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, 1997
                                       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   1-11331
                          333-06693
                            Ferrellgas Partners, L.P.
                        Ferrellgas Partners Finance Corp.

           (Exact name of registrants as specified in their charters)
        Delaware                                          43-1698480
        Delaware                                          43-1742520
----------------------------                     ------------------------------
(State or other jurisdictions of                (I.R.S. Employer Identification
incorporation or organization)
                   One Liberty Plaza, Liberty, Missouri 64068

               (Address of principal executive offices) (Zip Code)

Registrant's 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                         New York Stock Exchange

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

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

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

The aggregate market value as of September 16, 1997, of the registrant's  Common
Units held by  nonaffiliates  of the registrant,  based on the reported  closing
price  of  such  units  on the  New  York  Stock  Exchange  on  such  date,  was
approximately $307,849,089.

At September 16, 1997,Ferrellgas Partners, L.P.had units outstanding as follows:
14,612,580        Common Units
16,593,721        Subordinated Units
Documents Incorporated by Reference:   None


<PAGE>


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

                          1997 FORM 10-K ANNUAL REPORT

                                Table of Contents

                                                                            Page
                                     PART I
ITEM     1.     BUSINESS.....................................................1
ITEM     2.     PROPERTIES...................................................8
ITEM     3.     LEGAL PROCEEDINGS............................................9
ITEM     4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........9

                                     PART II

ITEM     5.     MARKET FOR THE REGISTRANT'S UNITS AND
                RELATED UNITHOLDER MATTERS....................................9
ITEM     6.     SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.............10
ITEM     7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS................11
ITEM     8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................17
ITEM     9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE..........................17

                                    PART III

ITEM    10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS..........17
ITEM    11.     EXECUTIVE COMPENSATION.......................................19
ITEM    12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT...............................................22
ITEM    13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............23

                                     PART IV

ITEM    14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                REPORTS ON FORM 8-K..........................................23

<PAGE>
                                       


                                     PART I

ITEM 1.       BUSINESS.

Business of Ferrellgas Partners, L.P.

     Ferrellgas Partners,  L.P. (the "Master Limited Partnership" or the "MLP"),
is a Delaware limited  partnership which was formed on April 19, 1994. The MLP's
Common Units are listed on the New York Stock Exchange. The MLP's activities are
conducted through its subsidiary Ferrellgas,  L.P. (the "Operating  Partnership"
or the "OLP"). The MLP, with a 99% limited partner interest, is the sole limited
partner of the Operating Partnership.  The MLP and the Operating Partnership are
together  referred to herein as the  "Partnership".  The  Operating  Partnership
accounts for nearly all of the MLP's  consolidated  assets,  sales and operating
earnings.  The MLP's  consolidated  net earnings also reflect  interest  expense
related to $160  million of 9 3/8%  Senior  Secured  Notes  issued by the MLP in
April 1996.

Business of Ferrellgas, L.P.

     The Operating  Partnership,  a Delaware limited partnership,  was formed on
April 22, 1994, to acquire,  own and operate the propane  business and assets of
Ferrellgas,  Inc. (the  "Company",  "Ferrellgas",  and "General  Partner").  The
Company has retained a 1% general  partner  interest in the MLP and also holds a
1.0101% general partner interest in the Operating Partnership, representing a 2%
general  partner  interest in the  Partnership on a combined  basis.  As General
Partner of the  Partnership,  the  Company  performs  all  management  functions
required for the Partnership.

General

     The Partnership is engaged in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The discussion that follows focuses on
the  Partnership's  retail  operations and its other  operations,  which consist
primarily  of propane  and  natural gas  liquids  trading  operations,  chemical
feedstocks marketing and wholesale propane marketing, all of which were conveyed
to the Partnership on July 5, 1994. All historical  references  prior to July 5,
1994 relate to the operations as conducted by the Company.

     The General  Partner  believes that the  Partnership  is the second largest
retail  marketer of propane in the United States (as measured by gallons  sold),
serving more than 800,000  residential,  industrial/commercial  and agricultural
customers in 45 states and the District of Columbia  through  approximately  513
retail  outlets with 295  satellite  locations in 38 states (some  outlets serve
interstate  markets).  For the  Partnership's  fiscal years ended July 31, 1997,
1996 and 1995,  annual  retail  propane  sales  volumes  were 694  million,  650
million, and 576 million gallons,  respectively.  The retail propane business of
the Partnership  consists  principally of transporting  propane purchased in the
contract and spot markets,  primarily  from major oil  companies,  to its retail
distribution  outlets and then to tanks located on its customers'  premises,  as
well as to portable propane cylinders.

     The General Partner also believes that the Partnership is a leading natural
gas liquids  trading  company.  Annual propane and natural gas liquids  trading,
chemical  feedstocks and wholesale propane sales volumes were  approximately 1.2
billion,  1.7 billion and 1.5 billion gallons during the fiscal years ended July
31, 1997, 1996 and 1995, respectively.


<PAGE>



Retail Operations

   Formation

     Ferrell Companies, Inc. ("Ferrell"),  the parent of Ferrellgas, was founded
in  1939  as a  single  retail  propane  outlet  in  Atchison,  Kansas  and  was
incorporated  in  1954.  In  1984,  a  subsidiary  was  formed  under  the  name
Ferrellgas,  Inc. to operate the retail propane business previously conducted by
Ferrell.  Ferrell is  primarily  owned by James E.  Ferrell and his family.  The
Company's  initial growth largely resulted from small  acquisitions in the rural
areas of eastern Kansas, northern and central Missouri,  Iowa, Western Illinois,
Southern  Minnesota,  South Dakota and Texas. In July 1984, the Company acquired
propane  operations with annual retail sales volumes of approximately 33 million
gallons and in December  1986,  the Company  acquired  propane  operations  with
annual retail sales volumes of approximately  395 million  gallons.  These major
acquisitions  and many other  smaller  acquisitions  significantly  expanded and
diversified  the  Company's  geographic  coverage.  In July  1994,  the  propane
business and assets of the Company were contributed to the Partnership.

   Business Strategy

     The Partnership's  business strategy is to continue Ferrellgas'  historical
focus on residential and commercial retail propane  operations and to expand its
operations  through strategic  acquisitions of smaller retail propane operations
located throughout the United States and through increased  competitiveness  and
efforts to acquire new customers. The propane industry is relatively fragmented,
with the ten largest retail  distributors  possessing  approximately  33% of the
total retail  propane  market and much of the industry  consisting of over 5,000
local or regional distributors.  The Partnership's retail operations account for
approximately  8% of the  retail  propane  purchased  in the United  States,  as
measured by gallons sold.  Since 1986,  and as of July 31, 1997,  Ferrellgas has
acquired 108 smaller  independent  propane  retailers which Ferrellgas  believes
were not individually  material,  except for the acquisition of Skelgas Propane,
Inc.  ("Skelgas") in May 1996 and Vision Energy  Resources,  Inc.  ("Vision") in
November 1994. For the fiscal years ended July 31, 1997 to 1993, the Partnership
or its predecessor invested  approximately $38.8 million,  $108.8 million, $70.1
million,  $3.4 million,  and $0.9 million,  respectively,  to acquire operations
with annual retail sales of  approximately  20.5 million,  111.8  million,  70.0
million, 2.9 million, and 0.7 million gallons of propane, respectively.

     The  Partnership  intends to  concentrate  its  acquisition  activities  in
geographical areas in close proximity to the Partnership's  existing  operations
and to acquire  propane  retailers  that can be  efficiently  combined with such
existing  operations to provide an attractive  return on investment after taking
into account the efficiencies  which may result from such combination.  However,
the  Partnership  will also pursue  acquisitions  which  broaden its  geographic
coverage.  The  Partnership's  goal in any  acquisition  will be to improve  the
operations and profitability of these smaller companies by integrating them into
the  Partnership's  established  supply network.  The General Partner  regularly
evaluates a number of propane distribution companies which may be candidates for
acquisition.  The General Partner  believes that there are numerous local retail
propane  distribution  companies that are possible candidates for acquisition by
the Partnership and that the  Partnership's  geographic  diversity of operations
helps to create  many  attractive  acquisition  opportunities.  The  Partnership
intends to fund acquisitions  through internal cash flow, external borrowings or
the issuance of additional Common Units. The Partnership's ability to accomplish
these  goals  will be  subject  to the  continued  availability  of  acquisition
candidates at prices  attractive to the  Partnership.  There is no assurance the
Partnership will be successful in sustaining the recent level of acquisitions or
that any acquisitions that are made will prove beneficial to the Partnership.

         In  addition  to  growth  through  acquisitions,  the  General  Partner
believes  that the  Partnership  may also  achieve  growth  within its  existing
propane  operations.  As a result of its experience in responding to competition
and in  implementing  more efficient  operating  standards,  the General Partner
believes that it has positioned the  Partnership to be more successful in direct
competition  for customers.  The  Partnership  currently has marketing  programs
underway which focus specific resources toward this effort.

                                       2
<PAGE>

   Marketing

     Natural  gas  liquids  are  derived  from  petroleum  products  and sold in
compressed  or liquefied  form.  Propane,  the  predominant  type of 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.

     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 certain industrial applications,  including use as
engine fuel, which is burned in internal  combustion engines that power vehicles
and  forklifts  and as a heating or energy  source in  manufacturing  and drying
processes.

     The retail propane marketing  business  generally involves large numbers of
small volume  deliveries  averaging  approximately  200 gallons each. The market
areas  are  generally  rural but also  include  suburban  areas  for  industrial
applications where natural gas service is not available.

     The Partnership utilizes marketing programs targeting both new and existing
customers  emphasizing  its superior  ability to deliver propane to customers as
well  as its  training  and  safety  programs.  The  Partnership  sells  propane
primarily  to  four  specific   markets:   residential,   industrial/commercial,
agricultural  and other  (principally  to other propane  retailers and as engine
fuel).  During  the  fiscal  year  ended  July 31,  1997,  sales to  residential
customers  accounted  for 61% of retail gross profit,  sales to  industrial  and
other commercial  customers  accounted for 24% of retail gross profit, and sales
to agricultural  and other  customers  accounted for 15% of retail gross profit.
Residential  sales have a greater profit margin,  more stable  customer base and
tend to be less  sensitive to price changes than the other markets served by the
Partnership.  No single customer of the Partnership  accounts for 10% or more of
the Partnership's consolidated revenues.

     Profits in the retail propane business are primarily based on margins,  the
cents-per-gallon  difference  between the purchase  price and the sales price of
propane.  The Partnership  generally  purchases propane in the contract and spot
markets,  primarily from major oil companies,  on a short-term basis, therefore,
its supply costs  fluctuate  with market price  fluctuations.  Should  wholesale
propane prices decline in the future,  the  Partnership's  margins on its retail
propane  distribution  business should increase in the short-term because retail
prices tend to change less rapidly than wholesale  prices.  Should the wholesale
cost of propane  increase,  for similar reasons retail margins and profitability
would likely be reduced at least for the  short-term  until retail prices can be
increased.  Retail propane  customers  typically  lease their storage tanks from
their propane  distributors.  Approximately 70% of the  Partnership's  customers
lease their tank from the  Partnership.  The lease  terms and,  in some  states,
certain fire safety regulations, restrict the filling of a leased tank solely to
the propane supplier that owns the tank. The cost and inconvenience of switching
tanks minimizes a customers tendency to switch among suppliers of propane on the
basis of minor variations in price.

     The retail market for propane is seasonal  because it is used primarily for
heating  in  residential  and  commercial  buildings.  Consequently,  sales  and
operating  profits  are  concentrated  in the second and third  fiscal  quarters
(November through April). To the extent necessary,  the Partnership will reserve
cash inflows from the second and third quarters for  distribution  to holders of
Common Units in the first and fourth fiscal quarters. In addition,  sales volume
traditionally fluctuates from year to year in response to variations in weather,
prices and other  factors,  although  the  Partnership  believes  that the broad
geographic distribution of its operations helps to minimize exposure to regional
weather or economic patterns. Long-term, historic weather data from the National
Climatic Data Center indicate that the average annual temperatures have remained
relatively  constant  over the last 30 years with  fluctuations  occurring  on a
year-to-year basis only. During times of colder-than-normal  winter weather, the
Company has been able to take  advantage  of its large,  efficient  distribution
network to help avoid supply  disruptions  such as those  experienced by some of
its competitors, thereby broadening its long-term customer base.

                                       3
<PAGE>

Supply and Distribution

     The  Partnership  purchases  propane  primarily  from  major  domestic  oil
companies.  Supplies  of propane  from these  sources  have  traditionally  been
readily  available,  although no assurance can be given that supplies of propane
will be readily  available in the future.  As a result of (i) the  Partnership's
ability  to buy  large  volumes  of  propane  and (ii) the  Partnership's  large
distribution  system and  underground  storage  capacity,  the  General  Partner
believes that the  Partnership is in a 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. The Partnership is not dependent
upon any single  supplier or group of suppliers,  the loss of which would have a
material adverse effect on the Partnership. For the year ended July 31, 1997, no
supplier  at  any  single   delivery   point  provided  more  than  10%  of  the
Partnership's  total domestic  propane  supply.  A portion of the  Partnership's
propane inventory is purchased under supply contracts which typically have a one
year term and a fluctuating price relating to spot market prices. Certain of the
Partnership's  contracts  specify certain minimum and maximum amounts of propane
to be purchased  thereunder.  The Partnership may purchase and store inventories
of propane in order to help insure uninterrupted  deliverability  during periods
of extreme demand.  The Partnership owns three  underground  storage  facilities
with an aggregate  capacity of  approximately  184 million  gallons.  Currently,
approximately  142 million  gallons of this capacity is leased to third parties.
The remaining space is available for the Partnership's use.

     Propane is generally  transported  from natural gas  processing  plants and
refineries,  pipeline  terminals and storage  facilities to retail  distribution
outlets and wholesale  customers by railroad tank cars leased by the Partnership
and highway transport trucks owned or leased by the Partnership. The Partnership
operates a fleet of  transport  trucks to  transport  propane  from  refineries,
natural gas processing plants or pipeline  terminals to its retail  distribution
outlets.  Common carrier  transport  trucks may be used during the peak delivery
season in the  winter  months or to  provide  service  in areas  where  economic
considerations  favor common carrier use.  Propane is then  transported from the
Partnership's  retail  distribution  outlets to  customers by its fleet of 1,605
bulk  delivery  trucks,  which are fitted  generally  with 2,000 to 3,000 gallon
propane tanks. Propane storage tanks located on the customers' premises are then
filled from the  delivery  truck.  Propane is also  delivered  to  customers  in
portable cylinders.

Industry and Competition

   Industry

     Based upon information contained in the Energy Information Administration's
Annual Energy Review 1996 magazine,  propane accounts for approximately  3-4% of
household  energy  consumption in the United States,  an average level which has
remained  relatively  constant for the past 19 years. It 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 suburban  areas where natural gas is  unavailable or
portability  of product is required.  Propane is generally  more  expensive than
natural  gas on an  equivalent  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, the Partnership believes that new opportunities for
propane sales arise as more geographically  remote  neighborhoods are developed.
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 cheaper 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. The Partnership's residential retail
propane customers,  therefore, will have an incentive to switch to fuel oil only
if fuel oil becomes  significantly  less expensive than propane.  Likewise,  the
Partnership may be unable to expand its customer base in areas where fuel oil is
widely used,  particularly the Northeast,  unless propane becomes  significantly
less expensive than fuel oil.  Alternatively,  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.  Propane
generally is becoming  increasingly  favored over fuel oil and other alternative
sources of fuel as an environmentally preferred energy source.

                                       4
<PAGE>

   Competition

     In addition to competing  with  marketers of other fuels,  the  Partnership
competes  with  other  companies  engaged  in the  retail  propane  distribution
business.  Competition within the propane  distribution  industry stems from two
types of participants:  the larger multi-state marketers, and the smaller, local
independent marketers.  Based upon information contained in the National Propane
Gas  Association's  LP-Gas  Market  Facts and the  January  1997 issue of LP Gas
magazine,  the  Partnership  believes  that the ten largest  multi-state  retail
marketers of propane,  including the Partnership,  account for approximately 33%
of  the  total  retail  sales  of  propane  in the  United  States.  Based  upon
information contained in industry publications, the Partnership also believes no
single  marketer  has a greater than 10% share of the total market in the United
States and that the Partnership is the second largest retail marketer of propane
in the United  States,  with a market share of  approximately  8% as measured by
volume of national retail propane sales.

     Most of the Partnership's retail distribution outlets compete with three or
more marketers or distributors.  The principal factors  influencing  competition
among propane  marketers are price and service.  The  Partnership  competes 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
locate in close  proximity to customers to lower the cost of providing  service.
The typical  retail  distribution  outlet has an effective  marketing  radius of
approximately 25 miles.

Other Operations

     The  other  operations  of the  Partnership  consist  principally  of:  (1)
trading,  (2) chemical feedstocks marketing and (3) wholesale propane marketing.
The  Partnership,  through  its  natural  gas  liquids  trading  operations  and
wholesale  marketing,  has  become  one of the  largest  independent  traders of
propane and natural gas liquids in the United States.  The  Partnership  owns no
properties that are material to these  operations.  These operations may utilize
available  space in the  Partnership's  underground  storage  facilities  in the
furtherance  of these  businesses.  Because  the  Partnership  possesses a large
distribution  system,  underground storage capacity and the utility to buy large
volumes of propane,  the General  Partner  believes that the Partnership is in a
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.

   Trading

     The Partnership's  traders are engaged in trading propane and other natural
gas liquids for the  Partnership's  account and for supplying the  Partnership's
retail and  wholesale  propane  operations.  The  Partnership  primarily  trades
products  purchased  from its  over 110  suppliers,  however,  it also  conducts
transactions on the New York Mercantile Exchange.  Trading activity is conducted
primarily  to  generate  a  profit  independent  of  the  retail  and  wholesale
operations,  but is also conducted to insure the  availability of propane during
periods of short supply.  Propane represents over 50% of the Partnership's total
trading  volume,  with the  remainder  consisting  principally  of various other
natural gas liquids.  The Partnership  attempts to minimize trading risk through
the enforcement of its trading  policies,  which include total inventory  limits
and loss limits,  and attempts to minimize credit risk through credit checks and
application  of its credit  policies.  However,  there can be no assurance  that
historical  experience or the  existence of such  policies will prevent  trading
losses in the future.  For the  Partnership's  fiscal years ended July 31, 1997,
1996 and 1995 net revenues of $5.5  million,  $7.3  million,  and $5.8  million,
respectively, were derived from trading activities.

                                       5
<PAGE>

   Chemical Feedstocks Marketing

     The  Partnership  is  also  involved  in  the  marketing  of  refinery  and
petrochemical  feedstocks.  Petroleum  by-products are purchased from refineries
and sold to petrochemical  plants. The Partnership leases 361 railroad tank cars
to facilitate  product  delivery.  Revenues of $29.8 million,  $44.4 million and
$91.9 million were derived from such  activities  for the  Partnership's  fiscal
years ended July 31, 1997, 1996 and 1995, respectively.

   Wholesale Marketing

     The Partnership  engages in the wholesale  distribution of propane to other
retail propane  distributors.  During the fiscal years ended July 31, 1997, 1996
and 1995, the Partnership sold 123 million,  104 million and 96 million gallons,
respectively, of propane to wholesale customers and had revenues attributable to
such sales of $68.7 million, $42.6 million and $33.5 million, respectively.

Employees

     The  Partnership  has no  employees  and is managed by the General  Partner
pursuant to the Partnership Agreement. At July 31, 1997, the General Partner had
3,370 full-time employees and 837 temporary and part-time employees. At July 31,
1997, the General Partner's  full-time  employees were employed in the following
areas:

Retail Locations                                                         2,834
Transportation and Storage                                                 219
Corporate Offices (Liberty, MO & Houston, TX)                              317
                                                                     -----------
                           Total                                         3,370
                                                                     ==========

     Approximately   one  percent  of  the  General   Partner's   employees  are
represented  by six  local  labor  unions,  which  are all  affiliated  with the
International  Brotherhood of Teamsters. The General Partner has not experienced
any significant work stoppages or other labor problems.

     The  Partnership's   supply,   trading,   chemical  feedstocks   marketing,
distribution  scheduling and product accounting functions are operated primarily
out of the  Partnership's  offices  located  in  Houston,  by a total  full-time
corporate staff of 83 people.

Governmental Regulation; Environmental and Safety Matters

     From August 1971 until January 1981, the United States Department of Energy
regulated the price and  allocation  of propane.  The  Partnership  is no longer
subject to any similar regulation.

     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, the Partnership  conducts 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.  Such  due  diligence  includes  questioning  the  sellers,  obtaining
representations   and  warranties   concerning  the  sellers'   compliance  with
environmental laws and visual  inspections of the properties,  whereby employees
of the  General  Partner  look  for  evidence  of  hazardous  substances  or the
existence of underground storage tanks.

                                       6
<PAGE>


     With respect to the  transportation of propane by truck, the Partnership is
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 ("DOT"). National
Fire Protection  Association  Pamphlet No. 58, which  establishes a set of rules
and   procedures   governing  the  safe  handling  of  propane,   or  comparable
regulations,  have been  adopted as the  industry  standard in a majority of the
states in which the Partnership  operates.  There are no material  environmental
claims pending and the  Partnership  complies in all material  respects with all
material   governmental   regulations  and  industry  standards   applicable  to
environmental and safety matters,  except as it relates to the DOT Final Interim
Rule on  emergency  shut off valves on bobtail  vehicles.  The DOT has taken the
position  that all existing  emergency  shut off devices  used on propane  cargo
vessels fail to comply with the existing Emergency  Discharge Control Regulation
49CFR  178.337-11.  Accordingly,  the DOT has issued a Final  Interim  Rule that
requires all transporters of propane to implement  revised  procedures to ensure
immediate  activation  of the  emergency  shut  off  device  in the  event  of a
catastrophic  failure of a cargo vehicle's  discharge system. The Partnership is
in compliance with Final Interim Rule as to transport  vehicles,  and is working
with both the DOT and outside  experts to develop a system for bobtail  vehicles
that complies with the existing Emergency  Discharge Control Regulations as well
as the provisions of the Final Interim Rule.

Service Marks and Trademarks

     The Partnership markets retail propane under the "Ferrellgas" tradename and
uses  the  tradename  "Ferrell  North  America"  for its  other  operations.  In
addition,  the  Partnership  has a  trademark  on the name  "FerrellMeter,"  its
patented gas leak detection device.  The Company  contributed all of its rights,
title and interest in such  tradenames and trademark in the  continental  United
States to the  Partnership.  The General Partner will have an option to purchase
such  tradenames and trademark from the  Partnership  for a nominal value if the
General Partner is removed as general partner of the Partnership  other than for
cause.  If the General  Partner  ceases to serve as the  general  partner of the
Partnership  for any other  reason,  it will have the  option to  purchase  such
tradenames and trademark from the Partnership for fair market value.

Business of Ferrellgas Finance Corp. and Ferrellgas Partners Finance Corp.

     Ferrellgas Finance Corp. (the "OLP Finance Corp."), a Delaware corporation,
was formed April 28, 1994,  and is a  wholly-owned  subsidiary  of the Operating
Partnership.  Ferrellgas  Partners  Finance  Corp.  (the "MLP  Finance  Corp") a
Delaware corporation (together with the OLP Finance Corp., the "Finance Corps.")
was formed on March 28, 1996, and is a  wholly-owned  subsidiary of the MLP. The
Finance Corps. have nominal assets and do not conduct any operations,  but serve
as co-obligors for securities  issued by the Operating  Partnership and the MLP.
Certain institutional investors that might otherwise be limited in their ability
to  invest  in  securities  issued  by  partnerships  by  reasons  of the  legal
investment laws of their states of organization or their charter documents,  may
be able to invest in the Operating Partnership's or MLP's securities because the
Finance  Corps.  are  co-obligors.  Accordingly,  a discussion of the results of
operations,  liquidity  and  capital  resources  of the Finance  Corps.  are not
presented.  See  the  Finance  Corp's.  notes  to  financial  statements  for  a
discussion  of the  securities  with  respect to which the  Finance  Corps.  are
serving as co-obligor.

                                       7
<PAGE>
ITEM 2.       PROPERTIES.

     The Partnership owns or leases the following transportation equipment which
is utilized primarily in retail operations, except for railroad tank cars, which
are used primarily by chemical feedstocks operations.
                                                   Owned       Leased      Total
         Truck tractors .........................    106         48          154
         Transport trailers......................    256         31          287
         Bulk delivery trucks....................    951        654        1,605
         Pickup and service trucks...............  1,015        442        1,457
         Railroad tank cars......................      -        361          361

     The transport  trailers  have an average  capacity of  approximately  9,000
gallons.  The bulk  delivery  trucks are  generally  fitted  with 2,000 to 3,000
gallon  propane  tanks.  Each railroad tank car has a capacity of  approximately
30,000 gallons.

     A typical  retail  distribution  outlet is located on one to three acres of
land and includes a small office,  a workshop,  bulk storage  capacity of 18,000
gallons to 60,000 gallons and a small inventory of stationary  customer  storage
tanks and portable propane cylinders that the Partnership provides to its retail
customers for propane  storage.  The Partnership  owns the land and buildings of
about 50% of its retail  outlets and leases the  remaining  facilities  on terms
customary in the industry and in the applicable local markets.

     Approximately  697,000 propane tanks are owned by the Partnership,  most of
which are  located  on  customer  property  and leased to those  customers.  The
Partnership also owns approximately 638,000 portable propane cylinders,  most of
which are leased to industrial and commercial customers for use in manufacturing
and  processing  needs,  including  forklift  operations,   and  to  residential
customers  for home  heating and  cooking,  and to local  dealers  who  purchase
propane from the Partnership for resale.

     The Partnership owns underground storage facilities at Hutchinson,  Kansas;
Adamana,  Arizona;  and Moab,  Utah.  At July 31,  1997,  the  capacity of these
facilities  approximated  88 million  gallons,  88 million gallons and 8 million
gallons,  respectively  (an  aggregate of  approximately  184 million  gallons).
Currently, approximately 142 million gallons of this capacity is leased to third
parties. The remaining space is available for the Partnership's use.

     The  Partnership  owns the land and two  buildings  (50,245  square feet of
office space) comprising its corporate  headquarters in Liberty,  Missouri,  and
leases the 27,696  square  feet of office  space in  Houston,  Texas,  where its
trading,  chemical feedstocks  marketing and wholesale marketing  operations are
primarily located.

     The Partnership  believes that it has satisfactory title to or valid rights
to use all of its material  properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
currently   due  and  payable  and   immaterial   encumbrances,   easements  and
restrictions,  the  Partnership  does not  believe  that any such  burdens  will
materially  interfere with the continued use of such properties in its business,
taken as a whole. In addition,  the  Partnership  believes that it has, or is in
the process of  obtaining,  all  required  material  approvals,  authorizations,
orders, licenses,  permits, franchises and consents of, and has obtained or made
all  required  material  registrations,  qualifications  and filings  with,  the
various state and local governmental and regulatory  authorities which relate to
ownership of the Partnership's properties or the operations of its business.

                                       8
<PAGE>
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.
The  Partnership,  in the ordinary course of business,  is threatened with or is
named as a defendant in various lawsuits which,  among other items,  seek actual
and punitive damages for product liability, personal injury and property damage.
The Partnership  maintains  liability  insurance  policies with insurers in such
amounts and with such coverages and deductibles as the General Partner  believes
is  reasonable  and  prudent.  However,  there  can be no  assurance  that  such
insurance  will be adequate to protect the  Partnership  from material  expenses
related  to such  personal  injury or  property  damage  or that such  levels of
insurance will continue to be available in the future at economical  prices.  It
is not possible to determine the ultimate disposition of these matters discussed
above;  however,  management is of the opinion that there are no known claims or
known contingent claims that are likely to have a material adverse effect on the
results of operations or financial condition of the Partnership.

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

     No  matters  were  submitted  to a vote  of  the  security  holders  of the
Partnership during the fiscal year ended July 31, 1997.

                                     PART II

ITEM 5.       MARKET FOR REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS.

     The Common Units,  representing  common  limited  partner  interests in the
Partnership,  are listed and  traded on the New York  Stock  Exchange  under the
symbol FGP.  The Common  Units  began  trading on June 28,  1994,  at an initial
public offering price of $21.00 per Common Unit. As of September 16, 1997, there
were 775 registered Common Unitholders of record. The following table sets forth
the high and low  sales  prices  for the  Common  Units on the NYSE and the cash
distributions declared per Common Unit for the periods indicated.
<TABLE>
<CAPTION>

                               Common Unit Price Range                Distributions
                      -------------------------------------------
                              High                  Low            Declared per Unit
                      --------------------- --------------------- ---------------------
                        1996       1997       1996       1997        1996       1997
                      ---------- ---------- ---------- ---------- ----------- ----------
<S>                    <C>        <C>        <C>        <C>         <C>         <C>  
First Quarter           $23.00    $23.50     $21.00     $22.50      $0.50       $0.50
Second Quarter           24.50     22.88      21.25      20.75       0.50        0.50
Third Quarter            24.25     23.00      21.88      21.13       0.50        0.50
Fourth Quarter           23.50     23.00      21.25      21.25       0.50        0.50
</TABLE>


     The Partnership also has issued  Subordinated  Units, all of which are held
by the Company, for which there is no established public trading market.

     The Partnership  makes quarterly cash  distributions of its Available Cash,
as defined  by the MLP's  Partnership  Agreement.  Available  Cash is  generally
defined as consolidated cash receipts less  consolidated cash  disbursements and
changes  in  cash  reserves  established  by  the  General  Partner  for  future
requirements.

     The Partnership is not subject to federal income tax. Instead,  Unitholders
are required to report their allocable share of the Partnership's  income, gain,
loss,  deduction  and  credit,  regardless  of  whether  the  Partnership  makes
distributions.

                                       9
<PAGE>
ITEM 6.       SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.

     The following table presents selected consolidated historical and pro forma
financial data of the Partnership and Predecessor.

(in thousands, except per unit data)
<TABLE>
<CAPTION>
                                                       Ferrellgas Partners L.P.                                (Predecessor)
                             ---------------------------------------------------------------------- --------------------------------
                                              Historical                  Pro Forma     Historical   Historical Eleven  Historical  
                                          Year Ended July 31,             Year Ended   Inception to    Months Ended,    Year Ended  
                              ---------------------------------------     July 31,       July 31,        July 31,        July, 31
                                  1997          1996         1995         1994 (1)          1994           1994           1993
                              -----------  ------------ ------------   ------------    ------------  --------------   --------------
Income Statement Data:
<S>                             <C>           <C>          <C>            <C>             <C>             <C>            <C>      
Total revenues                  $804,298      $653,640     $596,436       $526,556        $ 24,566        $501,990       $ 541,945
Depreciation and amortization     43,789        37,024       32,014         28,835           2,383          26,452          30,840
Operating income (loss)           68,819        62,506       55,927         68,631          (2,391)         71,522          58,553
Interest expense                  45,769        37,983       31,993         28,130           2,662          53,693          60,071
Earnings (loss) from continuing   23,218        24,312       23,820         39,909          (5,026)         12,337             109
  operations
Earnings from continuing            0.74          0.77         0.76          1.29
  operations per unit
Cash distributions declared per     2.00          2.00         1.65
  unit (3)
Balance Sheet Data (at end 
  of period):
Working capital                 $ 18,111      $ 15,294     $ 28,928       $ 34,948        $ 34,948        $ 91,912       $ 74,408
Total assets                     657,076       654,295      578,596        477,193         477,193         592,664        573,376
Pay to (rec from) parent and                                                                                (4,050)          (916)
 affiliates
Long-term debt                   487,334       439,112      338,188        267,062         267,062         476,441        489,589
Stockholder's equity                                                                                        22,829         11,359

Partners' Capital:
Common Unitholders              $ 52,863      $ 71,323     $ 84,489       $ 84,532        $ 84,532
Subordinated Unitholders          50,337        71,302       91,824         99,483          99,483
General Partner (2)              (58,417)      (58,016)     (57,676)       (62,622)        (62,622)

Operating Data:
Retail propane sales volumes     693,995       650,214      575,935        564,224          23,915        $540,309        553,413
   (in gallons)
Capital expenditures (4):                                                    
        Maintenance             $ 10,137      $  6,657     $  8,625       $  5,688         $   911        $  4,777       $ 10,527
        Growth                     6,055         6,654       11,097          4,032             983           3,049          2,851
        Acquisition               38,780       108,803       70,069          3,429             878           2,551            897
                               -----------  ------------ ------------   ------------    ------------     ------------   ------------
            Total               $ 54,972      $122,114     $ 89,791       $ 13,149         $ 2,772        $ 10,377       $ 14,275
                               ===========  ============ ============   ============    ============     ============   ============
Supplemental Data:
Earnings (loss) before          $ 12,608      $ 99,530     $ 87,941       $ 97,466         $    (8)       $ 97,974       $ 89,393 
 interest and taxes (5)
</TABLE>

(1)  The pro forma year ended July 31, 1994  includes  the eleven  months  ended
     June 30, 1994 and  historical  financial  data of the  Partnership  for the
     period from inception, July 5, 1994, to July 31, 1994 (adjusted principally
     for the pro  forma  effect on  interest  expense  resulting  from the early
     retirement of debt net of additional borrowings).

(2)  Pursuant to the MLP's Partnership  Agreement,  the net loss from continuing
     operations of $5,026,000  was  allocated  100% to the General  Partner from
     inception  of the  Partnership  to the last day of the taxable  year ending
     July 31, 1994. An amount equal to 99% of this net loss was  reallocated  to
     the  limited  partners  in the  taxable  year ending July 31, 1995 based on
     their ownership percentage.  In addition, the retirement of debt assumed by
     the  Partnership   resulted  in  an  extraordinary  loss  of  approximately
     $60,062,000  resulting from debt prepayment premiums,  consent fees and the
     write-off of unamortized  discount and financing  costs. In accordance with
     the Partnership  Agreement,  this  extraordinary loss was allocated 100% to
     the General Partner and was not reallocated to the limited  partners in the
     next taxable year.

(3)  No cash  distributions  were declared by the Partnership from inception
     to July 31, 1994. The $0.65 distribution made at the end of the 1995 first
     quarter included $0.50 for the first quarter 1995 and $0.15 for the
     inception period.
                                       10
<PAGE>

(4)  The   Partnership's   capital   expenditures   fall  generally  into  three
     categories:   (i)   maintenance   capital   expenditures,   which   include
     expenditures  for repair and replacement of property,  plant and equipment;
     (ii) growth capital expenditures,  which include expenditures for purchases
     of new propane  tanks and other  equipment to  facilitate  expansion of the
     Partnership's  customer base and operating capacity;  and (iii) acquisition
     capital   expenditures,   which   include   expenditures   related  to  the
     acquisitions of retail propane operations. Acquisition capital expenditures
     represent total cost of acquisition less working capital acquired.

(5)  EBITDA is  calculated  as operating  income  (loss) plus  depreciation  and
     amortization.  EBITDA is not intended to  represent  cash flow and does not
     represent  the  measure of cash  available  for  distribution.  EBITDA is a
     non-GAAP measure,  but provides  additional  information for evaluating the
     Partnership's  ability  to make  the  Minimum  Quarterly  Distribution.  In
     addition,  EBITDA is not intended as an alternative to earnings (loss) from
     continuing operations or net earnings (loss).


ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS
     The following  discussion should be read in conjunction with the historical
consolidated  financial  statements and the notes thereto included  elsewhere in
this Form 10-K.

   Statements included in this report that are not historical facts, including a
statement  concerning the Partnership's belief that the OLP will have sufficient
funds to meet its  obligations  to enable it to distribute to the MLP sufficient
funds to permit the MLP to meet its  obligations  with respect to the MLP Senior
Notes issued in April 1996, and to enable it to distribute the Minimum Quarterly
Distribution  ($0.50 per Unit) on all Common Units and  Subordinated  Units, are
forward-looking statements.

     Such  statements  are subject to risks and  uncertainties  that could cause
actual results to differ  materially  from those  expressed in or implied by the
statements.  The risks and  uncertainties  include  but are not  limited  to the
following  and their effect on the  Partnership's  operations:  a) the effect of
weather  conditions on demand for propane,  b) price and availability of propane
supplies,  c) the availability of capacity to transport propane to market areas,
d)  competition  from other energy sources and within the propane  industry,  e)
operating risks incidental to transporting,  storing, and distributing  propane,
f) changes in interest rates g)  governmental  legislation and  regulations,  h)
energy efficiency and technology trends and (i) other factors that are discussed
in the Partnership's filings with the Securities and Exchange Commission.

General

     The Partnership is engaged in the sale, distribution, marketing and trading
of propane and other natural gas liquids.  The Partnership's  revenue is derived
primarily  from the retail  propane  marketing  business.  The  General  Partner
believes the Partnership is the second largest retail marketer of propane in the
United  States,  based on gallons sold,  serving more than 800,000  residential,
industrial/commercial  and agricultural  customers in 45 states and the District
of  Columbia  through   approximately  513  retail  outlets  and  295  satellite
locations.  Annual retail  propane sales volumes were 694 million,  650 million,
and 576 million  gallons for the fiscal  years ended July 31,  1997,  1996,  and
1995, respectively.

     The retail  propane  business of the  Partnership  consists  principally of
transporting propane purchased in the contract and spot markets,  primarily from
major  oil  companies,  to its  retail  distribution  outlets  and then to tanks
located on the 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 certain industrial applications,  including use as
an engine  fuel,  which is burned in  internal  combustion  engines  that  power
vehicles and forklifts and as a heating or energy  source in  manufacturing  and
drying processes.

                                       11
<PAGE>

     The Partnership is also engaged in the trading of propane and other natural
gas liquids,  chemical  feedstocks  marketing and wholesale  propane  marketing.
Through its natural gas liquids trading operations and wholesale marketing,  the
Partnership is one of the largest independent traders of propane and natural gas
liquids in the United States. In fiscal year 1997, the  Partnership's  wholesale
and trading sales volume was  approximately  1.2 billion  gallons of propane and
other natural gas liquids, over 50% of which was propane.

     The Partnership's  traders are engaged in trading propane and other natural
gas liquids for the  Partnership's  account and for supplying the  Partnership's
retail and  wholesale  propane  operations.  The  Partnership  primarily  trades
products  purchased  from its  over 110  suppliers,  however,  it also  conducts
transactions on the New York Mercantile Exchange.  Trading activity is conducted
primarily  to  generate  a  profit  independent  of  the  retail  and  wholesale
operations,  but is also conducted to insure the  availability of propane during
periods of short supply.  Propane represents over 50% of the Partnership's total
trading  volume,  with the  remainder  consisting  principally  of various other
natural gas liquids.  The Partnership  attempts to minimize trading risk through
the enforcement of its trading  policies,  which include total inventory  limits
and loss limits,  and attempts to minimize credit risk through credit checks and
application  of its credit  policies.  However,  there can be no assurance  that
historical  experience or the  existence of such  policies will prevent  trading
losses in the future.  For the  Partnership's  fiscal years ended July 31, 1997,
1996 and 1995,  net revenues from trading  activities  were $5.5  million,  $7.3
million and $5.8 million, respectively.

Selected Quarterly Financial Data
(in thousands, except per unit data)

     Due to the  seasonality  of the retail propane  business,  first and fourth
quarter  revenues,  gross profit and net earnings are consistently less than the
comparable second and third quarter results. Other factors affecting the results
of operations include competitive conditions,  demand for product, variations in
the weather and fluctuations in propane prices.

Fiscal 1997

During the first three  quarters of fiscal  1997,  the  Partnership  experienced
increased  revenues  and gross profit due to the affect of  acquisitions  in the
fourth quarter of fiscal 1996 and significantly higher wholesale propane product
costs,  partially  offset by the impact of warmer  weather.  The fourth  quarter
gross  profit  was  negatively  affected  by  a  cumulative   inventory  costing
adjustment  that related to the prior three  quarters.  This  inventory  costing
adjustment  contributed to approximately .3%, 1.4%, and 1.0%, as a percentage of
revenues,  of the Partnership's  gross profit increase in the first,  second and
third quarters of fiscal 1997,  respectively.  In addition,  net earnings (loss)
for the third and fourth  quarters  of fiscal 1997 were  positively  affected by
favorable  general  liability  claims  experience.  The  following  presents the
Partnership's selected quarterly financial data for the two years ended July 31,
1997.

                                       12
<PAGE>
<TABLE>
<CAPTION>

Fiscal year ended July 31, 1997

                                          First            Second              Third           Fourth
                                         Quarter           Quarter            Quarter          Quarter
                                        ------------     ------------       -----------     -----------

<S>                                     <C>                 <C>               <C>             <C>     
Revenues                                $167,860            $347,056          $192,873        $ 96,509
Gross profit                              66,785             143,291            84,855          39,239
Net earnings (loss)                      (10,298)             54,412             9,676         (30,572)
Net earnings (loss) per
 limited partner unit                      (0.33)               1.73              0.31           (0.97)

Fiscal year ended July 31, 1996
                                          First            Second              Third           Fourth
                                         Quarter           Quarter            Quarter          Quarter              
                                        ------------     ------------       -----------     -----------

Revenues                                  $124,588          $238,381           $190,743        $99,928
Gross profit                                55,479           111,909             85,480         44,458
Earnings (loss) before
  extraordinary loss                        (7,303)           41,476             18,012        (27,873)
Earnings (loss) before
  extraordinary loss per limited
  partner unit                               (0.23)             1.32               0.57          (0.88)
Net earnings (loss) (1)                     (7,303)           41,476             18,012        (28,838)
</TABLE>

(1) Reflects a $965  extraordinary loss on early retirement of debt, net of
     minority interest of $10.

Results of Operations

   Fiscal Year Ended July 31, 1997 versus Fiscal Year Ended July 31, 1996

     Total Revenues.  Total revenues increased 23.0% to $804,298,000 as compared
to  $653,640,000  in the prior year,  primarily due to increased sales price per
retail  gallon,  increased  retail  propane  volumes,  and to a lesser extent an
increase in revenues from other  operations (net trading  operations,  wholesale
propane marketing and chemical feedstocks marketing).

     A volatile  propane  market  during the first half of fiscal  1997 caused a
significant  increase in the cost of product which in turn caused an increase in
sales price per gallon.  Retail volumes increased by 6.7% or 44 million gallons,
primarily  due to the  increase  in volumes  related to  acquisitions  partially
offset by the affect of warmer  weather during fiscal 1997 as compared to fiscal
1996 and by customer conservation efforts.  Fiscal 1997 winter temperatures,  as
reported by the American Gas Association, were 6% warmer than the prior year and
4% warmer than normal.

     The 10.2% increase in revenues from other operations to $103,971,000 is due
to an  increase  in  wholesale  marketing  volumes  and sales  price per gallon,
partially  offset by a  decrease  in  chemical  feedstocks  marketing  revenues.
Wholesale   marketing  volumes   increased   primarily  due  to  the  effect  of
acquisitions  while price  increased as a result of  increased  cost of product.
Chemical  feedstocks volumes decreased as a result of decreased  availability of
product from  refineries  and  decreased  demand from  petrochemical  companies.
Unrealized gains and losses on options, forwards, and futures contracts were not
significant at July 31, 1997 and 1996, respectively.

                                       13
<PAGE>

     Gross Profit.  Gross profit  increased 12.4% to $334,170,000 as compared to
$297,326,000  in the 1996 fiscal  year,  primarily  due to an increase in retail
sales gross margin,  partially  offset by a decrease in gross profits from other
operations. Retail operations results increased primarily due to the increase in
volumes attributed to acquisitions and an increase in retail margins,  partially
offset by the  effect of  warmer  weather  and  customer  conservation  efforts.
Wholesale  marketing  and chemical  feedstocks is comprised of low margin sales,
therefore,  the net  increase in revenues  did not  significantly  affect  gross
profit.

     Operating  Expenses.  Operating expenses increased 10.5% to $198,298,000 as
compared to $179,462,000 in the prior year primarily due to acquisition  related
increases in personnel costs,  plant and office expenses,  and vehicle and other
expenses, partially offset by favorable general liability claims experience.

     Depreciation  and  Amortization.   Depreciation  and  amortization  expense
increased 18.3% to $43,789,000 as compared to $37,024,000 for the prior year due
primarily to acquisitions of propane businesses.

     Interest  expense.  Interest  expense  increased 20.5% over the prior year.
This increase is primarily the result of the MLP's issuance of $160,000,000 of 9
3/8% Senior  Secured Notes in April 1996,  (the "MLP Senior Notes") the proceeds
of which were primarily used to fund acquisitions made in fiscal 1996, partially
offset by an overall decrease in interest rates on borrowings during the year.


   Fiscal Year Ended July 31, 1996 versus Fiscal Year Ended July 31, 1995

     Total  Revenues.  Total  revenues  increased  9.6% as compared to the prior
year,  primarily due to increased  retail  propane  volumes and increased  sales
price per retail gallon,  partially offset by the decline in revenues from other
operations (net trading  operations,  wholesale  propane  marketing and chemical
feedstocks marketing).

     Retail volumes  increased by 12.9% or 74 million gallons,  primarily due to
the affect of colder  weather  during fiscal 1996 as compared to fiscal 1995 and
acquisition related growth. Fiscal 1996 winter temperatures,  as reported by the
American Gas Association,  were 14.3% colder than the prior year and 3.0% colder
than normal. Colder winter temperatures also caused higher cost of product which
in turn produced a corresponding  increase in sales price per gallon as compared
to the prior fiscal year.

     The 28.5%  decrease in revenues  from other  operations to  $94,318,000  is
primarily due to a decrease in chemical  feedstocks  marketing revenues due to a
decrease in sales volume and selling price. Both volume and price decreased as a
result of decreased availability of product from refineries and decreased demand
from petrochemical companies.  Unrealized gains and losses on options, forwards,
and  futures  contracts  were  not  significant  at  July  31,  1996  and  1995,
respectively.

     The acquisition of Skelgas in May 1996 did not have a significant affect on
fiscal  1996  revenues  due to the  expected  low  retail  volumes in the fourth
quarter of fiscal  1996.  The  Partnership  expects  fiscal 1997 retail  propane
revenues to increase primarily due to the full fiscal year impact of the Skelgas
acquisition.  Due to, among other factors,  the  uncertainty in both fiscal 1997
temperature  levels and sales price per  gallon,  the  Partnership  is unable to
predict the impact of the Skelgas  acquisition  on future  revenues.  During the
nine months ended April 30, 1996,  Skelgas sold  approximately 87 million retail
propane gallons, however, temperatures were 3.0% colder than normal.

     Gross Profit.  Gross profit  increased 15.8% as compared to the 1995 fiscal
year,  primarily due to a $28,415,000  increase in retail sales gross margin and
to a lesser  extent  gross  profits  from other  operations.  Retail  operations
results  increased  primarily  due to the  increase  in  retail  volumes.  Other
operations  increased  $11,027,000  mainly due to the  increased  activity  of a
non-retail  transportation operation. This increased activity did not materially
impact  income  from  continuing  operations  due to  the  related  increase  in
operating  expenses.  Chemical  feedstocks  is  comprised  of low margin  sales,
therefore, the decrease in revenues did not significantly impact gross profit.

                                       14
<PAGE>

     Operating Expenses. Operating expenses increased 17.1% over the prior year.
The increase is primarily  attributable to acquisitions of propane and increased
activity in the  non-retail  transportation  operations as compared to the prior
year.

     Depreciation  and  Amortization.   Depreciation  and  amortization  expense
increased  15.6% over the prior year due  primarily to  acquisitions  of propane
businesses.

     Interest expense and extraordinary  loss.  Interest expense increased 18.7%
over the prior year. This increase is primarily the result of the MLP's issuance
the  MLP  Senior  Notes,   the  increased  net  borrowings  from  the  Operating
Partnership's  revolving  credit loans during the first nine months of the year,
partially  offset by decreasing  interest  rates during the first nine months of
the year.

     The extraordinary charge of $965,000 is due to the write off of unamortized
debt  issuance  costs as a  result  of the  refinancing  of the  $50,000,000  of
floating rate debt previously issued by the Operating Partnership.

Liquidity and Capital Resources

     The ability of the MLP to satisfy its  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 its control.
For the fiscal year ending July 31, 1998, the General Partner  believes that the
OLP will  have  sufficient  funds  to meet  its  obligations  and  enable  it to
distribute to the MLP sufficient funds to permit the MLP to meet its obligations
with  respect to the MLP Senior  Notes  issued in April  1996,  and enable it to
distribute  the Minimum  Quarterly  Distribution  ($0.50 per Unit) on all Common
Units and Subordinated  Units.  Future  maintenance and working capital needs of
the  Partnership  are  expected  to be provided  by cash  generated  from future
operations,  existing cash balances and the working capital borrowing  facility.
In order to fund expansive capital projects and future acquisitions, the OLP may
borrow on existing bank lines,  the MLP or OLP may issue  additional debt or the
MLP may issue additional  Common Units.  Toward this purpose the MLP maintains a
shelf  registration  statement with the  Securities and Exchange  Commission for
1,887,420 Common Units  representing  limited partner  interests in the MLP. The
Common Units may be issued from time to time by the MLP in  connection  with the
OLP's  acquisition  of other  businesses,  properties  or securities in business
combination transactions.

     Operating Activities. Cash provided by operating activities was $75,087,000
for the year ended July 31,  1997,  compared to  $65,096,000  in the prior year.
This increase is primarily due to the decrease in accounts receivable related to
timing of trading activity at year end and increased  earnings prior to non-cash
deductions.

     Investing  Activities.  The  Partnership  made  total  acquisition  capital
expenditures of $40,200,000  (including  working capital acquired of $1,420,000)
during  fiscal  1997.  This  amount  was  funded by  $36,114,000  cash  payments
(including  $795,000 for  transition  costs  previously  accrued for fiscal 1996
acquisitions) and $4,881,000 in other costs and consideration.

     During  the year ended  July 31,  1997,  the  Partnership  made  growth and
maintenance  capital  expenditures  of  $16,192,000  primarily for the following
purposes:  1) additions to  Partnership-owned  customer tanks and cylinders,  2)
vehicle lease  buyouts,  3) relocating  the Houston  office and  relocating  and
upgrading  district  plant  facilities,  and 4)  development  of an enhanced gas
inventory  management  system and  upgrading  computer  equipment  and software.
Capital requirements for repair and maintenance of property, plant and equipment
are relatively low since technological change is limited and the useful lives of
propane tanks and cylinders,  the Partnership's  principal  physical assets, are
generally  long.  The  Partnership  maintains  its  vehicle  and  transportation
equipment  fleet by leasing  light and medium  duty  trucks  and  tractors.  The
General Partner  believes vehicle leasing is a cost effective method for meeting
the Partnership's  transportation  equipment needs. The Partnership continues to
seek  expansion of its  operations  through  strategic  acquisitions  of smaller
retail  propane  operations   located   throughout  the  United  States.   These
acquisitions will be funded through internal cash flow,  external  borrowings or
the issuance of additional Partnership interests.  The Partnership does not have
any material commitments of funds for capital expenditures other than to support
the current level of operations.  In fiscal 1998, the Partnership expects growth
and  maintenance  capital  expenditures  to increase  slightly  over fiscal 1997
levels.
                                       15
<PAGE>

     Financing  Activities.  During the fiscal  year  ended July 31,  1997,  the
Partnership  borrowed  $41,729,000  under its $255,000,000  Credit Facility (the
"Credit  Facility") to fund expected  seasonal  working capital needs,  business
acquisitions,  and  capital  expenditures.  At July  31,  1997,  $86,400,000  of
borrowings were outstanding  under the revolving portion of the Credit Facility.
In addition, letters of credit outstanding, used primarily to secure obligations
under certain insurance arrangements, totaled $24,102,000. At July 31, 1997, the
Operating   Partnership  had  $94,498,000   available  for  general   corporate,
acquisition  and  working  capital  purposes  under  the  Credit  Facility.  The
Partnership typically has significant cash needs during the first quarter due to
expected  low  revenues,  increasing  inventories  and  the  Partnership's  cash
distribution paid in mid-September.

     On April 26,  1996,  the MLP issued the MLP  Senior  Notes.  The MLP Senior
Notes will be redeemable at the option of the Partnership,  in whole or in part,
at any  time on or  after  June 15,  2001.  The MLP  Senior  Notes  will  become
guaranteed by the OLP on a senior  subordinated  basis if certain conditions are
met. The Amended and Restated Credit Agreement and the OLP Senior Note Indenture
currently  prohibit the OLP from  guaranteeing  any indebtedness  unless,  among
meeting  other  conditions,  the fixed charge  coverage  ratio for the OLP meets
certain  levels  at  prescribed  dates.  Currently  the OLP does  not meet  such
conditions and, therefore,  there can be no assurance as to whether or when this
guarantee will occur.  Interest is payable  semi-annually  in arrears on June 15
and December  15. The OLP also has  outstanding  $200,000,000  of 10% Fixed Rate
Senior  Notes due 2001.  These notes are  redeemable,  at the option of the OLP,
anytime on or after August 1, 1998 with a premium through August 1, 2000.

     On July 31,  1996,  the OLP amended and restated  its  $205,000,000  Credit
Facility (with Bank of America National Trust & Savings Association ("BofA"), as
Agent. Among other changes, the amendment increased the maximum borrowing amount
to  $255,000,000  and extended the  termination  date of the  revolving  line of
credit to July 1999. The unsecured Credit Facility  permits  borrowings of up to
$185,000,000  on a  senior  unsecured  revolving  line of  credit  basis to fund
general  corporate,  working  capital and  acquisition  purposes (of which up to
$50,000,000 is available to support letters of credit). The Credit Facility also
provides an unsecured  revolving line of credit for additional  working  capital
needs of $20,000,000.  The Partnership  anticipates  either exercising a renewal
for up to one year or  refinancing  any  amounts  still owed in July  1999.  The
Credit  Facility  also  includes  an  unsecured  term loan due June 1, 2001 (the
"Refinancing Loan ") which was used to refinance the OLP's $50,000,000  Floating
Rate Series B Senior Notes (the "Floating Senior Notes").

     To offset the variable rate characteristic of the Credit Facility,  the OLP
has entered into  interest  rate collar  agreements,  expiring  between June and
December 1998 with three major banks, that effectively limit interest rates on a
certain  notional  amount  between  4.9%  and 6.5%  under  the  current  pricing
arrangement.  At July 31, 1997,  the total  notional  principal  amount of these
agreements was $125,000,000.

     During  the  year  ended  July  31,  1997,   the   Partnership   paid  cash
distributions of $2.00 per limited partner unit. These distributions covered the
period from May 1, 1996 to April 30, 1997. On August 19, 1997,  the  Partnership
declared its fourth-quarter cash distribution of $0.50 per limited partner unit,
which was paid September 12, 1997. The Partnership's  annualized distribution is
presently $2.00 per limited partner unit.

                                       16
<PAGE>

     The MLP Senior Notes,  the OLP Fixed Rate Senior Notes and Credit  Facility
contain  various  restrictive  covenants  applicable  to the MLP, the  Operating
Partnership and its  subsidiaries,  the most restrictive  relating to additional
indebtedness,  sale and disposition of assets, and transactions with affiliates.
In  addition,   the  Operating   Partnership  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 the Operating
Partnership  fails to meet certain  coverage  tests.  The MLP and the  Operating
Partnership  are in compliance  with all  requirements,  tests,  limitations and
covenants  related to the MLP Senior Notes,  the OLP Fixed Rate Senior Notes and
Credit Facility.


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The  Partnership's  Consolidated  Financial  Statements  and the Reports of
Certified Public Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statements and Financial Statement
Schedules  are  hereby  incorporated  by  reference.  See  Item  7 for  Selected
Quarterly Financial Data.



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

     None.

                                                     PART III


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.

Partnership Management

     The General Partner manages and operates the activities of the Partnership,
and the General Partner  anticipates that its activities will be limited to such
management and operation.  Unitholders do not directly or indirectly participate
in the management or operation of the  Partnership.  The General  Partner owes a
fiduciary duty to the Unitholders.

     In  September  1994,  the  General  Partner  appointed  two persons who are
neither  officers nor  employees of the General  Partner or any affiliate of the
General  Partner  to  serve  on a  committee  of  the  Partnership  (the  "Audit
Committee") with the authority to review, at the request of the General Partner,
specific  matters  as to which  the  General  Partner  believes  there  may be a
conflict of interest in order to determine if the  resolution  of such  conflict
proposed by the General Partner is fair and reasonable to the  Partnership.  The
Audit  Committee will only review  matters  relating to conflicts of interest at
the request of the General Partner,  and the General Partner has sole discretion
to  determine  which  matters,  if any,  to submit to the Audit  Committee.  Any
matters  approved by the Audit Committee will be conclusively  deemed to be fair
and reasonable to the  Partnership,  approved by all partners of the Partnership
and not a breach by the General Partner of any duties it may owe the Partnership
or the Unitholders.

     The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. At July 31, 1997, 3,370 full-time and 837
temporary and part-time individuals were employed by the General Partner.


                                       17
<PAGE>


Directors and Executive Officers of the General Partner

     The  following  table sets forth  certain  information  with respect to the
directors and executive  officers of the General  Partner at July 31, 1997. Each
of the  persons  named  below is elected to their  respective  office or offices
annually. None of the executive officers have entered into employment agreements
with the General Partner.


                                    Director
Name                      Age        Since      Position
James E. Ferrell          57          1984       Chairman of the Board, Chief
                                                 ExecutiveOfficer and a
                                                 Director of the General Partner

Danley K. Sheldon         39                     President, Chief Financial
                                                 Officer and Treasurer

Patrick J. Chesterman     47                     Senior Vice President, Supply

James M. Hake             37                     Vice President, Acquisitions

Robert J. Wikse           48                     Vice President, Administration

Daniel M. Lambert         56           1994      Director of the General Partner

A. Andrew Levison         41           1994      Director of the General Partner

     James E. Ferrell--Mr. Ferrell has been with Ferrell or its predecessors and
its affiliates in various executive capacities since 1965.

     Danley K.  Sheldon--Mr.  Sheldon has been  President  of the Company  since
October 1996 and Chief  Financial  Officer of the Company since January 1994. He
has served as Treasurer since 1989 and joined the Company in 1986.

     Patrick J.  Chesterman--Mr.  Chesterman  has been  Senior  Vice  President,
Supply since  September  1997.  After joining the Company in June,  1994, he had
one-year  assignments  as Vice  President-Retail  Operations,  Director of Human
Resources  and  Director of Field  Support.  Prior to joining the  Company,  Mr.
Chesterman was Director of Fuels Policy and Operations for the U.S. Air Force.

     James M.  Hake--Mr.  Hake  has been  Vice  President,  Acquisitions  of the
Company since October, 1994. He joined the Company in 1986.

     Robert J. Wikse--Mr.  Wikse has been Vice President,  Administration  since
his appointment in January 1995. After joining the Company in July, 1991, he had
a three-year assignment as Region Director of Western US -Retail Operations.

     Daniel M.  Lambert---Dr.  Lambert  was elected a director of the Company in
September  1994. Dr.  Lambert has been President of Baker  University in Baldwin
City, Kansas, since July 1, 1987

     A.  Andrew  Levison---Mr.  Levison was elected a director of the Company in
September 1994. Mr. Levison has been a Managing Director of Donaldson,  Lufkin &
Jenrette Securities Corporation since 1989.

                                       18
<PAGE>
Compensation of the General Partner

     The General Partner  receives no management fee or similar  compensation in
connection  with its management of the  Partnership and receives no remuneration
other than:

     (i)  distributions  in  respect of its 2% general  partner  interest,  on a
combined basis, in the Partnership and the Operating Partnership; and

     (ii)  reimbursement for all direct and indirect costs and expenses incurred
     on behalf of the  Partnership,  all  selling,  general  and  administrative
     expenses  incurred  by  the  General  Partner  for  or  on  behalf  of  the
     Partnership and all other expenses  necessary or appropriate to the conduct
     of the business of, and allocable to, the Partnership. The selling, general
     and  administrative  expenses  reimbursed include specific employee benefit
     and incentive plans for the benefit of the executive officers and employees
     of the General Partner.

ITEM 11.      EXECUTIVE COMPENSATION.

   Summary Compensation Table

     The following table sets forth the compensation for the past three years of
the Company's Chief Executive Officer ("CEO") and the Company's four most highly
compensated  executive  officers other than the Chief Executive  Officer ("named
executive  officers"),  who were serving as executive officers at the end of the
1997 fiscal year.
<TABLE>
<CAPTION>
                                                                        Long-Term Compensation
                                                                    -------------------------------
                                           Annual Compensation          Awards         Pay-outs
                                         -------------------------  --------------- ---------------
                                                                        Stock         Long-Term
                                                                       Options/       Incentive           All Other
            Name and                       Salary        Bonus           SARs          Payouts          Compensation
       Principal Position         Year       ($)          ($)            (#)             ($)                 ($)
--------------------------------- ------ ------------ ------------  --------------- ---------------    ----------------
<S>                                <C>       <C>                <C>         <C>           <C>                         <C>      <C>
James E. Ferrell                   1997      480,000            0          ---             ---                    32,126       (1)
   Chairman and Chief Executive    1996      480,000            0          ---             ---                    16,801
   Officer                         1995      480,000      180,000          ---             ---                    36,977

Danley K. Sheldon                  1997      218,221            0       30,000             ---                    15,440       (1)
   President, Chief Financial      1996      177,500      100,000          ---             ---                    13,972
   Officer and Treasurer           1995      165,000       50,000       70,000             ---                    15,897

Patrick J. Chesterman              1997      132,917       27,500       20,000             ---                     9,087       (1)
   Senior Vice President, Supply

James A. Hake                      1997      120,000       90,000       15,000             ---                    13,592       (1)
   Vice President, Acquisitions    1996      120,000       85,000          ---             ---                     9,962
                                   1995      112,583       60,000       36,000             ---                    10,424

Robert J. Wikse                    1997      125,000       14,700          ---             ---                     6,245       (1)
   Vice President,  Administration
</TABLE>
 (1) Includes for Mr. Ferrell  contributions of $14,814 to the employee's 401(k)
     and profit  sharing plans and  compensation  of $17,312  resulting from the
     payment of life insurance premiums.  Includes for Mr. Sheldon contributions
     of  $15,300  to  the  employee's   401(k)  and  profit  sharing  plans  and
     compensation of $140 resulting from the payment of life insurance premiums.
     Includes for Mr. Chesterman  contributions of $8,443 to the employee 401(k)
     and  profit  sharing  plans and  compensation  of $644  resulting  from the
     payment of life insurance premiums.  Includes for Mr. Hake contributions of
     $12,866 to the employee's  401(k) and profit sharing plans and compensation
     of $726 resulting from the payment of life insurance premiums. Includes for
     Mr.  Wikse  contributions  of $5,985 to the  employee's  401(k)  and profit
     sharing plans and  compensation  of $260 resulting from the payment of life
     insurance premiums.
                                       19
<PAGE>

     Unit Options

     On October 14, 1994, the General Partner adopted the Ferrellgas,  Inc. Unit
Option Plan (the "Unit Option Plan") pursuant to which key employees are granted
options to purchase the MLP's Subordinated Units. The purpose of the Unit Option
Plan is to  encourage  certain  employees  of the  General  Partner to develop a
proprietary  interest  in the  growth and  performance  of the  Partnership,  to
generate an  increased  incentive  to  contribute  to the  Partnership's  future
success and  prosperity,  thus  enhancing the value of the  Partnership  for the
benefit of its Unitholders, and to enhance the ability of the General Partner to
attract and retain key  individuals  who are  essential to progress,  growth and
profitability of the Partnership.

     The Unit Options are exercisable  beginning  after July 31, 1999,  assuming
the subordination  period has lapsed at prices ranging from $16.80 to $21.67 per
unit, which is an estimate of the fair market value of the Subordinated Units at
the time of grant,  vest immediately over a one to five year period,  and expire
on  the  tenth  anniversary  of  the  date  of  grant.  Upon  conversion  of the
Subordinated  Units held by the General Partner and its affiliates,  outstanding
Subordinated Unit Options will convert to Common Unit Options.

     The  following  table  lists  information  on the CEO and  named  executive
officers' Unit Options granted in the fiscal year ended July 31, 1997.
<TABLE>
<CAPTION>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                Individual Grant
                                 -----------------------------------------------------------
                                  Number of
                                  Securities      % of Total
                                  Underlying    Options Granted to   Exercise                      Grant Date
                                   Options        Employees in         Price     Expiration          Present
Name                               Granted (1)     Fiscal Year       ($/Unit)       Date           Value $ (2)
-----------------------------    ------------- -------------------- ------------ -----------      --------------
James E. Ferrell                         -              -                  -            -                 -
<S>                                 <C>                <C>             <C>         <C> <C>           <C>   
Danley K. Sheldon                   30,000             14              20.19       8/1/06            23,000
Patrick J. Chesterman               20,000              9              20.19       8/1/06            16,000
James M. Hake                       15,000              7              20.19       8/1/06            12,000
Robert J. Wikse                          -              -                  -            -                 -

(1)  Unit Options generally vest over five years.

(2)  Based on a binomial option valuation model. The key input variables used in
     valuing the options were the  following:  risk-free  interest rate - 5.85%;
     distribution  amount  of $0.50  per unit per  quarter;  Common  Unit  price
     volatility  of  16.9%  was  used  as  an  estimate  of  Subordinated   Unit
     volatility;  options exercised on earliest possible dates,  i.e., August 1,
     1999,  2000 and  2001,  assuming  certain  financial  tests  are  achieved.
     Additionally,  it was assumed  that the  Partnership  will make its Minimum
     Quarterly  Distribution each quarter and that the Subordination Period will
     end in 1999. The New York Stock Exchange "Monthly Market Statistics Report"
     was used and the volatility variable reflected 130 weeks of historical Unit
     price trading  data.  No  adjustments  for  non-transferability  or risk of
     forfeiture  were made. The actual value, if any, a grantee may realize will
     depend on the excess of the Unit price over the exercise  price on the date
     the option is exercised,  so that there is no assurance the value  realized
     will be at or near the value  estimated  by the binomial  option  valuation
     model.

     The  following  table  lists  information  on the CEO and  named  executive
officers'  exercised/unexercised unit options for the fiscal year ended July 31,
1997.
</TABLE>

                                       20
<PAGE>
     AGGREGATED OPTION/SAR EXERCISES IN LAST FY AND FY-END OPTION SAR VALUES
<TABLE>
<CAPTION>

                                                              Number of Securities        Value of Unexercised
                                                             Underlying Unexercised    In-The-Money Options/SARs
                                                                Options/SARs at              at FY-End ($)
                                                                   FY-End (#)
                                                            ------------------------- -----------------------------
                             Shares
                           Acquired on       Value                Exercisable/                Exercisable/
Name                      Exercise (#)   Realized ($)            Unexercisable                Unexercisable
------------------------- -------------- --------------     ------------------------- ------------------------------

James E. Ferrell                -              -                          -                             -
<S>                             <C>            <C>                 <C>                          <C>      
Danley K. Sheldon               0              0                   0/100,000                    0/518,300
Patrick J. Chesterman           0              0                    0/30,000                     0/96,430
James M. Hake                   0              0                    0/51,000                    0/265,350
Robert J. Wikse                 0              0                    0/20,000                    0/124,000
</TABLE>

   Profit Sharing Plan

     The  Ferrell  Profit  Sharing  and 401(k)  Investment  Plan is a  qualified
defined  contribution plan (the "Profit Sharing Plan"). All full-time  employees
of Ferrell 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.  In regards to the  profit  sharing  portion,  the Board of  Directors  of
Ferrell  determines the amount of the annual  contribution to the Profit Sharing
Plan,  which is purely  discretionary.  This  decision is based on the operating
results of Ferrell  for the  previous  fiscal year and  anticipated  future cash
needs of the General Partner and Ferrell. The contributions are allocated to the
Profit Sharing Plan participants based on each participant's  wages or salary as
compared to the total of all participants' wages and salaries.

     Historically,  the annual  contribution to the Profit Sharing Plan has been
1% to 7% of each  participant's  annual wage or salary.  The Profit Sharing Plan
also has a cash-or-deferred, or 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 Profit Sharing Plan.

   Supplemental Savings Plan

     The Ferrell  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 application
of certain IRS rules and regulations.

Compensation of Directors

     The  General  Partner  does  not pay  any  additional  remuneration  to its
employees  for serving as  directors.  Directors  who are not  employees  of the
General  Partner  receive a fee per  meeting  of $500,  plus  reimbursement  for
out-of-pocket expenses.


                                       21
<PAGE>

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  table sets forth certain  information  as of July 31, 1997,
regarding the beneficial  ownership of the Common and Subordinated  Units of the
MLP by certain  beneficial owners, all directors and named executive officers of
the General Partner and the Partnership,  each of the named executive  officers,
and all directors and executive  officers of the General Partner as a group. The
General Partner knows of no other person beneficially owning more than 5% of the
Common Units.
<TABLE>
<CAPTION>

Ferrellgas Partners, L.P.
                                                                                Units
                                                                               Benefically                Percentage 
Title of Class           Name and Address of Beneficial Owner                   Owned    (1)                   of Class
---------------          ------------------------------------                 --------------              --------------
<S>                                                                            <C>       <C>                  <C>
Common Units                   James E. Ferrell                                1,210,162 (2)                  8.3
                               Goldman, Sachs & Co.                            1,463,470 (3)                 10.0
                               The Goldman Sachs Group                         1,463,470 (3)                 10.0
                               Danley K. Sheldon                                   1,000                        *
                               Patrick J. Chesterman                                 200                        *
                               Robert J. Wikse                                       500                        *
                               James M. Hake                                         400                        *
                               A. Andrew Levison                                  15,000                        *
                               Daniel M. Lambert                                     575                        *
                               All Directors and Officers as a Group           1,227,837                      8.4

Subordinated Units             James E. Ferrell                               16,593,721 (2)                100.0

* Less than 1%

</TABLE>
(1)  Beneficial  ownership for the purposes of the foregoing table is defined by
     Rule 13d-3 under the  Securities  Exchange Act of 1934.  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  ("Voting
     Power")  or to  dispose  or direct  the  disposition  thereof  ("Investment
     Power") or has the right to acquire  either of those  powers  within  sixty
     (60) days.

(2)  The address for James E.  Ferrell is c/o  Ferrellgas,  Inc.,  P.O.  Box
     4644, Houston, TX, 77210

     Includes  1,210,162 Common Units and 16,593,721  Subordinated Units held by
     Ferrellgas, Inc. a wholly owned subsidiary of Ferrell  Companies, Inc.  Mr.
     Ferrell is the sole director of Ferrell Companies, Inc.

(3)  The address for both Goldman Sachs Group, L.P. and Goldman, Sachs & Co.
     is 85 Broad Street, New York, New York, 10004.

     Goldman, Sachs & Co., a broker/dealer,  and its parent Goldman Sachs Group,
     L.P. are deemed to have shared  voting power and shared  dispositive  power
     over 1,463,470 Common Units owned by their customers.


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

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

     Based  solely on its  review of the copies of such  forms  received  by the
General Partner, or written  representations from certain reporting persons that
no Form 5's were required for those persons,  the General Partner  believes that
during  fiscal year 1997 all filing  requirements  applicable  to its  officers,
directors, and greater than 10% beneficial owners were met in a timely manner.

                                       22
<PAGE>

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

     The  Partnership  has no  employees  and is managed and  controlled  by the
General Partner.  Pursuant to the Partnership Agreement,  the General Partner is
entitled  to  reimbursement  for all direct and  indirect  expenses  incurred or
payments  it makes on behalf of the  Partnership,  and all  other  necessary  or
appropriate  expenses  allocable  to the  Partnership  or  otherwise  reasonably
incurred by the General Partner in connection  with operating the  Partnership's
business. These costs, which totaled $128,033,000 and $109,637,000 for the years
ended July 31, 1997 and 1996, include compensation and benefits paid to officers
and employees of the General Partner,  and general and administrative  costs. In
addition,  the  conveyance  of the net assets of the Company to the  Partnership
included the assumption of specific  liabilities related to employee benefit and
incentive  plans for the benefit of the  officers  and  employees of the General
Partner.  The conveyance of the net assets of the Company to the  Partnership is
described in Note A of the Ferrellgas  Partners,  L.P. notes to the consolidated
financial statements.

     Ferrell,  the parent of the  General  Partner,  and its other  wholly-owned
subsidiaries engage in various investment activities including,  but not limited
to, commodity  investments and the trading thereof. The Partnership from time to
time acts as an agent on behalf of Ferrell to  purchase  and market  natural gas
liquids and enter into certain trading  activities.  The Partnership charges all
direct and indirect  expenses incurred in performing this agent role to Ferrell.
During  the year ended July 31,  1997,  the  Partnership,  as  Ferrell's  agent,
performed the following services:  a) purchased 1,089,929 barrels of propane, b)
marketed  and  sold  619,929  barrels,  and  c)  entered  into  certain  hedging
arrangements.  The  Partnership  charged  Ferrell  $73,078  for its  direct  and
indirect  expenses  incurred  during fiscal year 1997. Of the 619,929 barrels of
propane sold,  534,929  barrels were sold to and used by the  Partnership at the
applicable market prices (an aggregate of $13,128,765). The Partnership believes
these transactions were under terms that were no less favorable to the OLP than
those arranged with other parties.

     A. Andrew Levison, a director of the General Partner is a Managing Director
of Donaldson,  Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted as an
underwriter  with  regard  to  the  private  placement  of  $160,000,000  senior
subordinated  notes  issued  in April  1996 and was paid fees of  $4,000,000  in
fiscal 1996.

     See  Note L to the  financial  statements  in  Item  14 for  discussion  of
transactions  involving  acquisitions  related to the  General  Partner  and the
Partnership.

                                                      PART IV

ITEM 14. 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.
          None filed during the fiscal year ended July 31, 1997.

                                       23
<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 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:

Signature                        Title                                     Date



/s/James E. Ferrell      Chairman of the Board,                        10/29/97
-------------------      Chief Executive Officer and
James E. Ferrell         Director (Principal Executive Officer)



/s/Daniel M. Lambert
---------------------     Director                                     10/29/97
A. Andrew Levison



/s/A. Andrew Levinson
---------------------    Director                                      10/29/97
A. Andrew Levison



/s/Danley K. Sheldon       President and Chief Financial               10/29/97
---------------------      Officer (Principal Financial
Danley K. Sheldon          and Accounting Officer)


<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
                                           Chairman 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:


Signature                Title                                            Date



/s/James E. Ferrell      Chairman of the Board,                        10/29/97
-------------------      Chief Executive Officer and
James E. Ferrell         Sole Director (Principal
                         Executive Officer)
 




/s/Danley K. Sheldon      Senior Vice President and Chief              10/29/97
--------------------      Financial Officer (Principal
Danley K. Sheldon         Financial and Accounting Officer)

<PAGE>


                                INDEX TO EXHIBITS

         The exhibits listed on the accompanying Exhibit Index are filed as part
of this report.  Exhibits  required by Item 601 of Regulation  S-K which are not
listed are not applicable.
               Exhibit
                Number    Description
    (1)      2.1         Stock  Purchase  Agreement  dated September  30, 1994,
                         between Ferrellgas, Inc. and Bell Atlantic Enterprises
                         International, Inc.

    (2)      2.2         Agreement for Purchase and Sale of Stock dated March
                         23, 1996, between Superior Propane, Inc. and
                         Ferrellgas, Inc.

    (3)      3.1         Agreement of Limited Partnership of Ferrellgas
                         Partners, L.P.

    (4)      3.2         Articles of Incorporation for Ferrellgas Partners
                         Finance Corp.

    (5)      3.3         Bylaws of Ferrellgas Partners Finance Corp.

    (6)      4.1         Indenture dated as of July 5, 1994, among Ferrellgas,
                         L.P., Ferrellgas Finance Corp. and Norwest Bank
                         Minnesota, National Association, as Trustee, relating
                         to $200,000,000 10% Series A Fixed Rate Senior Notes
                         due 2001 and $50,000,000 Series B Floating Rate
                         Senior Notes due 2001.

    (7)      4.2         Indenture dated as of April 26, 1996, among Ferrellgas
                         Partners, L.P., Ferrellgas Partners Finance Corp.,
                         Ferrellgas, L.P.as guarantor, and Amercan Bank National
                         Association, as Trustee, relating to $160,000,000
                         9 3/8% Senior Secured Notes due 2006.

    (8)      4.3         Registration  Rights Agreement dated as of April,  26,
                         1996, among Ferrellgas  Partners, L.P., Ferrellgas
                         Partners Finance Corp., Ferrellgas,  L.P., Donaldson,
                         Lufkin & Jenrette Securities Corporation and Goldman,
                         Sachs & Co.

    (9)      10.2        Agreement dated as of April 1, 1994, between BP
                         Exploration & Oil, Inc. and Ferrellgas, L.P. dba
                         Ferrell North America

    (10)#    10.3        Ferrell Companies, Inc. Supplemental Savings Plan.

    (11)#    10.4        Ferrellgas, Inc. Unit Option Plan.

    (12)     10.5        Contribution, Conveyance and Assumption Agreement dated
                         as of November 1, 1994, among the Partnership, the
                         Operating Partnership and Ferrellgas, Inc.

    (13)     10.6        First Amendment to Contribution, Conveyance and
                         Assumption Agreement between Ferrellgas, the
                         Partnership and the Operating Partnership.

    (14)     10.7        Second Amendment to Contribution, Conveyance and
                         Assumption Agreement between Ferrellgas, the
                         Partnership and the Operating Partnership.

    (15)     10.8        Purchase Agreement dated as of April 23,  1996, between
                         Ferrellgas  Partners,  L.P., Ferrellgas  Partners
                         Finance Corp.,  Ferrellgas,  Inc.,  Ferrellgas,  L.P.,
                         Donaldson, Lufkin & Jenrette Securities Corporation
                         and Goldman, Sachs & Co.

    (16)     10.9        Amended and Restated Agreement of Limited Partnership
                         of Ferrellgas, L.P. dated as of April 23, 1996.

                                      E-1
<PAGE>

    (17)     10.10       Pledge and Security  Agreement  dated as of April
                         26, 1996, among Ferrellgas Partners,  L.P., Ferrellgas,
                         Inc.,  and  American  Bank  National  Association,   as
                         collateral agent.

    (18)     10.11       Amended and Restated Credit Agreement dated as of July
                         31, 1996, among Ferrellgas, L.P., Stratton Insurance
                         Company, Inc.,Ferrellgas, Inc.,Bank of America National
                         Trust and Savings Association, as agent, and the other
                         financial institutions party thereto.

    (19)     21.1        List of subsidiaries.

             27          Financial Data Schedules - Filed only with the EDGAR
                         version.
----------------------------------------------------------------------------
     #          Management contracts or compensatory plans.

        (1)     Incorporated by reference to the same numbered Exhibit to
                Registrant's Registration Statement on Form S-1 File No.
                33-55185 filed with the Commission on November 14, 1994

        (2)     Incorporated by reference to Exhibit 2.1 to Registrant's
                Current Report on Form 8-K filed on May 6, 1996.

        (3)     Incorporated  by reference to the same  numbered  Exhibit to the
                Registrant's Current Report on Form 8-K filed August 15, 1994.

        (4)     Incorporated  by reference to Exhibit same  numbered  Exhibit to
                Registrant's  Quarterly  Report on Form  10-Q  filed on June 13,
                1997.

        (5)     Incorporated  by reference to Exhibit same  numbered  Exhibit to
                Registrant's  Quarterly  Report on Form  10-Q  filed on June 13,
                1997.

        (6)     Incorporated by reference to Exhibit 10.2 to the Registrant's
                Current Report on Form 8-K filed August 15, 1994.

        (7)     Incorporated by reference to Exhibit 4.1 to Registrant's Current
                Report on Form 8-K filed on May 6, 1996.

        (8)     Incorporated by reference to Exhibit 4.2 to Registrant's Current
                Report on Form 8-K filed on May 6, 1996.

        (9)     Incorporated by reference to the Exhibit 10.4 to Registrant's
                Annual Report on Form 10-K filed on October 20, 1994.

       (10)     Incorporated by reference to the Exhibit 10.7 to Registrant's
                Annual Report on Form 10-K filed on October 17, 1995.

       (11)     Incorporated by reference to the Exhibit 10.8 to Registrant's
                Registration Statement on Form S-1 File No. 33-55185 filed with
                the Commission on November 14, 1994

       (12)     Incorporated by reference to the Exhibit 10.9 to Registrant's
                Registration Statement on Form S-1 File No. 33-55185 filed with
                the Commission on November 14, 1994

       (13)     Incorporated by reference to Exhibit 10.8 to Registrant's Annual
                Report on Form 10-K filed on October 20, 1994.

       (14)     Incorporated by reference to the Exhibit 10.11 to Registrant's
                Annual Report on Form 10-K filed on October 17, 1995.

                                      E-2
<PAGE>
       (15)     Incorporated by reference to Exhibit 10.1 to Registrant's 
                Current Report on Form 8-K filed on May 6, 1996.

       (16)     Incorporated by reference to Exhibit 10.1 to Registrant's
                Quarterly Report on Form 10-Q filed on June 12, 1996.

       (17)     Incorporated by reference to Exhibit 10.2 to Registrant's
                Current Report on Form 8-K filed on May 6, 1996.

       (18)     Incorporated by reference to the Exhibit 10.11 to Registrant's
                Annual Report on Form 10-K filed on October 18, 1996.

       (19)     Incorporated by reference to the Exhibit 21.1 to Registrant's
                Registration Statement on Form S-4 File No. 333-06693 filed 
                with the Commission on July 30, 1996

                                      E-3
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page

Ferrellgas Partners, L.P. and Subsidiaries
         Independent Auditors' Report....................................... F-2
         Consolidated Balance Sheets - July 31, 1997 and 1996................F-3
         Consolidated Statements of Earnings- Years ended July
              31, 1997, 1996 and 1995........................................F-4
         Consolidated Statements of Partners' Capital - Years ended
              July 31, 1997, 1996 and 1995...................................F-5
         Consolidated Statements of Cash Flows - Year ended July 31,
               1997, 1996 and 1995...........................................F-6
         Notes to Consolidated Financial Statements..........................F-7


Ferrellgas Partners Finance Corp.
         Independent Auditors' Report......................................F-17
         Balance Sheets - July 31, 1997 and 1996...........................F-18
         Statements of Earnings - Year ended July 31, 1997 and
              From the Date of inception to July 31, 1996..................F-19
         Statements of Stockholder's Equity - Year ended July 31, 1997 and
              From the Date of Inception to July 31, 1996..................F-20
         Statements of Cash Flows - Year ended July 31, 1997 and
              From the Date of Inception to July 31,1996...................F-21
         Notes to Financial Statements.....................................F-22



                                      F-1
<PAGE>
                                       
                          INDEPENDENT AUDITORS' REPORT

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

We have  audited the  accompanying  consolidated  balance  sheets of  Ferrellgas
Partners,  L.P. and  subsidiaries  as of July 31, 1997 and 1996, and the related
consolidated  statements of earnings,  partners'  capital and cash flows for the
years ended July 31, 1997,  1996 and 1995.  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  generally   accepted  auditing
standards.  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, 1997 and 1996, and the results of their  operations
and their  cash  flows for the years  ended  July 31,  1997,  1996 and 1995,  in
conformity with generally accepted accounting principles.






DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1997




                                      F-2

<PAGE>
                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except unit data)

<TABLE>
<CAPTION>


                                                                    July 31,             July 31,
ASSETS                                                                1997                 1996
----------------------------------------------------------       ----------------    -----------------

Current Assets:
<S>                                                                     <C>                  <C>
  Cash and cash equivalents                                             $ 14,788             $ 13,770
  Accounts and notes receivable (net of
    allowance for doubtful accounts of $1,234 and
    $1,169 in 1997 and 1996, respectively)                                61,835               70,118
  Inventories                                                             43,112               41,395
  Prepaid expenses and other current assets                                8,906                5,685
                                                                 ----------------    -----------------
    Total Current Assets                                                 128,641              130,968

Property, plant and equipment, net                                       405,736              403,732
Intangible assets, net                                                   112,058              107,960
Other assets, net                                                         10,641               11,635
                                                                 ---------------     -----------------
    Total Assets                                                        $657,076             $654,295
                                                                 ================    =================



LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------------
Current Liabilities:
  Accounts payable                                                     $  39,322            $  48,400
  Other current liabilities                                               49,422               41,754
  Short-term borrowings                                                   21,786               25,520
                                                                 ----------------    -----------------
    Total Current Liabilities                                            110,530              115,674

Long-term debt                                                           487,334              439,112
Other liabilities                                                         12,354               12,402
Contingencies and commitments
Minority interest                                                          2,075                2,498

Partners' Capital:
  Common unitholders (14,612,580 units outstanding
    in 1997 and 1996, respectively)                                       52,863               71,324
  Subordinated unitholders (16,593,721 units outstanding
    in 1997 and 1996, respectively)                                       50,337               71,302
  General partner                                                        (58,417)             (58,017)
                                                                 ----------------    -----------------
    Total Partners' Capital                                               44,783               84,609
                                                                 ----------------    -----------------
    Total Liabilities and Partners' Capital                             $657,076             $654,295
                                                                 ================    =================
</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>
<CAPTION>

                                                                       For the year ended July 31,
                                                        ----------------------------------------------------------
                                                              1997                1996                1995
                                                        ------------------  ------------------  ------------------

Revenues:
<S>                                                              <C>                 <C>                 <C>     
  Gas liquids and related product sales                          $759,941            $612,593            $565,607
  Other                                                            44,357              41,047              30,829
                                                        ------------------  ------------------  ------------------
    Total revenues                                                804,298             653,640             596,436

Cost of product sold (exclusive of
  depreciation, shown separately below)                           470,128             356,314             339,641
                                                        ------------------  ------------------  ------------------

Gross profit                                                      334,170             297,326             256,795

Operating expense                                                 198,298             179,462             153,226
Depreciation and amortization expense                              43,789              37,024              32,014
General and administrative expense                                 15,831              13,221              11,357
Vehicle and tank lease expenses                                     7,433               5,113               4,271
                                                        ------------------  ------------------  ------------------

Operating income                                                   68,819              62,506              55,927

Interest expense                                                  (45,769)            (37,983)            (31,993)
Interest income                                                     2,002               1,666               1,268
Loss on disposal of assets                                         (1,439)             (1,586)             (1,139)
                                                        ------------------  ------------------  ------------------
Earnings before income taxes,
  minority interest and extraordinary loss                         23,613              24,603              24,063

Minority interest                                                     395                 291                 243
                                                        ------------------  ------------------  ------------------

Earnings before extraordinary loss                                 23,218              24,312              23,820

Extraordinary loss on early extinguishment of debt,
   net of minority interest of $10                                      -                 965                   -
                                                        ------------------  ------------------  ------------------

Net earnings                                                       23,218              23,347              23,820

General partner's interest in net earnings                            232                 233                 238
                                                        ------------------  ------------------  ------------------
Limited partners' interest in net earnings                       $ 22,986            $ 23,114            $ 23,582
                                                        ==================  ==================  ==================

Net earnings per limited partner unit:
   Earnings before extraordinary loss                            $   0.74            $   0.77            $   0.76
   Extraordinary loss                                                   -                0.03                   -
                                                        ------------------  ------------------  ------------------
Net earnings per limited partner unit                            $   0.74            $   0.74            $   0.76
                                                        ==================  ==================  ==================

Weighted average number of units outstanding                     31,206.3            31,128.8            30,908.1
                                                        ==================  ==================  ==================
</TABLE>

                 See notes to consolidated financial statements

                                       F-4

<PAGE>

                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (in thousands)
<TABLE>
<CAPTION>



                                         Number of units
                                  ------------------------------
                                                                                                 General    Total partners'
                                    Common       Subordinated       Common     Subordinated      partner       capital
                                  ------------  ----------------  ----------- ---------------- ------------ ---------------


<S>                                       <C>               <C>         <C>              <C>        <C>              <C>     
July 31, 1994                          14,100.0          16,593.7    $84,532          $99,483    $ (62,622)       $121,393


  Special allocation of  prior
     year operating loss                      -                 -     (2,312)          (2,664)       4,976               -

  Assets contributed in
    connection with acquisitions              -                 -      3,324            3,830           72           7,226

  Common units issued in
     connection with
     acquisitions                         298.9                 -      6,600                -           66           6,666

  Quarterly distributions                     -                 -    (23,756)         (27,380)        (518)        (51,654)

  Adjustments to capital related to
     resolution of income tax
     contingencies                            -                 -      5,145            5,929          112          11,186

  Net earnings                                -                 -     10,956           12,626          238          23,820

                                  ------------  ----------------  ----------- ---------------- ------------ ---------------
July 31, 1995                          14,398.9          16,593.7     84,489           91,824      (57,676)        118,637

  Assets contributed in
   connection with acquisitions               -                 -        284              325            6             615

  Common units issued in
     connection with
     acquisitions                         213.7                 -      4,825                -           48           4,873

  Quarterly distributions                     -                 -    (29,047)         (33,188)        (628)        (62,863)

  Net earnings                                -                 -     10,773           12,341          233          23,347

                                  ------------  ----------------  ----------- ---------------- ------------ ---------------
July 31, 1996                          14,612.6          16,593.7     71,324           71,302      (58,017)         84,609

  Quarterly distributions                     -                 -    (29,224)         (33,188)        (632)        (63,044)

  Net earnings                                -                 -     10,763           12,223          232          23,218
 
                                  ------------  ----------------  ----------- ---------------- ------------ ---------------
July 31, 1997                          14,612.6          16,593.7    $52,863          $50,337    $ (58,417)        $44,783
                                  ============  ================  =========== ================ ============ ===============
</TABLE>

                 See notes to consolidated financial statements.

                                       F-5


<PAGE>
                   FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



<TABLE>
<CAPTION>

                                                                         For the year ended July 31,
                                                             ----------------------------------------------------
                                                                  1997              1996              1995
                                                             ---------------   ---------------   ----------------

Cash Flows From Operating Activities:
<S>                                                                 <C>               <C>                <C>    
 Net earnings                                                       $23,218           $23,347            $23,820
 Reconciliation of net earnings  to net
  cash from operating activities:
  Depreciation and amortization                                      43,789            37,024             32,014
  Minority interest                                                     395               291                243
  Extraordinary loss                                                      -               965                  -
  Other                                                               6,056             4,478              3,191
  Changes in  operating  assets and  liabilities
    net of effects  from  business acquisitions:
    Accounts and notes receivable                                     6,685            (3,988)              (906)
    Inventories                                                        (906)            7,612              7,388
    Prepaid expenses and other current assets                        (3,221)              765             (3,497)
    Accounts payable                                                 (9,078)          (10,576)             5,246
    Accrued interest expense                                         (1,171)            1,270             10,680
    Other current liabilities                                         9,368             3,649            (11,703)
    Other liabilities                                                   (48)              259               (446)
                                                             ---------------   ---------------   ----------------
      Net cash provided  by operating activities                     75,087            65,096             66,030
                                                             ---------------   ---------------   ----------------

Cash Flows From Investing Activities:
 Business acquisitions                                              (36,114)           (8,116)           (19,677)
 Capital expenditures                                               (16,192)          (13,011)           (19,722)
 Cash from acquired company                                               -             9,620                  -
 Other                                                                3,068            (1,587)               173
                                                             ---------------   ---------------   ----------------
      Net cash used by investing activities                         (49,238)          (13,094)           (39,226)
                                                             ---------------   ---------------   ----------------

Cash Flows From Financing Activities:
 Distributions                                                      (63,044)          (62,863)           (51,654)
 Additions to long-term debt                                         45,463           222,268             85,000
 Reductions of long-term debt                                        (2,640)         (234,082)           (61,400)
 Net reductions to short-term borrowings                             (3,734)            5,520             17,000
 Minority interest activity                                            (818)            1,002               (459)
 Other                                                                  (58)               46                 51
                                                              ---------------   ---------------   ----------------
      Net cash used by financing activities                         (24,831)          (68,109)           (11,462)
                                                              ---------------   ---------------   ----------------

Increase (decrease) in cash and cash equivalents                      1,018           (16,107)            15,342
Cash and cash equivalents - beginning of period                      13,770            29,877             14,535
                                                             ---------------   ---------------   ----------------
Cash and cash equivalents - end of period                           $14,788           $13,770            $29,877
                                                             ===============   ===============   ================

Cash paid for interest                                              $44,516           $34,994            $19,918
                                                             ===============   ===============   ================
</TABLE>

                 See notes to consolidated financial statements

                                       F-6
<PAGE>
                            FERRELLGAS PARTNERS, L.P.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 1997

A.  Partnership Organization and Formation

    Ferrellgas  Partners,  L.P. (the "MLP") 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" or "OLP"). The MLP and the
    OLP are both Delaware limited partnerships, and are collectively referred to
    as the  Partnership.  Ferrellgas  Partners,  L.P., 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.  (the  "Company"  or  "General  Partner"),  a
    wholly-owned subsidiary of Ferrell Companies, Inc. ("Ferrell").  The Company
    has retained a 1% general partner interest in Ferrellgas Partners,  L.P. and
    also holds a 1.0101% general partner interest in the Operating  Partnership,
    representing a 2% general partner  interest in the Partnership on a combined
    basis.  As General  Partner of the  Partnership,  the Company  performs  all
    management functions required for the Partnership.


B.  Summary of Significant Accounting Policies

    (1) Nature of operations:  The Partnership is engaged primarily in the sale,
    distribution, marketing and trading of propane and other natural gas liquids
    throughout the United States.  The retail market is seasonal because propane
    is used primarily for heating in residential and commercial  buildings.  The
    Partnership serves more than 800,000 residential,  industrial/commercial and
    agricultural customers.

    (2)  Accounting  estimates:  The  preparation  of  financial  statements  in
    conformity with generally accepted  accounting  principles ("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 financial
    statements include reserves that have been established for product liability
    and other claims.

    (3) Principles of  consolidation:  The accompanying  consolidated  financial
    statements  present  the  consolidated   financial   position,   results  of
    operations  and  cash  flows  of  the  Partnership   and  its   wholly-owned
    subsidiary,  Ferrellgas Partners Finance Corp. The Company's 1.0101% General
    Partner  interest  in  Ferrellgas,  L.P.  is  accounted  for  as a  minority
    interest. All material intercompany profits,  transactions and balances have
    been eliminated.

    (4) Cash and cash equivalents:  For purposes of the Consolidated  Statements
    of Cash Flows, the Partnership  considers all highly liquid debt instruments
    purchased  with an  original  maturity  of three  months  or less to be cash
    equivalents.

    (5)  Inventories:  Inventories  are  stated  at the lower of cost or market
     using average cost and actual cost methods.

                                      F-7
<PAGE>


    (6) Property, plant and equipment and intangible assets: Property, plant and
    equipment is stated at cost less accumulated depreciation.  Expenditures for
    maintenance  and routine  repairs are expensed as incurred.  Depreciation is
    calculated using the straight-line method based on estimated useful lives of
    the assets ranging from two to thirty years.  Intangible assets,  consisting
    primarily of customer location values and goodwill,  are stated at cost, net
    of  amortization  calculated  using the  straight-line  method over  periods
    ranging from 5 to 40 years.  Accumulated  amortization of intangible  assets
    totaled  $109,211,000  and  $95,801,000  as  of  July  31,  1997  and  1996,
    respectively.

    (7) Accounting for derivative  commodity  contracts:  The Partnership enters
    into commodity  forward and futures  purchase/sale  agreements and commodity
    options  involving  propane  and  related  products  which are used both for
    trading and overall risk management  purposes.  To the extent such contracts
    are entered  into at fixed  prices and thereby  subject the  Partnership  to
    market risk,  the  contracts  are accounted for using the fair value method.
    Under the fair value method, derivatives are carried on the balance sheet at
    fair  value  with  changes  in  that  value  recognized  in  earnings.   The
    Partnership  classifies all earnings from derivative  commodity contracts as
    other  revenue on the  statement  of earnings  and as net income on the cash
    flow statement.

    (8) Income taxes: The Partnership is a limited partnership. As a result, the
    Partnership's  earnings or loss for Federal  income tax purposes is included
    in the tax returns of the individual partners.  Accordingly,  no recognition
    has been given to income taxes in the accompanying  financial  statements of
    the Partnership.  Net earnings for financial  statement  purposes may differ
    significantly  from taxable income  reportable to 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 the
    Partnership Agreement.

    (9) Net earnings  (loss) per limited  partner unit: Net earnings  (loss) per
    limited  partner unit is computed by dividing net earnings,  after deducting
    the  General  Partner's  1%  interest,  by the  weighted  average  number of
    outstanding  Common Units,  Subordinated  Units and the dilutive  effect (if
    any) of  Subordinated  Unit  options.  In  accordance  with the terms of the
    Partnership Agreement, the Partnership reallocated 99% of the initial year's
    net  loss  before   extraordinary   loss  ($4,976,000)  based  on  ownership
    percentages  to the  limited  partners  in 1995.  The  fiscal  1995  special
    allocation of the prior year operating loss to the limited partners resulted
    in a reduction in equity of $0.16 per limited partner unit.

     (10) Unit-based compensation:  The Partnership accounts for its Unit Option
      Plan  under the  provisions  of  Accounting  Principles  Board  ("APB")
      No. 25, "Accounting for Stock Issued to Employees,"and makes the pro forma
      information disclosures  required under the provisions of Statement of 
      Financial  Accounting Standards ("SFAS") No. 123, "Accounting for 
      Stock-Based Compensation."

     (11)  Adoption  of  new  accounting  standards:   The  Financial  Standards
     Accounting  Board recently issued the following new accounting  standards:
     SFAS No. 128, "Earnings Per Share", SFAS No. 130 "Reporting Comprehensive 
     Income" and SFAS  No.  131  "Disclosures   About  Segments of an Enterprise
     and  Related Information."

    SFAS No.  128 is  required  to be  adopted  by the  Partnership  during  the
    three-month  period ending  January 31, 1998. The adoption of this statement
    is not expected to have a material effect on the calculation of earnings per
    unit.  SFAS Nos. 130 and 131 are  required to be adopted by the  Partnership
    for the fiscal year ended July 31, 1998.  The adoption of both standards are
    not expected to have material effect on the Partnership's financial position
    or results of operations.

                                      F-8
<PAGE>

C.  Quarterly Distributions of Available Cash

    The Partnership makes quarterly cash  distributions of all of its "Available
    Cash",  generally  defined as consolidated  cash receipts less  consolidated
    cash  disbursements  and net changes in reserves  established by the General
    Partner for future requirements.  These reserves are retained to provide for
    the proper  conduct of the  Partnership  business,  or to provide  funds for
    distributions  with  respect  to any  one or more of the  next  four  fiscal
    quarters.

    Distributions by the Partnership in an amount equal to 100% of its Available
    Cash will generally be made 98% to the Common and  Subordinated  Unitholders
    (the "Unitholders") and a 2% to the General Partner,  subject to the payment
    of incentive  distributions to the holders of Incentive  Distribution Rights
    to the extent that certain target levels of cash distributions are achieved.
    To the extent  there is  sufficient  Available  Cash,  the holders of Common
    Units have the right to receive the "Minimum Quarterly  Distribution" ($0.50
    per Unit),  plus any  "arrearages",  prior to any  distribution of Available
    Cash to the  holders of  Subordinated  Units.  Common  Units will not accrue
    arrearages  for any  quarter  after the  "Subordination  Period" (as defined
    below) and Subordinated Units will not accrue any arrearages with respect to
    distributions for any quarter.

    In general,  the Subordination  Period will continue  indefinitely until the
    first day of any quarter  beginning on or after August 1, 1999, in which (i)
    distributions  of  Available  Cash  constituting  Cash from  Operations  (as
    defined in the Partnership  Agreement) equal or exceed the Minimum Quarterly
    Distribution on the Common Units and the Subordinated  Units for each of the
    three consecutive four quarter periods  immediately  preceding such date and
    (ii) the Partnership  has invested at least $50 million in acquisitions  and
    capital additions or improvements to increase the operating  capacity of the
    Partnership.  Prior  to  the  end  of the  Subordination  Period,  5,531,240
    Subordinated  Units held by the Company may convert into Common Units if (i)
    distributions of Available Cash on the Common Units and  Subordinated  Units
    equal or  exceed  the  Minimum  Quarterly  Distribution  for each of the two
    consecutive  four-quarter period preceding August 1, 1997, and (ii) the Cash
    from Operations  generated by the  Partnership in each of such  four-quarter
    periods  equaled or exceeded 125% of the Minimum  Quarterly  Distribution on
    all  Common  Units  and  all  Subordinated  Units.  Upon  expiration  of the
    Subordination  Period,  all  remaining  Subordinated  Units will  convert to
    Common Units.

    The Partnership  makes  distributions of all of its Available Cash 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.

<TABLE>
<CAPTION>

D.  Supplemental Balance Sheet Information

    Inventories consist of:

        (in thousands)                                                                    1997             1996
                                                                                      --------------   --------------
<S>                                                                                         <C>              <C>    
        Liquefied propane gas and related products                                          $35,351          $33,366
        Appliances, parts and supplies                                                        7,761            8,029
                                                                                      --------------   --------------
                                                                                            $43,112          $41,395
                                                                                      ==============   ==============
      
        In  addition  to  inventories  on  hand,  the  Partnership  enters  into
        contracts to buy product for supply purposes.  Nearly all such contracts
        have  terms of less  than one year and most  call for  payment  based on
        market prices at date of delivery.  All fixed price contracts have terms
        of less than one year.

</TABLE>

                                      F-9
<PAGE>

<TABLE>
<CAPTION>
    Property, plant and equipment consist of:

<S>                                                                                        <C>             <C> 
        (in thousands)                                                                     1997            1996
                                                                                       -------------   --------------
        Land and improvements                                                               $29,849        $  26,024
        Buildings and improvements                                                           39,907           39,376
        Vehicles                                                                             54,879           55,860
        Furniture and fixtures                                                               23,985           22,074
        Bulk equipment and district facilities                                               59,876           43,203
        Tanks and customer equipment                                                        402,608          403,770
        Other                                                                                 3,870            5,800
                                                                                       -------------   --------------
                                                                                            614,974          596,107
        Less:  accumulated depreciation                                                     209,238          192,375
                                                                                       -------------   --------------
                                                                                           $405,736         $403,732
                                                                                       ==============  ==============
</TABLE>

        Depreciation expense totaled $29,960,000,  $25,101,000, and $21,649,000,
        for the years ended July 31, 1997, 1996, and 1995, respectively.

<TABLE>
<CAPTION>

    Other current liabilities consist of:

<S>                                                                                        <C>              <C> 
        (in thousands)                                                                     1997             1996
                                                                                       --------------   -------------
        Accrued insurance                                                                    $ 7,327         $ 6,638
        Accrued interest                                                                      13,071          14,242
        Accrued payroll                                                                        8,161           7,062
        Other                                                                                 20,863          13,812
                                                                                       --------------   -------------
                                                                                             $49,422         $41,754
                                                                                       ==============   =============
</TABLE>

E.   Long-Term Debt
<TABLE>
<CAPTION>

     Long-term debt consists of:

<S>                                                                                      <C>              <C> 
      (in thousands)                                                                     1997             1996
                                                                                     -------------     ------------
      Senior Notes
        Fixed rate, 10%, due 2001 (1)                                                    $200,000         $200,000
        Fixed rate, 9.375%, due 2006 (2)                                                  160,000          160,000

      Credit Agreement
        Term loan, 6.25% and 6%, due 2001 (3)                                              50,000           50,000
        Revolving credit loans, 6.25% and 8.25%, due 1999 (3)                              64,614           18,980

      Notes payable, 6.4% and 5.7% weighted average interest rates,
        respectively, due 1997 to 2007 (4)                                                 14,567           11,742
                                                                                     -------------     ------------
                                                                                          489,181          440,722
      Less:  current portion                                                                1,847            1,610
                                                                                     -------------     ------------
                                                                                         $487,334         $439,112
                                                                                     =============     ============
</TABLE>
                                      F-10
<PAGE>

     (1)  The OLP fixed rate Senior  Notes,  issued in June,  1994,  are general
          unsecured  obligations  of the OLP and rank on an equal basis in right
          of payment with all senior  indebtedness  of the OLP and senior to all
          subordinated  indebtedness of the OLP. The Senior Notes are redeemable
          at the  option of the OLP  anytime  on or after  August 1, 1998 with a
          premium until August 1, 2000.

     (2)  The MLP fixed rate Senior Secured Notes issued in April 1996,  will be
          redeemable  at the option of the MLP, in whole or in part, at any time
          on or after  June  15,  2001.  The  notes  are  secured  by the  MLP's
          partnership  interest in the OLP. The notes will become  guaranteed by
          the OLP on a senior  subordinated basis if certain conditions are met.
          The OLP's Credit  Agreement  relating to the Credit Facility  ("Credit
          Agreement") and the OLP Indenture relating to the $200,000,000  Senior
          Notes ("OLP Indenture")  currently  prohibit the OLP from guaranteeing
          any indebtedness  unless,  among meeting other  conditions,  the fixed
          charge  coverage  ratio for the OLP meets certain levels at prescribed
          dates. Currently the OLP does not meet such conditions and, therefore,
          there can be no  assurance as to whether or when this  guarantee  will
          occur.  The  Senior  Secured  Notes  bear  interest  from  the date of
          issuance,  payable semi-annually in arrears on June 15 and December 15
          of each year.

     (3)  On July 31, 1996, the OLP amended and restated its $205,000,000 Credit
          Facility  (the  "Credit  Facility")  with a major  bank as Agent.  The
          unsecured  Credit  Facility  now consists of a  $50,000,000  term loan
          facility,  a  $185,000,000   revolving  credit  facility  for  general
          corporate,   working  capital  and  acquisition   purposes  (of  which
          $50,000,000  is  available  to  support   letters  of  credit)  and  a
          $20,000,000 revolving working capital facility, which is subject to an
          annual  reduction in outstandings  to $0 for 30 consecutive  days. All
          borrowings  under the current  pricing  arrangement  bear  interest at
          either LIBOR plus an applicable  margin  varying from 0.425% to 1.375%
          or the Bank's Base rate, depending on the nature of the borrowing. The
          Bank's  Base  rates at July 31,  1997 and 1996 were  8.50% and  8.25%,
          respectively. To offset the variable rate characteristic of the Credit
          Facility,  the OLP  entered  into  interest  rate  collar  agreements,
          expiring  between  June and  December  1998,  with three  major  banks
          limiting the floating rate portion of LIBOR-based  loan interest rates
          on a notional amount of $125,000,000 to between 4.9% and 6.5%.

     (4)  The notes  payable are secured by  approximately  $4,542,000  and
          $4,714,000  of property and  equipment at July 31, 1997 and 1996,
          respectively.

      At July 31, 1997 and 1996, $21,786,000 and $25,520,000, respectively, of
      short-term borrowings were outstanding under the revolving line of credit
      and letters of credit outstanding, used primarily to secure obligations
      under certain insurance arrangements, totaled $24,102,000 and $26,824,000,
      respectively.

     The  OLP  Indenture  and  Credit  Agreement  contain  various   restrictive
     covenants applicable to the Operating Partnership and its subsidiaries, the
     most restrictive relating to additional indebtedness,  sale and disposition
     of assets,  and transactions  with affiliates.  In addition,  the Operating
     Partnership  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 the Operating Partnership fails
     to meet certain coverage and capital  expenditure tests. The Partnership is
     in  compliance  with all  requirements,  tests,  limitations  and covenants
     related to the Senior Note Indenture and Credit Agreement.

     Annual  principal  payments  on  long-term  debt for each of the next  five
     fiscal years are  $1,847,000 in 1998,  $66,805,000  in 1999,  $2,131,000 in
     2000, $52,996,000 in 2001 and $200,876,000 in 2002.

     During fiscal year 1996, the Partnership  recognized an extraordinary  loss
     from  the  write-off  of  unamortized   financing  costs  of  approximately
     $965,000,  net of minority  interest of $10,000,  resulting  from the early
     extinguishment of $50,000,000 of its floating rate senior notes.

                                      F-11
<PAGE>

F.   Partners' Capital

     Partners'  capital consists of 14,612,580  Common Units  representing a 46%
     limited partner interest,  16,593,721 Subordinated Units representing a 53%
     limited partner interest, and a 1% General Partner interest.

     The  Agreement of Limited  Partnership  of Ferrellgas  Partners,  L.P. (the
     "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.

     During the Subordination  Period, the Partnership may issue up to 7,000,000
     Common Units  (excluding  Common Units issued in connection with conversion
     of  Subordinated  Units  into  Common  Units)  or an  equivalent  number of
     securities  ranking  on a parity  with the  Common  Units and an  unlimited
     number of  partnership  interests  junior  to the  Common  Units  without a
     Unitholder  vote. The  Partnership may also issue  additional  Common Units
     during the Subordination  Period in connection with acquisitions if certain
     cash flow criteria are met. After the Subordination Period, the Partnership
     Agreement  authorizes the General Partner to cause the Partnership to issue
     an unlimited number of additional general and limited partner interests and
     other equity  securities of the Partnership for such  consideration  and on
     such terms and conditions as shall be  established  by the General  Partner
     without the approval of any Unitholders.

     The Partnership  maintains a shelf registration  statement for Common Units
     representing limited partner interests in the Partnership. The Common Units
     may be issued from time to time by the  Partnership in connection  with the
     Partnership's acquisition of other businesses,  properties or securities in
     business combination transactions.

     In connection  with the formation of the  Partnership,  the General Partner
     contributed  certain assets and liabilities.  Pursuant to an examination by
     the Internal Revenue  Service,  certain  adjustments  which relate to these
     contributed  assets  resulted in additional  deferred taxes recorded by the
     General  Partner in fiscal  1995.  This  noncash  adjustment  retroactively
     increased the basis of the assets the General  Partner  contributed  to the
     Operating  Partnership by $11,300,000 which, in turn, caused an increase to
     the General  Partner's  contributed  capital  which was  allocated pro rata
     among all  partners.  In  addition,  Operating  Partnership  goodwill  also
     increased by $11,300,000 (to be amortized prospectively over a period of 15
     years). These adjustments were not material to the Partnership's  financial
     position or its results of operations or liquidity,  nor have they affected
     the limited partners' tax basis in the Partnership units.

G.   Transactions with Related Parties

     The  Partnership  has no  employees  and is managed and  controlled  by the
     General Partner. Pursuant to the Partnership Agreement, the General Partner
     is entitled to reimbursement  for all direct and indirect expenses incurred
     or payments it makes on behalf of the Partnership,  and all other necessary
     or  appropriate   expenses   allocable  to  the  Partnership  or  otherwise
     reasonably incurred by the General Partner in connection with operating the
     Partnership's   business.   These  costs,   which   totaled   $128,033,000,
     $109,637,000  and  $100,750,000 for the years ended July 31, 1997, 1996 and
     1995, respectively,  include compensation and benefits paid to officers and
     employees of the General Partner, and general and administrative  costs. In
     addition,  the  conveyance  of  the  net  assets  of  the  Company  to  the
     Partnership on July 5, 1994,  (the date the MLP completed an initial public
     offering)  included  the  assumption  of  specific  liabilities  related to
     employee  benefit and  incentive  plans for the benefit of the officers and
     employees of the General Partner. See Note L for discussion of transactions
     involving acquisitions related to the General Partner and the Partnership.

                                      F-12
<PAGE>

     Ferrell,  the parent of the  General  Partner,  and its other  wholly-owned
     subsidiaries  engage in various investment  activities  including,  but not
     limited to, commodity  investments and the trading thereof. The Partnership
     from time to time acts as an agent on behalf of  Ferrell  to  purchase  and
     market natural gas liquids and enter into certain trading  activities.  The
     Partnership charges all direct and indirect expenses incurred in performing
     this agent role to  Ferrell.  During  the year  ended  July 31,  1997,  the
     Partnership,  as Ferrell's  agent,  performed  the following  services:  a)
     purchased  1,089,929  barrels of  propane,  b)  marketed  and sold  619,929
     barrels, and c) entered into certain hedging arrangements.  The Partnership
     charged  Ferrell  $73,078  for its direct and  indirect  expenses  incurred
     during  fiscal year 1997. Of the 619,929  barrels of propane sold,  534,929
     barrels were sold to and used by the  Partnership at the applicable  market
     prices (an  aggregate  of  $13,128,765). Management  believes  these
     transactions   were  under  terms  that  were  no  less  favorable  to  the
     Partnership than those arranged with other parties.

     A.  Andrew  Levison,  a  director  of the  General  Partner,  is a Managing
     Director of Donaldson,  Lufkin & Jenrette Securities  Corporation  ("DLJ").
     DLJ  acted as an  underwriter  with  regard  to the  private  placement  of
     $160,000,000 Senior Secured Notes issued in April 1996 and was paid fees of
     $4,000,000 in 1996.


H.   Contingencies and Commitments

     The  Partnership  is  threatened  with or named as a  defendant  in various
     lawsuits which, 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
     known  contingent  claims that are likely to have a material adverse effect
     on the results of operations or financial condition of the Partnership.

     Certain  property and  equipment is leased under  noncancellable  operating
     leases which  require  fixed  monthly  rental  payments and which expire at
     various  dates  through 2016.  Rental  expense  under these leases  totaled
     $13,169,000,  $12,054,000,  and  $11,233,000,  for the years ended July 31,
     1997,  1996 and 1995,  respectively.  Future minimum lease  commitments for
     such leases are  $11,095,000  in 1998,  $9,494,000  in 1999,  $8,101,000 in
     2000, $5,732,000 in 2001, $2,364,000 in 2002 and $521,296 thereafter.


I.   Employee Benefits

     The  Partnership  has no  employees  and is managed and  controlled  by the
     General Partner.  The Partnership  assumed all liabilities,  which included
     specific  liabilities  related to the following  employee benefit plans for
     the benefit of the officers and employees of the General Partner.

     The General  Partner and its parent,  Ferrell  have a defined  contribution
     profit-sharing plan which covers substantially all employees with more than
     one year of service.  Contributions  are made to the plan at the discretion
     of Ferrell's Board of Directors.  This 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.  Contributions  for the
     years ended July 31, 1997, 1996 and 1995,  respectively,  were  $3,000,000,
     $1,160,000  and  $1,300,000  under the profit  sharing  provision  and were
     $1,542,000, $1,388,000 and $1,407,000 under the 401(k) provision.

                                      F-13
<PAGE>

J.   Unit Options

     The  Ferrellgas,  Inc. Unit Option Plan (the "Unit Option Plan")  currently
     authorizes  the  issuance of options  (the "Unit  Options")  covering up to
     850,000 Subordinated Units to certain officers and employees of the General
     Partner.  The Unit Options are  exercisable  beginning after July 31, 1999,
     assuming the  Subordination  Period has elapsed at exercise  prices ranging
     from  $16.80 to $21.67 per unit,  which is an  estimate  of the fair market
     value of the Subordinated  Units at the time of grant,  vest immediately or
     over a one to five year period,  and expire on the tenth anniversary of the
     date of  grant.  Upon  conversion  of the  Subordinated  Units  held by the
     General Partner and its affiliates,  outstanding  Subordinated Unit Options
     granted will convert to Common Unit Options.

     The Partnership  accounts for stock-based  compensation using the intrinsic
     value  method  prescribed  in  APB  No.  25  and  related  Interpretations.
     Accordingly,  no compensation  cost has been recognized for the Unit Option
     Plan. Had compensation  cost for the Unit Option Plan been determined based
     upon the  fair  value  of the  grant  date for  awards  under  these  plans
     consistent   with  the   methodology   prescribed   under  SFAS  123,   the
     Partnership's  net income and earnings per share would have been reduced by
     approximately  $29,000  or less than $0.01 per unit and $7,000 or less than
     $0.01 per unit for the 1997 and 1996 fiscal years,  respectively.  The fair
     value of the  options  granted  during the 1997 and 1996  fiscal  years was
     determined  using a binomial  option  valuation  model  with the  following
     assumptions:  a)  distribution  amount  of $0.50 per unit per  quarter,  b)
     average  Common Unit price  volatility  of 16.9% was used as an estimate of
     Subordinated Unit volatility, c) the risk-free interest rate used was 5.9%,
     and d) the expected life of the option is 5 years.
<TABLE>
<CAPTION>

                                                                    Number      Weighted Average       Weighted
                                                                      of         Exercise Price      Average Fair
                                                                     Units                              Value
                                                                  ------------ -------------------- ---------------
                                                                  ------------ -------------------- ---------------
<S>                                                                    <C>               <C>               <C>
         Outstanding, July 31, 1995                                 701,500          $ 16.98
         Granted                                                     99,750            19.96            $0.34
         Forfeited                                                 (132,825)           17.21
                                                                  ------------
         Outstanding, July 31, 1996                                 668,425            17.38
         Granted                                                    216,500            20.23            $0.52
         Forfeited                                                 (157,325)           18.02
                                                                  ------------
         Outstanding, July 31, 1997                                 727,600           $18.09
                                                                  ------------
         Options exercisable, July 31, 1997                               0
                                                                  ------------

                                                                        Options Outstanding at July 31, 1997
                                                                  -------------------------------------------------
         Range of option prices at end of year                                     $16.80-$21.67
         Weighted average remaining contractual life                                 8.1 years


</TABLE>

K.   Disclosures About Off Balance Sheet Risk and Fair Value of Financial
      Instruments

     The carrying amount of cash and cash  equivalents  approximates  fair value
     because of the short  maturity of the  instruments.  Short-term  borrowings
     approximate  fair value as of July 31, 1997 and 1996.  The  estimated  fair
     value of the Partnership's long-term debt was $507,134,000 and $440,122,000
     as of July 31,  1997 and 1996,  respectively.  The fair value is  estimated
     based on quoted market prices adjusted for discounted cash flows.

                                      F-14
<PAGE>


     Interest Rate Collar  Agreements.  The Partnership has entered into various
     interest  rate  collar  agreements  involving  the  exchange  of fixed  and
     floating  interest  payment   obligations   without  the  exchange  of  the
     underlying  principal  amounts.  At  July  31,  1997,  the  total  notional
     principal amount of these agreements was $125,000,000 and the fair value of
     these  agreements  was  immaterial to the financial  position or results of
     operations of the Partnership.  The  counterparties to these agreements are
     large financial  institutions.  The interest rate collar agreements subject
     the  Partnership  to financial risk that will vary during the life of these
     agreements  in  relation  to  market  interest  rates.  The mark to  market
     adjustment  applicable  to the portion of the notional  amount in excess of
     variable  rate  indebtedness  at July  31,  1997  was not  material  to the
     financial position or the results of operations of the Partnership.

     Option  Commodity  Contracts.  The Partnership is a party to certain option
     contracts, involving various liquefied petroleum products, for overall risk
     management  purposes in connection with its supply and trading  activities.
     Contracts are executed with private  counterparties  and to a lesser extent
     on national  mercantile  exchanges.  Open contract positions are summarized
     below.

     Forward and Futures  Commodity  Contracts.  The  Partnership  is a party to
     certain forward and futures contracts for trading purposes.  Net gains from
     trading activities were $5,476,000,  $7,323,000,  $5,818,000, for the years
     ended July 31, 1997,  1996, and 1995,  respectively.  Such contracts permit
     settlement  by delivery  of the  commodity.  Open  contract  positions  are
     summarized  below  (assets are defined as purchases or long  positions  and
     liabilities are sales or short positions).
<TABLE>
<CAPTION>

                                  As of July 31
                  (In thousands, except price per gallon data)

                    Derivative Commodity Instruments Held for                     Derivative Commodity
                           Purposes Other than Trading                            Instruments Held for
                                     (Options)                                      Trading Purposes
                                                                                 (Forward and Futures)
                    -------------------------------------------    ---------------------------------------------------
                           1997                    1996                     1997                        1996
                    --------------------    -------------------    -----------------------     -----------------------
                     Asset      Liab.        Asset     Liab.         Asset       Liab.           Asset       Liab.
                    --------- ----------    -------- ----------    ----------- -----------     ----------- -----------

   Volume
<S>                  <C>      <C>             <C>                   <C>        <C>              <C>        <C>      
   (gallons)         14,406   (13,189)        21         -          165,739    (187,744)        178,011    (153,990)

   Price(cent)/gal)   38-35     50-35         30         -           40-32       43-33           37-33       40-35

   Maturity           8/97-     9/97-       8/96-                     8/97-       8/97-         8/96-         8/96-
   Dates              3/98      2/98        12/96             -       3/98        7/98          7/97          3/97

   Contract
   Amounts ($)       10,193   (13,164)       1,575       -           64,859     (75,578)         64,223     (62,917)

   Fair Value ($)    10,244   (13,071)       1,609       -           62,925     (73,217)         65,972     (62,623)

   Unrealized
   gain (loss) ($)     51        93           34         -           (1,934)      2,361           1,749         294
</TABLE>

    Risks  related to these  contracts  arise  from the  possible  inability  of
    counterparties  to  meet  the  terms  of  their  contracts  and  changes  in
    underlying product prices. The Partnership  attempts to minimize market risk
    through  the  enforcement  of its  trading  policies,  which  include  total
    inventory  limits and loss  limits,  and  attempts to  minimize  credit risk
    through application of its credit policies.

                                      F-15
<PAGE>

L.  Acquisitions

     During the year ended July 31, 1997, the Partnership  made  acquisitions of
     businesses  valued at $40,200,000  (including  working capital  acquired of
     $1,420,000).  This  amount  was funded by  $36,114,000  cash  payments  and
     noncash transactions totaling $4,086,000 in other costs and consideration.

     On April 30, 1996, the General  Partner  consummated the purchase of all of
     the stock of Skelgas Propane,  Inc.  ("Skelgas"),  a subsidiary of Superior
     Propane,  Inc. of Toronto,  Canada.  The cash purchase price, after working
     capital adjustments, was $89,404,000.

     As of May 1, 1996,  the General  Partner (i) caused Skelgas and each of its
     subsidiaries to be merged into the General Partner and (ii) transferred all
     of the assets of Skelgas and its subsidiaries to the Operating Partnership.
     In exchange,  the Operating  Partnership  assumed  substantially all of the
     liabilities,  whether  known or unknown,  associated  with  Skelgas and its
     subsidiaries and their propane business (excluding income tax liabilities).
     In  consideration of the retention by the General Partner of certain income
     tax liabilities,  the Partnership issued 41,203 Common Units to the General
     Partner. The liabilities assumed by the Operating  Partnership included the
     loan agreement  under which the General  Partner  borrowed funds to pay the
     purchase  price for Skelgas.  Immediately  following the transfer of assets
     and related transactions  described above, the Operating Partnership repaid
     the loan  with  cash  and  borrowings  under  the  Operating  Partnership's
     existing  acquisition bank credit line. The total assets contributed to the
     Operating  Partnership  (at the  General  Partner's  cost  basis) have been
     allocated as follows:  (i) working capital of  $17,168,000,  (ii) property,
     plant and equipment of $60,947,000  and (iii) and the balance to intangible
     assets. In total, during the year ended July 31, 1996, the Partnership made
     acquisitions   and  received   contributions   of   businesses   valued  at
     $128,165,000  (including  working capital  acquired of  $19,362,000).  This
     amount was funded by $8,116,000 of cash payments and the following  noncash
     transactions: $108,120,000 debt assumed, $4,825,000 issuance of Partnership
     units, and $7,104,000 other costs and consideration.

    All transactions have been accounted for similar to purchase accounting and,
    accordingly,  the  results  of  operations  of all  acquisitions  have  been
    included  in the  consolidated  financial  statements  from  their  dates of
    contribution.  The following  pro forma  financial  information  assumes the
    Skelgas transaction occurred at the beginning of the period presented and
    also includes the pro forma effects of  the  Partnership's  issuance  of the
    $160,000,000 of 9 3/8% Senior Notes in April 1996 (as described in Note E):

      (in thousands, except per unit amounts)
      -------------------------------------------------------------
      (unaudited)                                             Pro Forma Year
                                                                   Ended
                                                              July 31, 1996
                                                           -----------------

      Total revenues                                            $732,372
      Income before extraordinary loss                            21,734
      Net earnings                                                20,769
      Net earnings per limited partner unit                     $   0.66


                                      F-16
<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,
1997, and 1996, and the related statement of earnings,  stockholder's equity and
cash flows for the year ended July 31, 1997 and the period from inception (April
8, 1996) to July 31, 1996. These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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, 1997 and 1996,  and the results of its operations and its cash flows for the
year ended July 31, 1997 and the period from  inception  (April 8, 1996) to July
31, 1996 in conformity with generally accepted accounting principles.








DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1997


                                      F-17
<PAGE>
                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)

                                 BALANCE SHEETS



<TABLE>
<CAPTION>



                                                                               July 31,             July 31,
      ASSETS                                                                     1997                 1996
      -----------------------------------------------------------------    -----------------    -----------------

<S>                                                                                  <C>                  <C>   
      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                                                        327                   42

      Accumulated deficit                                                              (327)                 (42)
                                                                           -----------------    -----------------
      Total Stockholder's Equity                                                      1,000                1,000
                                                                           -----------------    -----------------

      Total Liabilities and Stockholder's Equity                                     $1,000               $1,000
                                                                           =================    =================


</TABLE>






                       See notes to financial statements
                                      F-18
<PAGE>

                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)



                             STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>



                                                        For the                  From
                                                       year ended            inception to
                                                     July 31, 1997           July 31, 1996
                                                    -----------------     --------------------

<S>                                                             <C>                      <C> 
Revenues                                                       $   -                    $   -

General and administrative expense                               285                       42
                                                    -----------------     --------------------
Net loss                                                       $(285)                    $(42)
                                                    =================     ====================

</TABLE>






                       See notes to financial statements

                                      F-19
<PAGE>


                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)

                       STATEMENTS OF STOCKHOLDER'S EQUITY


<TABLE>
<CAPTION>



                                                                                                       
                                    Common stock                                                       Total
                             ---------------------------      Additional         Accumulated        stockholder's
                                Shares        Dollars       paid in capital       deficit             equity
                             -------------  ------------  -----------------   -----------------  ------------------

<S>                                   <C>        <C>                <C>                   <C>                 <C>      
   April 8, 1996                        0        $    0              $   0               $   0            $      0
                             -------------  ------------  -----------------   -----------------  ------------------


   Capital Contribution             1,000         1,000                 42                   -               1,042

   Net loss                             -             -                  -                 (42)                (42)
                             -------------  ------------  -----------------   -----------------  ------------------
   July 31, 1996                    1,000         1,000                 42                 (42)              1,000

   Capital Contribution                 -             -                285                   -                 285

   Net loss                             -             -                  -                (285)               (285)
                             -------------  ------------  -----------------   -----------------  ------------------
   July 31, 1997                    1,000        $1,000               $327               $(327)             $1,000
                             =============  ============  =================   =================  ==================
</TABLE>






                       See notes to financial statements

                                      F-20
<PAGE>

                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>


                                                                 
                                                                 For the               From
                                                               year ended          incepetion to 
                                                              July 31, 1997        July 31, 1996
                                                             -----------------    ----------------
Cash Flows From Operating Activities:
<S>                                                                     <C>                  <C>  
  Net loss                                                              $(285)               $(42)
                                                             -----------------    ----------------
      Cash used by operating activities                                  (285)                (42)
                                                             -----------------    ----------------
Cash Flows From Financing Activities:
  Capital contribution                                                    285               1,042
  Net advance from affiliate                                                0                   0
                                                             -----------------    ----------------
      Cash provided by financing activities                               285               1,042
                                                             -----------------    ----------------

Increase (decrease) in cash                                                 0               1,000
Cash - beginning of period                                              1,000                   0
                                                             -----------------    ----------------
Cash - end of period                                                   $1,000              $1,000
                                                             =================    ================

</TABLE>





                       See notes to financial statements

                                      F-21
<PAGE>
                                                       
                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1997


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  $160,000,000 of 9 3/8% Senior
        Secured  Notes due 2006 (the "Senior  Notes").  The Senior Notes will be
        redeemable at the option of the Partnership, in whole or in part, at any
        time on or after June 15, 2001. The Senior Notes will become  guaranteed
        by the Operating  Partnership (the "OLP") on a senior subordinated basis
        if certain  conditions are met. Certain OLP's credit  agreements and the
        indentures currently prohibit the OLP from guaranteeing any indebtedness
        unless, among meeting other conditions,  the fixed charge coverage ratio
        for the OLP meets certain levels at prescribed dates.  Currently the OLP
        does not meet such conditions and, therefore,  there can be no assurance
        as to whether or when this  guarantee  will  occur.  Interest is payable
        semi-annually in arrears on June 15 and December 15 of each year.
        The Finance Corp. serves as a co-obligor for the Senior Notes.

C.      Income Taxes

        Income  taxes have been  computed  as though the  Company  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 Company to utilize the deferred tax benefit
        of $17 associated with the current year net operating loss  carryforward
        of $306,  of which $21 expires July 31, 2011,  and $285 expires July 31,
        2012, 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,  1997 or the period  ended July 31, 1996 and
        there is no net deferred tax asset as of July 31, 1997 or July 31, 1996.

                                      F-22
<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, 1997 and
                  1996,  and Statements of Earnings and Cash Flows for the Years
                  ended July 31, 1997, 1996, and 1995........................S-3


Schedule II       Valuation and Qualifying Accounts for the Years ended
                  July 31, 1997, 1996 and 1995...............................S-6

                                      S-1
                                       
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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

We have audited the consolidated  financial  statements of Ferrellgas  Partners,
L.P.  (formerly  Ferrellgas,  Inc.),  and  subsidiaries as of July 31, 1997, and
1996, and for the years ended July 31, 1997, 1996, and 1995, and have issued our
report  thereon dated  September 24, 1997. Our audit also included the financial
statement  schedules listed at Item 14(a)2.  These financial statement schedules
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion based on our audit. 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 therein set forth.





DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1997

                                      S-2

<PAGE>

                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                                 BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>


 ASSETS                                                  July 31, 1997             July 31, 1996      
----------------------------------------------------   -------------------      --------------------  

<S>                                                           <C>                          <C>     
 Cash and cash equivalents                                    $         1                  $      1
 Investment in Ferrellgas, L.P.                                   203,360                   244,771
 Other assets, net                                                  3,298                     4,693
                                                       -------------------      --------------------    
   Total Assets                                                 $206,659                   $249,465       
                                                       ===================      ====================    



LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------

Other current liabilities                                        $  1,876                  $  4,856    

Long term debt                                                    160,000                   160,000

Partners' Capital
  Common unitholders                                               52,863                    71,323     
  Subordinated unitholders                                         50,337                    71,302     
  General partner                                                 (58,417)                  (58,016)    
                                                       -------------------      --------------------   
    Total Partners' Capital                                        44,783                    84,609     
                                                       -------------------      --------------------     

    Total Liabilities and Partners' Capital                      $206,659                  $249,465      
                                                       ===================      ====================  

                                                                      
</TABLE>






                                      S-3
<PAGE>
                            FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                             STATEMENTS OF EARNINGS
                                 (in thousands)
<TABLE>
<CAPTION>
        

                                                                            For the Year Ended
                                                        -----------------------------------------------------------
                                                          July 31, 1997       July 31, 1996       July 31, 1995
                                                        ------------------  ------------------- -------------------

<S>                                                               <C>                  <C>                 <C>    
Equity in earnings of Ferrellgas, L.P.                            $38,673              $27,508             $23,821
Operating expense                                                      27                    0                   1
Interest expense                                                   15,428                4,161
                                                        ------------------  ------------------- -------------------
  Net earnings                                                    $23,218              $23,347             $23,820
                                                        ==================  =================== ===================


</TABLE>







                                       S-4
<PAGE>
                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                            For the Year Ended
                                                                       ------------------------------------------------------------
                                                                        July 31, 1997         July 31, 1996         July 31, 1995
                                                                       ----------------      -----------------     ----------------
     Cash Flows From Operating Activities:
<S>                                                                            <C>                    <C>                  <C>    
      Net earnings                                                             $23,218                $23,347              $23,820
      Reconciliation of net earnings to
      net cash from operating activities:
         Amortization of capitalized financing costs                               511                    161
         Equity in (earnings) loss of Ferrellgas, L.P.                         (39,068)               (27,508)             (23,821)
         Other current assets                                                      879                 (4,854)
         Distributions received from Ferrellgas, L.P.                           80,085                 62,863               51,654
         Increase in other current liabilities                                  (2,980)                 4,855                    1
                                                                       ----------------      -----------------     ----------------
           Net cash provided by operating activities                            62,645                 58,864               51,654
                                                                       ----------------      -----------------     ----------------

     Cash Flows From Investing Activities:
      Investment in Ferrellgas, L.P.                                                 -                      -                    -
                                                                       ----------------      -----------------     ----------------
           Net cash used by investing activities                                     -                      -                    -
                                                                       ----------------      -----------------     ----------------

     Cash Flows From Financing Activities:
      Distributions to partners                                                (63,044)               (62,863)             (51,654)
      Additions to long-term debt                                                                     160,000
      Contribution to subsidiary                                                                     (156,000)
       Net advance from affiliate                                                  399
      Net issuance of Common Units                                                   -                      -                    -
                                                                       ----------------      -----------------     ----------------
           Net cash provided (used) by financing activities                    (62,645)               (58,863)             (51,654)
                                                                       ----------------      -----------------     ----------------

     Increase in cash and cash equivalents                                           0                      1                    -
     Cash and cash equivalents - beginning of period                                 1                      -                    -
                                                                       ----------------      -----------------     ----------------
     Cash and cash equivalents - end of period                                      $1                     $1      $              -
                                                                       ================      =================     ================


</TABLE>






                                      S-5
<PAGE>

                    FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                 Balance at   Charged to                          Deductions          Balance
                                                 beginning      cost/             Other            (amounts           at end
                 Description                     of period     expenses         Additions (A)     charged-off)       of period
-------------------------------------------    -------------- ---------------  ----------------  ----------------  ---------------

Year ended July 31, 1997

<S>                                              <C>               <C>                  <C>                <C>           <C>       
Allowance for doubtful accounts                    $   1,169       $ 2,604          $   0           $2,539         $  1,234

Accumulated amortization:

   Intangible assets                               $  95,801       $13,410          $   0           $    0         $109,211

   Other assets                                    $   4,647       $ 2,106          $   0           $    0         $  6,753


Year ended July 31, 1996

Allowance for doubtful accounts                    $     874       $ 1,151          $ 702           $1,558         $  1,169
 
Accumulated amortization:

   Intangible assets                               $  81,995       $11,620          $2,946          $  760         $ 95,801

   Other assets                                    $   3,337       $ 1,742          $  975          $1,407         $  4,647


Year ended July 31, 1995
 
Allowance for doubtful accounts                    $     798       $ 1,191          $  400          $1,515         $    874

Accumulated amortization:

   Intangible assets                               $  68,489       $ 9,997          $  3,509        $    0         $ 81,995

   Other assets                                    $   1,860       $   368          $  1,109        $    0         $  3,337
</TABLE>




   (A)     On April 30, 1996, the General  Partner  purchased all of the capital
           stock of Skelgas, Inc. On May 1, 1996 the General Partner contributed
           the assets and substantially  all of the liabilities  associated with
           Skelgas, Inc. to the Operating  Partnership.The  amounts reflected as
           "Other  Additions"   represent   valuation  and  qualifying  accounts
           assumedby  the   Operating   Partnership   in  connection   with  the
           contribution by the General Partner.

          On November 1, 1994, the General  Partner purchased all of the capital
          stock of Vision Energy Resources, Inc. Immediately following the close
          of the  purchase,  the  General  Partner  contributed  the  assets and
          substantially  all of the  liabilities  associated  with Vision Energy
          Resources, Inc. to the Operating Partnership. The amounts reflected as
          "Other Additions"  represent valuation and qualifying accounts assumed
          by the Operating  Partnership in connection  with the  contribution by
          the General Partner.

                                      S-6