funded by $6.3 million of cash payments, the issuance of
     0.1  million  common  units  by  Ferrellgas  Partners,  L.P.  valued  at an
     aggregate of $2.3 million, and $2.2 million of notes payable to the seller.
     The aggregate value was allocated as follows:  $7.1 million for assets such
     as  customer  tanks,  buildings  and land,  $2.7  million  for  non-compete
     agreements,  $1.2 million for customer lists, $32 thousand for other assets
     and $(0.2)  million  for net  working  capital.  Net  working  capital  was
     comprised  of $0.6  million of current  assets and $0.7  million of current
     liabilities.  The  weighted  average  amortization  period for  non-compete
     agreements and customer lists are five and 15 years, respectively.

     During the fiscal year ended July 31, 2001,  Ferrellgas,  L.P. acquired the
     following  retail  propane  businesses  with  an  aggregate  value  of $0.4
     million:

     o    Stone Petroleum, based in Florida, acquired September 2000;

     o    Jordan's Gas Service, based in Ohio, acquired May 2001; and

     o    Wilson Oil, based in Kentucky, acquired May 2001.

     These  purchases  were  funded by $0.2  million  of cash  payments  and the
     issuance of $0.2 million of notes payable to the seller. These acquisitions
     do not include a $4.6 million  adjustment made in the second fiscal quarter
     of fiscal 2001 to working capital  related to a final valuation  adjustment
     to record a fiscal 2000 acquisition.

                                      F-62
<PAGE>


     The results of  operations  of all  acquisitions  have been included in the
     consolidated financial statements from their dates of acquisition.  The pro
     forma  effect of these  transactions  was not  material  to the  results of
     operations.

R.   Quarterly data (unaudited)

     The following  summarized unaudited quarterly data includes all adjustments
     (consisting only of normal recurring adjustments),  which Ferrellgas,  L.P.
     considers necessary for a fair presentation.  Due to the seasonality of the
     retail  distribution of propane,  first and fourth quarter revenues,  gross
     profit and net  earnings  are  consistently  less than the second and third
     quarter results.  Other factors affecting the results of operations include
     competitive  conditions,   demand  for  product,  timing  of  acquisitions,
     variations in the weather and fluctuations in propane prices.

     Fiscal year ended July 31, 2003
<TABLE>
        <S>                             <C>                   <C>                   <C>                  <C>
                                         First quarter         Second quarter        Third quarter         Fourth quarter
                                        ----------------      ----------------      ---------------      ----------------

     Revenues                              $216,314              $464,466              $369,365              $171,494
     Gross profit                            92,642               209,748               161,431                66,849
     Earnings (loss) before
       cumulative change in
       accounting principle                 (11,338)               92,703                44,923               (40,090)
     Net earnings (loss)                    (14,120)               92,703                44,923               (40,090)

     Fiscal year ended July 31, 2002
                                         First quarter        Second quarter         Third quarter         Fourth quarter
                                        ----------------      ----------------      ----------------      ------------------

     Revenues                              $245,243              $355,738              $287,161              $146,654
     Gross profit                            95,296               179,147               152,521                74,395
     Net earnings (loss)                     (9,633)               72,807                40,938               (27,753)
</TABLE>

                                      F-63
<PAGE>


                 INDEPENDENT AUDITORS' REPORT

Board of Directors
Ferrellgas Finance Corp.
Liberty, Missouri


We have audited the  accompanying  balance sheet of Ferrellgas  Finance Corp. (a
wholly-owned  subsidiary  of  Ferrellgas,  L.P.),  as of July 31, 2003,  and the
related  statements  of  earnings,  stockholder's  equity and cash flows for the
period from inception until July 31, 2003.  These  financial  statements are the
responsibility of the Ferrellgas Finance Corp.'s management.  Our responsibility
is to express an opinion on these financial statements based on our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of  Ferrellgas  Finance Corp. as of July 31,
2003,  and the results of its  operations and its cash flows for the period from
inception until July 31, 2003 in conformity with accounting principles generally
accepted in the United States of America.




DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003


                                      F-64
<PAGE>



                            FERRELLGAS FINANCE CORP.
                 (a wholly-owned subsidiary of Ferrellgas, L.P.)

                                  BALANCE SHEET



                                                            July 31,
    ASSETS                                                    2003
    ------------------------------------------------      -------------

    Cash                                                     $1,000
                                                          -------------
    Total assets                                             $1,000
                                                          =============



    STOCKHOLDER'S EQUITY
    ------------------------------------------------

    Common stock, $1.00 par value; 2,000 shares
    authorized; 1,000 shares issued and outstanding          $1,000

    Additional paid in capital                                  515

    Accumulated deficit                                        (515)
                                                          -------------
    Total stockholder's equity                               $1,000
                                                          =============

                       See notes to financial statements.

                                      F-65
<PAGE>


                            FERRELLGAS FINANCE CORP.
                 (a wholly-owned subsidiary of Ferrellgas, L.P.)

                              STATEMENT OF EARNINGS




                                                       From inception to
                                                        to July 31, 2003
                                                     -----------------------

Revenues                                                   $  -

General and administrative expense                           515
                                                     -----------------------

Net loss                                                   $(515)
                                                     =======================

                       See notes to financial statements.

                                      F-66
<PAGE>


                            FERRELLGAS FINANCE CORP.
                 (a wholly-owned subsidiary of Ferrellgas, L.P.)

                        STATEMENT OF STOCKHOLDER'S EQUITY




<TABLE>
   <S>                           <C>         <C>         <C>         <C>          <C>
                                     Common stock         Additional                  Total
                                 ----------------------    paid in   Accumulated    stockholder's
                                   Shares     Dollars      capital     deficit        equity
                                 ----------- ----------  ----------- ------------ -----------------

   January 16, 2003                  0        $  -        $  -         $  -          $  0

   Initial capitalization         1,000      1,000          -            -           1,000

   Capital contribution               -          -          515           -             515

   Net loss                           -          -           -         (515)           (515)
                                 ----------- ----------  ----------- ------------ -----------------
   July 31, 2003                   1,000     $1,000       $ 515        ($515)        $1,000
                                 =========== ========== =========== ============ ===================
</TABLE>

                       See notes to financial statements.

                                      F-67
<PAGE>


                            FERRELLGAS FINANCE CORP.
                 (a wholly-owned subsidiary of Ferrellgas, L.P.)

                             STATEMENT OF CASH FLOWS




                                                  From inception to
                                                  to July 31, 2003
                                                 ------------------
Cash flows from operating activities:
  Net loss                                            $ (515)
                                                 ------------------
      Cash used by operating activities                 (515)
                                                 ------------------


Cash flows from financing activities:
  Capital contribution                                 1,515
                                                 ------------------
      Cash provided by financing activities            1,515
                                                 ------------------

Change in cash                                         1,000
Cash - at inception                                      -
                                                 ------------------
Cash - end of year                                    $1,000
                                                 ==================

                       See notes to financial statements.

                                      F-68
<PAGE>


                            FERRELLGAS FINANCE CORP.
                 (a wholly-owned subsidiary of Ferrellgas, L.P.)

                          NOTES TO FINANCIAL STATEMENTS



A.        Formation

          Ferrellgas   Finance   Corp.   (the  "Finance   Corp."),   a  Delaware
          corporation,  was formed on  January  16,  2003 and is a  wholly-owned
          subsidiary of Ferrellgas, L.P. (the "Partnership").

          The Partnership contributed $1,000 to the Finance Corp. on January 24,
          2003 in exchange for 1,000 shares of common stock.

B.        Income taxes

          Income taxes have been computed as though the Finance Corp.  files its
          own income tax return.  Deferred income taxes are provided as a result
          of temporary differences between financial and tax reporting using the
          asset/liability  method.  Deferred income taxes are recognized for the
          tax  consequences  of  temporary  differences  between  the  financial
          statement  carrying  amounts  and tax  basis of  existing  assets  and
          liabilities.

          Due to the  inability of the Finance Corp. to utilize the deferred tax
          benefit of $200  associated  with the current year net operating  loss
          carryforward  of $515,  which expire at various dates through July 31,
          2023, a valuation  allowance  has been  provided on the full amount of
          the  deferred  tax asset.  Accordingly,  there is no net  deferred tax
          benefit for the year ended July 31, 2003, and there is no net deferred
          tax asset as of July 31, 2003.



                                      F-69
<PAGE>



                     INDEX TO FINANCIAL STATEMENT SCHEDULES
                                                                          Page
Ferrellgas Partners, L.P. and Subsidiaries
Independent Auditors' Report on Schedules.................................S-2

Schedule I     Parent Company Only Balance Sheets as of
               July 31, 2003 and 2002 and Statements of
               Earnings and Cash Flows for the years
               ended July 31, 2003, 2002 and 2001.........................S-3


Schedule II    Valuation and Qualifying Accounts for the
               years ended July 31, 2003, 2002 and 2001...................S-6

Ferrellgas, L.P. and Subsidiaries
Independent Auditors' Report on Schedules.................................S-7

Schedule II    Valuation and Qualifying Accounts for the
               years ended July 31, 2003, 2002 and 2001...................S-8


                                      S-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri


          We have audited the  consolidated  financial  statements of Ferrellgas
     Partners, L.P. and subsidiaries (the "Partnership") as of July 31, 2003 and
     2002,  and for each of the three years in the period  ended July 31,  2003,
     and have issued our report thereon,  which expressed an unqualified opinion
     and included an explanatory  paragraph for changes in accounting principles
     relating to the  adoption of Statement  of  Financial  Accounting  Standard
     (SFAS) No. 143,  "Accounting  for Asset  Retirement  Obligations" in fiscal
     2003 and SFAS 142, "Goodwill and Other Intangible  Assets", in fiscal 2002,
     dated  September 29, 2003. Our audit also included the financial  statement
     schedules  listed in Item 15. These financial  statement  schedules are the
     responsibility of the Partnership's  management.  Our  responsibility is to
     express an opinion  based on our audits.  In our  opinion,  such  financial
     statement schedules,  when considered in relation to the basic consolidated
     financial  statements  taken as a whole,  present  fairly  in all  material
     respects the information set forth therein.






DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003


                                      S-2
<PAGE>


                                                                     Schedule I

                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                                 BALANCE SHEETS
                        (in thousands, except unit data)
<TABLE>
<S>                                                                           <C>            <C>
                                                                                        July 31,
                                                                              ----------------------------
 ASSETS                                                                           2003           2002
--------------------------------------------------------------------------    -------------  -------------

 Cash and cash equivalents                                                       $    338     $    393
 Prepaid expenses and other current assets                                            677        2,079
 Investment in Ferrellgas, L.P.                                                   229,452      180,401
 Other assets, net                                                                  4,690          423
                                                                              -------------  -------------
    Total assets                                                                 $235,157     $183,296
                                                                              =============  =============



LIABILITIES AND PARTNERS' CAPITAL
--------------------------------------------------------------------------

Accounts payable                                                                 $    193     $    -
Other current liabilities                                                          12,476        2,135
Long term debt                                                                    219,569      160,000

Partners' capital
  Senior unitholder (1,994,146 and 2,782,211 units
    outstanding at 2003 and 2002, respectively -
    liquidation preference $79,766 and $111,288, respectively)                     79,766      111,288
  Common unitholders (37,673,455 and 36,081,203 units
    outstanding in 2003 and 2002, respectively)                                   (15,602)     (28,320)
  General partner (400,683 and 392,556 units outstanding at
   2003 and 2002, respectively)                                                   (59,277)     (59,035)
  Accumulated other comprehensive loss                                             (1,968)      (2,772)
                                                                              -------------  -------------
    Total partners' capital                                                         2,919       21,161
                                                                              -------------  -------------
    Total liabilities and partners' capital                                      $235,157     $183,296
                                                                              =============  =============
</TABLE>


                                      S-3
<PAGE>

                                                                      Schedule I

                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                             STATEMENTS OF EARNINGS
                                 (in thousands)
<TABLE>
<S>                                        <C>                 <C>                <C>
                                                          For the year ended July 31,
                                           ---------------------------------------------------------
                                                 2003                2002               2001
                                           -----------------   -----------------  ------------------

Equity in earnings of Ferrellgas, L.P.        $ 82,573            $ 75,588            $ 81,203
Operating expense                                  435                   2                   -
                                           -----------------   -----------------  ------------------

  Operating income                              82,138              75,586              81,203

Interest expense                               (18,205)            (15,592)            (13,858)
Interest income                                     10                   9                   -
Early extinguishment of debt expense            (7,052)                  -                   -
Other charges                                     (142)                (44)             (3,277)
                                           -----------------   -----------------  ------------------

  Net earnings                                $ 56,749            $ 59,959            $ 64,068
                                           =================   =================  ==================
</TABLE>

                                      S-4
<PAGE>



                                                                      Schedule I
                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
    <S>                                                        <C>            <C>          <C>
                                                                     For the year ended July 31,
                                                               ----------------------------------------
                                                                   2003          2002         2001
                                                               -------------  -----------  ------------
    Cash flows from operating activities:
     Net earnings                                                $56,749        $59,959     $64,068
     Early extinguishment of debt expenses                         1,854            -           -
      Reconciliation of net earnings to net cash
      used in operating activities:
        Other                                                      1,202            711       1,008
        Equity in earnings of Ferrellgas, L.P.                   (82,573)       (75,588)    (81,203)
                                                               -------------  -----------  ------------
          Net cash used in operating activities                  (22,768)       (14,918)    (16,127)
                                                               -------------  -----------  ------------

    Cash flows from investing activities:
     Distributions received from Ferrellgas, L.P.                101,200         99,051      83,133
     Business acquisitions, net of cash acquired                 (32,000)           -           -
     Cash contributed to Ferrellgas, L.P.                        (17,576)           -           -
                                                               -------------  -----------  ------------
          Net cash provided by investing activities               51,624         99,051      83,133
                                                               -------------  -----------  ------------

    Cash flows from financing activities:
     Distributions                                               (84,729)       (84,075)    (69,125)
     Proceeds from issuance of debt                              219,680            -           -
     Principal payments on debt                                 (160,000)           -           -
     Cash paid for financing costs                                (5,342)           -           -
     Issuance of common units, net of issuance costs
       of $195 and $500 in 2003 and 2001, respectively            26,153            -        84,865
     Redemption of senior units                                  (31,522)        (777)      (83,464)
     Proceeds from exercise of common unit options                 6,725          939         1,718
     Other                                                           124          (42)         (786)
                                                               -------------  -----------  ------------
          Net cash used by financing activities                  (28,911)     (83,955)      (66,792)
                                                               -------------  -----------  ------------

    Increase (decrease) in cash and cash equivalents                 (55)         178           214
    Cash and cash equivalents - beginning of year                    393          215             1
                                                               -------------  -----------  ------------
    Cash and cash equivalents - end of year                      $   338        $ 393       $   215
                                                               =============  ===========  ============
</TABLE>


                                      S-5
<PAGE>



                                                                      Scedule II
                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>
<S>                                  <C>          <C>                 <C>               <C>                  <C>
                                                              Additions
                                                  -----------------------------------
                                      Balance at     Charged to                            Deductions           Balance
                                      beginning        cost/              Other             (amounts            at end
            Description               of period       expenses          Additions         charged-off)         of period
----------------------------------   -----------  -----------------   ---------------   ------------------   --------------

Year ended July 31, 2003
------------------------
Allowance for doubtful accounts        $1,467           $4,106              $0              $(2,901)             $2,672

Year ended July 31, 2002
------------------------
Allowance for doubtful accounts        $3,159           $1,604              $0              $(3,296)             $1,467

Year ended July 31, 2001
------------------------
Allowance for doubtful accounts        $2,388           $3,029              $0              $(2,258)             $3,159
</TABLE>


                                      S-6
<PAGE>


             INDEPENDENT AUDITORS' REPORT


To the Partners of
Ferrellgas, L.P. and Subsidiaries
Liberty, Missouri


     We have audited the consolidated  financial statements of Ferrellgas,  L.P.
and subsidiaries (the  "Partnership") as of July 31, 2003 and 2002, and for each
of the three years in the period ended July 31, 2003, and have issued our report
thereon,  which  expressed an  unqualified  opinion and included an  explanatory
paragraph  for changes in  accounting  principles  relating  to the  adoption of
Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset
Retirement  Obligations"  in fiscal 2003 and SFAS No. 142,  "Goodwill  and Other
Intangible  Assets" in fiscal 2002,  dated  September  29, 2003.  Our audit also
included the  financial  statement  schedule  listed in Item 15. This  financial
statement  schedule is the responsibility of the Partnership's  management.  Our
responsibility  is to express an opinion  based on our audits.  In our  opinion,
such  financial  statement  schedule,  when  considered in relation to the basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.






DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 29, 2003


                                      S-7
<PAGE>


                                                                     Schedule II

                       FERRELLGAS, L.P. AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>
<S>                                  <C>          <C>                 <C>               <C>                  <C>
                                                               Addition
                                                  -----------------------------------
                                      Balance at     Charged to                            Deductions           Balance
                                      beginning        cost/              Other             (amounts            at end
            Description               of period       expenses          Additions         charged-off)         of period
----------------------------------   -----------  -----------------   ---------------   ------------------   --------------

Year ended July 31, 2003
------------------------
Allowance for doubtful accounts        $1,467          $4,106              $0              $(2,901)              $2,672

Year ended July 31, 2002
------------------------
Allowance for doubtful accounts        $3,159          $1,604              $0              $(3,296)              $1,467

Year ended July 31, 2001
------------------------
Allowance for doubtful accounts        $2,388          $3,029              $0              $(2,258)              $3,159
</TABLE>


                                      S-8