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, 1998
                                       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 Nos.)
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 October 12, 1998, 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 $266,005,660.

At October 12, 1998, Ferrellgas Partners, L.P. had units outstanding as follows:
14,699,678        Common Units
16,593,721        Subordinated Units
Documents Incorporated by Reference:   None


<PAGE>


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

                          1998 FORM 10-K ANNUAL REPORT

                                Table of Contents
<TABLE>
<CAPTION>

                                                                                                               Page
                                     PART I
<S>      <C>                                                                                                  <C>
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    7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................17
ITEM     8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................18
ITEM     9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................18

                                    PART III

ITEM    10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS...........................................18
ITEM    11.     EXECUTIVE COMPENSATION........................................................................20
ITEM    12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT................................................................................23

ITEM    13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................25

                                     PART IV

ITEM    14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                REPORTS ON FORM 8-K...........................................................................26

</TABLE>

<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 97% 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  Partnership  believes that it 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  566 retail  outlets
with 298  satellite  locations  in 38  states  (some  outlets  serve  interstate
markets). Based upon information contained in industry publications for calendar
year 1997,  the  Partnership  believes  that its retail  operations  account for
approximately  8% of the  retail  propane  purchased  in the  United  States  as
measured by gallons  sold.  For the  Partnership's  fiscal  years ended July 31,
1998, 1997 and 1996,  annual retail propane sales volumes were 660 million,  694
million, and 650 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  Partnership  also  believes  that it is a leading  natural gas liquids
trading  company.  Annual  propane and natural  gas  liquids  trading,  chemical
feedstocks and wholesale  propane sales volumes were  approximately 1.0 billion,
1.2 billion and 1.7 billion gallons during the fiscal years ended July 31, 1998,
1997 and 1996, respectively.


<PAGE>



Retail Operations

   Formation and History

     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. Ferrell was previously owned primarily by James E. Ferrell
and his family but was sold in July 1998 to the Ferrell Companies, Inc. Employee
Stock  Ownership  Trust  ("ESOT").  Ferrellgas was formed in 1984 to operate the
retail  propane  business  previously  conducted by Ferrell.  In July 1994,  the
propane   business  and  assets  of  Ferrellgas  were  contributed  to  the
Partnership in connection  with the  Partnership's  initial  public  offering of
Common Units.

     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 two
major acquisitions and many other smaller  acquisitions  significantly  expanded
and diversified the Company's  geographic coverage.  Since 1986,  Ferrellgas has
acquired more than 100 smaller  independent  propane  retailers,  the largest of
which were Skelgas  Propane,  Inc.  ("Skelgas")  acquired in May 1996 and Vision
Energy  Resources,  Inc.  ("Vision")  acquired in November  1994. For the fiscal
years ended July 31, 1998 to 1994, the Partnership (or its predecessor) invested
approximately $13.0 million,  $38.8 million,  $108.8 million, $70.1 million, and
$3.4 million,  respectively,  to acquire  operations with annual retail sales of
approximately 4.4 million,  20.5 million,  111.8 million,  70.0 million, and 2.9
million  gallons  of  propane,  respectively.  Primarily  as a  result  of  this
acquisition  strategy,  retail propane  gallons sold by the  Partnership (or its
predecessor)  increased  from 68 million in fiscal 1986 to 660 million in fiscal
1998. 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  more  than  5,000  local  or  regional
distributors.  The  Partnership  believes the  fragmented  nature of the propane
industry provides significant opportunities for growth through acquisitions.

   Business Strategy

     The goal of the  Partnership is to be the leading retail propane company in
the United States.  The Partnership  believes that it has obtained a competitive
advantage by promoting an entrepreneurial culture that empowers its employees to
be  responsive  to  individual  customer  needs.  In addition,  the  Partnership
believes  this  culture is  supported  and  enhanced  by the recent  transfer of
ownership  of  Ferrell  to the  ESOT  for  the  sole  benefit  of the  Company's
employees.  The  Partnership's  business  strategy is to continue its historical
focus on residential and commercial retail propane  operations.  The Partnership
anticipates  that its future  growth  will be  achieved  primarily  through  the
acquisition of smaller retail  propane  operations  throughout the United States
and to a lesser extent  through the  expansion of its existing  customer base by
increased competitiveness and investment in internal growth opportunities.

     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  Partnership   regularly
evaluates a number of propane distribution companies which may be candidates for
acquisition.  The  Partnership  believes  that there are  numerous  local retail
propane distribution  companies that are possible candidates for acquisition and
that its  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
                                       2
<PAGE>

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 Partnership  believes
that it 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 Partnership believes that it has positioned
itself  to  be  more  successful  in  direct  competition  for  customers.   The
Partnership  currently  has marketing  programs  underway  which focus  specific
resources toward this effort.

   Marketing

     Natural gas liquids are derived  from  petroleum  products  and are 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 by emphasizing  its  efficiency in delivering  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,  1998,  sales to  residential
customers  accounted  for 56% of retail gross profit,  sales to  industrial  and
other commercial  customers  accounted for 31% of retail gross profit, and sales
to agricultural  and other  customers  accounted for 13% 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 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
                                       3
<PAGE>

(November through April). To the extent necessary,  the Partnership will reserve
cash inflows from the second and third  quarters for  distribution  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  indicates  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.

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 Partnership  believes
it 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, 1998,  no supplier  provided more
than  10% of  the  Partnership's  total  propane  purchases.  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 148 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 1,596
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 industry publications,  propane accounts for approximately 3% to
4% of household energy  consumption in the United States, an average level which
has remained  relatively  constant for the past two  decades.  Propane  competes
primarily  with  natural  gas,  electricity  and  fuel oil as an  energy  source
principally on the basis of price, availability and portability.  Propane serves
as an  alternative  to natural gas in rural and suburban areas where natural gas
is unavailable or portability of product is required.  Propane is generally more
                                       4
<PAGE>

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. The Partnership believes
that propane generally is becoming  increasingly favored over fuel oil and other
alternative sources of fuel as an environmentally preferred energy source.

   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  industry  publications,   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  for calendar year 1997,  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  leading  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 ability to buy large
volumes of propane, the Partnership believes that it 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.

                                       5
<PAGE>



   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 125  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 60% 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, 1998,
1997 and 1996 net revenues of $7.5  million,  $5.5  million,  and $7.3  million,
respectively, were derived from trading activities.

   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  314 tank  cars to
facilitate product delivery.  Revenues of $15.3 million, $29.8 million and $44.4
million were derived from such  activities  for the  Partnership's  fiscal years
ended July 31, 1998, 1997 and 1996, respectively.

   Wholesale Marketing

     The Partnership  engages in the wholesale  distribution of propane to other
retail propane  distributors.  During the fiscal years ended July 31, 1998, 1997
and 1996, the Partnership sold 136 million, 123 million and 104 million gallons,
respectively, of propane to wholesale customers and had revenues attributable to
such sales of $49.9 million, $57.5 million and $42.6 million, respectively.

Employees

     The  Partnership  has no  employees  and is managed by the General  Partner
pursuant to the Partnership Agreement. At July 31, 1998, the General Partner had
3,494 full-time employees and 831 temporary and part-time employees. At July 31,
1998, the General Partner's  full-time  employees were employed in the following
areas:

                   Retail Locations                                   2,933
                   Transportation and Storage                           248
                   Corporate Offices (Liberty, MO & Houston, TX)        313
                                                                   ==========
                           Total                                      3,494
                                                                   ==========

     Approximately   one  percent  of  the  General   Partner's   employees  are
represented  by five  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 68 people.


                                       6
<PAGE>


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.

     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.

     The  Partnership  complies  in all  material  respects  with  all  material
governmental  regulations and industry standards applicable to environmental and
safety  matters,  except that the  Partnership  was not in compliance with Final
Rule for Continued  Operation of the Present Propane Trucks published August 18,
1997  (the  "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.  As a  result  of  actions  filed by five of the  principal  multi-state
propane marketers (including the Partnership),  the United States District Court
for the Western District of Missouri issued a preliminary injunction against the
DOT in February,  1998,  staying and postponing  certain provisions of the Final
Interim Rule. As a result of the preliminary injunction,  the Partnership is now
in full  compliance  with the court modified Final Interim Rule for bobtails and
transport  vehicles.  The  Partnership  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. In June 1998, the DOT established a formal Regulation  Negotiation
Committee to address these issues and the Partnership was granted a seat on this
committee. At this time, the Partnership cannot determine whether enforcement of
the Final Interim Rule will be permanently  enjoined,  or the ultimate long-term
cost of compliance with the Final Interim Rule to the Partnership or the propane
industry in general.

Service Marks and Trademarks

     The Partnership markets retail propane under the "Ferrellgas" tradename and
uses the tradename  "Ferrell  North  America" for its wholesale  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.

                                       7
<PAGE>


Business of  Ferrellgas Partners Finance Corp.

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


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 ........................   92           69          161
         Transport trailers.....................  263           14          277
         Bulk delivery trucks...................  814          782        1,596
         Pickup and service trucks..............  995          491        1,486
         Railroad tank cars.....................    -          314          314

     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
approximately  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 626,000 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,  1998,  the  capacity of these
facilities was approximatly 88 million gallons, 88 million gallons and 8 million
gallons,  respectively  (an  aggregate of  approximately  184 million  gallons).
Currently, approximately 148 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 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
                                       8
<PAGE>

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.


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 it 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, 1998.


                                     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 ("NYSE") 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 October 12, 1998,  there
were 745 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
                      --------------------- --------------------- ---------------------
                        1997       1998       1997       1998        1997       1998
                      ---------- ---------- ---------- ---------- ----------- ----------
<S>                     <C>        <C>        <C>        <C>         <C>        <C>  
First Quarter           $23.50     $24.25     $22.50     $22.63      $0.50      $0.50
Second Quarter           22.88      23.25      20.75      22.00       0.50       0.50
Third Quarter            23.00      22.63      21.13      20.25       0.50       0.50
Fourth Quarter           23.00      21.94      21.25      20.25       0.50       0.50
</TABLE>

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

                                       9
<PAGE>



     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  taxes.   Instead,
Unitholders are required to report their  allocable  share of the  Partnership's
income,  gains,  losses,  deductions  and  credits,  regardless  of whether  the
Partnership makes distributions.


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)
                          ---------------------------------------------------------------------------------   -------------
                                                                                  Pro Forma    Historical      Historical
                                                                                                                 Eleven
                                               Historical                         Year Ended    Inception     Months Ended
                                                                                                   to
                                           Year Ended July 31,                     July 31,     July 31,        June 30,
                          ------------------------------------------------------
                              1998          1997         1996          1995        1994 (1)        1994           1994
                          ------------- ------------ ------------- ------------- ------------- ------------   -------------
Income Statement Data:
<S>                        <C>                    <C>               <C>           <C>           <C>            <C>        
Total revenues             $   667,353    $ 804,298   $   653,640   $   596,436   $   526,556   $   24,566     $   501,990
Depreciation and                45,009       43,789        37,024        32,014        28,835        2,383          26,452
amortization
ESOP compensation charge           350
Operating income (loss)         52,760       68,819        62,506        55,927        68,631      (2,391)          71,522
Interest expense                49,129       45,769        37,983        31,993        28,130        2,662          53,693
Earnings (loss) from             4,943       23,218        24,312        23,820        39,909      (5,026)          12,337
continuing operations
Earnings from continuing          0.16         0.74          0.77          0.76          1.29
operations per unit
Cash distributions                2.00         2.00          2.00          1.65
declared per unit (3)

Balance Sheet Data (at end of period):
Working capital              $   (443)   $   18,111    $   15,294    $   28,928    $   34,948   $   34,948      $   91,912
Total assets                   621,223      657,076       654,295       578,596       477,193      477,193         592,664
Pay to (rec from) parent and                                                                                       (4,050)
affiliates
Long-term debt                 507,222      487,334       439,112       338,188       267,062      267,062         476,441
Stockholder's equity                                                                                                22,829

Partners' Capital:
Common Unitholders          $   27,985   $   52,863    $   71,323    $   84,489    $   84,532   $   84,532
Subordinated Unitholders        19,908       50,337        71,302        91,824        99,483       99,483
General Partner (2)           (58,976)     (58,417)      (58,016)      (57,676)      (62,622)     (62,622)

Operating Data:
Retail propane sales           659,932      693,995       650,214       575,935       564,224       23,915         540,309
volumes (in gallons)
Capital expenditures                                                              
(4):
        Maintenance         $   10,569   $   10,137     $   6,657     $   8,625     $   5,688      $   911       $   4,777
        Growth                  10,060        6,055         6,654        11,097         4,032          983           3,049
        Acquisition             13,003       38,780       108,803        70,069         3,429          878           2,551
                          ------------- ------------ ------------- ------------- ------------- ------------   -------------
            Total           $   33,632   $   54,972   $   122,114    $   89,791    $   13,149    $   2,772      $   10,377
                          ============= ============ ============= ============= ============= ============   =============
</TABLE>
<TABLE>
<CAPTION>

Supplemental Data:
Earnings (loss) before depreciation, amortization,
<S>                 <C>     <C>           <C>          <C>                <C>           <C>             <C>          <C>       
 interest and taxes (5)     $   98,119   $  112,608    $   99,530     $   87,941    $   97,466      $   (8)      $   97,974
</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).

                                       10
<PAGE>



(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.

(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 and an ESOP related non-cash  compensation  charge.  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 is a discussion  of the  historical  financial  condition and
results of operations for Ferrellgas  Partners,  L.P. and its  subsidiaries  and
should  be  read in  conjunction  with  the  historical  consolidated  financial
statements and accompanying notes thereto included elsewhere in this Form 10-K.

Forward-looking statements

     Statements included in this report that are not historical facts, including
statements 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
Secured 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 i) Year 2000  compliance and j) other
factors that are discussed in the Partnership's  filings with the Securities and
Exchange Commission.



                                       11
<PAGE>


Year 2000 Compliance

     Many computer  systems and  applications  in use throughout the world today
may not be able to  appropriately  interpret  dates  beginning  in the year 2000
("Year 2000" issue). As a result,  this problem could have adverse  consequences
on the operations of companies and the integrity of information processing.

   The  Partnership  began the process in 1997 of identifying and correcting its
computer systems and applications  that were exposed to the Year 2000 issue. The
Partnership  initially  focused  on  the  systems  and  applications  that  were
considered  critical to its operations and services for supplying propane to its
customers and to its ability to account for those business services  accurately.
These  critical  areas  include the retail  propane  accounting  and  operations
system,  financial  accounting  and  reporting  system,  local area  network and
electronic mail systems.  The Partnership expects that these critical areas will
be Year 2000 compliant by December 31, 1999.

   The  Partnership  has  also  taken  steps  to  identify  other   non-critical
applications that may have exposure to the Year 2000 issue. It has established a
test lab for the independent  testing of these  applications to ensure Year 2000
compatibility.  To date, no material Year 2000 issues have been  identified as a
result of this testing.

     The Partnership  conducts business with several hundred outside  suppliers.
While no single supplier is considered  material to the Partnership,  a combined
number could constitute a material amount to the Partnership. The Partnership is
currently  reviewing their largest  suppliers to obtain  appropriate  assurances
that  they  are,  or  will  be,  Year  2000  compliant.  If  compliance  by  the
Partnership's  suppliers is not achieved in a timely manner,  it is unknown what
effect, if any, the Year 2000 issue could have on the Partnership's operations.

     The Partnership has evaluated its Year 2000 issues and does not expect that
the total cost of related  modifications  and  conversions  will have a material
effect on its financial  position,  results of  operations  or cash flows.  Such
costs are being  expensed as incurred.  To date, the  Partnership  has currently
incurred  approximately  $100,000 to identify  and correct its Year 2000 issues.
This  expense  has  been   primarily   related  to  its  critical   systems  and
applications.  It is estimated  that the  Partnership  will incur an  additional
$300,000  to $500,000  during the next  fiscal year to identify  and correct its
Year 2000 issues. The Partnership does not anticipate  significant  purchases of
computer  software  or  hardware as a result of its Year 2000 issue and does not
believe  that the  correction  of its Year 2000 issues  will delay or  eliminate
other scheduled computer upgrades and replacements.


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 Partnership  believes
that it 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  566  retail  outlets  and  298  satellite
locations.  Annual retail  propane sales volumes were 660 million,  694 million,
and 650 million  gallons for the fiscal  years ended July 31,  1998,  1997,  and
1996, 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.
                                       12
<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 leading independent traders of propane and natural gas
liquids in the United States.

     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 125  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 60% of the Partnership's total
trading  volume,  with the  remainder  consisting  principally  of various other
natural gas  liquids.  For the  Partnership's  fiscal years ended July 31, 1998,
1997 and 1996,  net revenues from trading  activities  were $7.5  million,  $5.5
million and $7.3 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.

The following presents the Partnership's  selected quarterly  financial data for
the two years ended July 31, 1998.

Fiscal year ended July 31, 1998
<TABLE>
<CAPTION>

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

<S>                                            <C>                  <C>                  <C>                  <C>    
Revenues                                       $153,205             $248,811             $175,167             $90,170
Gross profit                                     66,589              117,932               89,449              50,783
Net earnings (loss)                            (13,311)               32,759               10,775            (25,280)
Net earnings (loss) per
 limited partner unit                            (0.42)                 1.04                 0.34              (0.80)
</TABLE>
<TABLE>
<CAPTION>

Fiscal year ended July 31, 1997
                                         First Quarter        Second Quarter        Third Quarter        Fourth Quarter
                                        -----------------    -----------------     ----------------     -----------------

<S>                                             <C>                  <C>                  <C>                    <C>    
Revenues                                        $167,860             $347,056             $192,873               $96,509
Gross profit                                      66,288              138,258               82,844                46,780
Net earnings (loss)                             (10,790)               49,430                7,685              (23,107)
Net earnings (loss) per
 limited partner unit                             (0.34)                 1.57                 0.24                (0.73)

</TABLE>

Results of Operations

   Fiscal Year Ended July 31, 1998 versus Fiscal Year Ended July 31, 1997

     Total Revenues.  Total revenues decreased 17.0% to $667,353,000 as compared
to  $804,298,000  in the prior year,  primarily due to a decrease in sales price
per  gallon  as a result  of the  unusually  higher  wholesale  cost of  propane
experienced  in the  previous  year,  the effects of the warmer  weather,  and a
                                       13
<PAGE>

decrease in revenues from other  operations (net trading  operations,  wholesale
propane  marketing  and  chemical  feedstocks  marketing),  partially  offset by
acquisitions of propane businesses.

     A less  volatile  propane  market  during  fiscal 1998 caused a significant
decrease in the cost of product,  which in turn caused a decrease in sales price
per gallon as compared  to fiscal  1997.  Retail  volumes  decreased  by 4.9% or
34,063,000  gallons,  primarily  due to the  decrease in volumes  related to the
unusually warm winter during fiscal 1998,  attributable  in large part to the El
Nino  weather  phenomenon.  The winter of fiscal 1998 was reported as the second
warmest winter in recorded  history.  For the year,  temperatures were 8% warmer
than  normal and 4% warmer  than the same  period  last year as  reported by the
American  Gas  Association.  The  warmer  than  normal  temperatures  were  also
compounded by other El Nino related  weather factors such as reduced wind chill,
humidity,  snow and cloud cover, all of which  contributed to a lower demand for
propane and a decrease in earnings for the Partnership.

     The 29.7% decrease in revenues from other  operations to $73,123,000 is due
to a decrease  in  wholesale  sales  price per gallon and a decrease in chemical
feedstocks  marketing  revenues.  Wholesale  marketing  sales  price per  gallon
decreased  primarily due to the decrease in the cost of product compared to last
year.  Chemical  feedstocks volumes decreased as a result of decreased marketing
demand from petrochemical companies.

     Gross Profit.  Gross profit  decreased 2.8% to  $324,753,000 as compared to
$334,170,000  during  fiscal 1997,  primarily  due to a decrease in retail sales
gross margin  dollars,  partially  offset by an increase  from trading  profits.
Retail  operations   results  decreased   primarily  due  to  decreased  volumes
attributed to the warmer  weather,  partially  offset by the impact of increased
retail margins and the increase in volumes attributed to acquisitions.

     Operating  Expenses.  Operating expenses increased slightly to $199,010,000
in fiscal 1998 as compared to $198,298,000 in fiscal 1997. This year's operating
expenses were impacted by decreased  variable  expenses,  resulting from reduced
gallon  deliveries  due to the  warmer  weather,  offset by  increased  expenses
associated with acquisitions.

     Vehicle and Tank Lease Expense. Vehicle and tank lease expense increased by
$2,694,000  due to the  utilization of operating  lease  financing to fund fleet
upgrades and replacements.

     Interest  Expense.  Interest expense increased 7.3% over the prior year due
primarily to increased  borrowings for the financing of acquisitions,  partially
offset by a slight decrease in the average interest rate paid by the Partnership
on its variable rate borrowings.

   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 effect 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  was
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 prices  increased as a result of increased cost of product.
Chemical  feedstocks volumes decreased as a result of decreased  availability of
                                       14
<PAGE>

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.

     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 was 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 was primarily the result of the MLP's issuance of  $160,000,000 of
9 3/8% Senior  Secured Notes in April 1996, 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.

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, 1999, 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 $160,000,000 senior secured notes issued in April 1996 ("MLP
Senior Secured Notes").

     The MLP Senior  Secured  Notes,  the  $350,000,000  OLP senior  notes ("New
Senior  Notes") and the amended and  restated OLP credit  facility  ("New Credit
Facility")  agreements  contain  several  financial  tests  which  restrict  the
Partnership's  ability to pay  distributions,  incur  indebtedness and engage in
certain other business  transactions  (See Financing  Activities  below).  These
tests,  in general,  are based on the ratio of the MLP's and OLP's  consolidated
cash flow to fixed charges,  primarily interest expense. Because the Partnership
is more highly  leveraged at the MLP than at the OLP,  the tests  related to the
MLP Senior Secured Notes are more sensitive to fluctuations in consolidated cash
flows and fixed charges.  The most sensitive of the MLP related tests  restricts
the Partnership's  ability to make certain  Restricted  Payments which includes,
but is not limited to, the payment of the Minimum Quarterly Distribution ("MQD")
to unitholders.

     Although the MLP's financial  performance  during fiscal 1998 was adversely
impacted by the El Nino  weather  pattern  and  associated  unseasonably  warmer
temperatures,  the Partnership  believes it will continue to meet the MLP Senior
Secured Notes Restricted Payment test during fiscal 1999, in addition to meeting
the other financial tests in the MLP Senior Secured Notes,  New Senior Notes and
New  Credit  Facility.  However,  if  the  Partnership  were  to  encounter  any
unexpected downturns in business operations,  it could result in the Partnership
not  meeting  certain  financial  tests in future  quarters,  including  but not
limited to, the MLP Senior Secured Notes Restricted  Payment test.  Depending on
the  circumstances,  the  Partnership  would pursue  alternatives  to permit the
continued payment of MQD to its Common Unitholders.  No assurances can be given,
however,  that such  alternatives  will be successful  with respect to any given
quarter.
                                       15
<PAGE>

     On August 1, 1999, the  subordination  period will end and the Subordinated
Units will convert to Common Units,  provided that certain  remaining  financial
tests, which are related to making the MQD on all Common and Subordinated Units,
are satisfied for each of the three  consecutive  four quarter periods ending on
July 31, 1999. The  Partnership  met such  financial  tests for the four quarter
periods  ended July 31, 1997 and July 31,  1998,  respectively.  There can be no
assurance that the  Partnership  will meet the remaining  financial tests in the
subsequent four quarter period and that the  Subordinated  Units will convert to
Common Units on August 1, 1999.

     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 1,800,322 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 $74,337,000
for the year ended July 31,  1998,  compared to  $75,087,000  in the prior year.
This small  decrease was primarily due to the decreased  inventory and increased
accounts  payable  partially  offset by decreased net income as compared to July
31, 1997.  These results were caused  primarily by a decrease in propane prices,
the decrease in volumes held in inventory and reduced retail volume  activity as
compared to those experienced during fiscal 1997.

     Investing  Activities.  The  Partnership  made  total  acquisition  capital
expenditures  of  $12,670,000  (including ($333,000) of working capital)
during  fiscal  1998.  This  amount was funded by $9,839,000 cash payments, 
$2,000,000 in Common Units and $831,000 in other costs and consideration.

     During  the year ended  July 31,  1998,  the  Partnership  made  growth and
maintenance  capital  expenditures  of  $20,629,000  primarily for the following
purposes:  1) additions to  Partnership-owned  customer tanks and cylinders,  2)
relocating  and  upgrading  district  plant  facilities,  3) upgrading  computer
equipment and software and 4) vehicle lease buyouts.  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  Partnership  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 1999, the  Partnership  does not expect a significant  increase in growth
and maintenance capital expenditures as compared to fiscal 1998 levels.

     Financing Activities. On August 4, 1998, the OLP issued $350,000,000 of new
privately  placed unsecured senior notes ("New Senior Notes") and entered into a
$145,000,000 revolving credit facility ("New Credit Facility") with its existing
banks.  The  proceeds of the New Senior  Notes,  which  include five series with
maturities ranging from year 2005 through 2013 at an average fixed interest rate
of 7.16%,  were used to redeem  $200,000,000  of OLP  fixed  rate  Senior  Notes
("Senior Notes") issued in July 1994,  including a 5% call premium, and to repay
outstanding  indebtedness  under the  existing  OLP  revolving  credit  facility
("Credit Facility"). As a result of these financings, the Partnership expects to
realize a decrease in interest  expense  during  fiscal 1999.  See Note E to the
audited financial  statements  included  elsewhere in this report for additional
information regarding the New Senior Notes and the New Credit Facility.

     On July 17,  1998,  all of the  outstanding  common  stock of  Ferrell  was
purchased by a newly  established ESOT. As a result of this change in control in
the  ownership  of Ferrell  and  indirectly  in the  General  Partner,  the MLP,
                                       16
<PAGE>

pursuant to the MLP Senior  Secured  Note  Indenture,  was  required to offer to
purchase  the  outstanding  notes  at a price  of 101% of the  principal  amount
thereof.  See Note E to the audited financial  statements  included elsewhere in
this report for  additional  details  regarding  the offer to  purchase  the MLP
Senior Secured Notes.

     During  the  fiscal  year ended July 31,  1998,  the  Partnership  borrowed
$20,458,000  under its  $255,000,000  Credit Facility to fund expected  seasonal
working  capital needs,  business  acquisitions,  and capital  expenditures.  In
addition,  letters of credit  outstanding,  used primarily to secure obligations
under certain insurance arrangements,  totaled $29,056,000. Giving affect to the
issuance of the New Senior Notes and the New Credit Facility completed August 4,
1998,  the  OLP  would  have  had  $96,944,000  million  available  for  general
corporate,  acquisition  and  working  capital  purposes  under  the New  Credit
Facility at July 31, 1998. 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 Secured Notes. These notes
will be redeemable at the option of the Partnership, in whole or in part, at any
time on or after June 15, 2001. Interest is payable  semi-annually in arrears on
June 15 and December 15.

     To offset the variable rate characteristic of the revolving credit facility
borrowings,  the OLP has entered into interest rate collar agreements,  expiring
between  October 1998 and December 2001 with two 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, 1998, the total notional principal
amount of these agreements was $100,000,000.

     During  the  year  ended  July  31,  1998,   the   Partnership   paid  cash
distributions of $2.00 per limited partner unit. These distributions covered the
period from May 1, 1997 to April 30, 1998. On August 19, 1998,  the  Partnership
declared its fourth-quarter cash distribution of $0.50 per limited partner unit,
which was paid September 14, 1998. The Partnership's  annualized distribution is
presently $2.00 per limited partner unit.

     The MLP Senior  Secured  Notes,  New Senior  Notes and New 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.
The MLP and the Operating  Partnership are in compliance with all  requirements,
tests,  limitations and covenants  related to the MLP Senior Secured Notes,  the
New Senior  Notes and New  Credit  Facility.  The New  Senior  Notes and the New
Credit  Facility  agreements  have similar  restrictive  covenants to the Senior
Notes and Credit Facility agreements that were replaced.

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

     The  market  risk  inherent  in the  Partnership's  market  risk  sensitive
instruments  and positions is the potential loss arising from adverse changes in
commodity prices.  Additionally,  the Partnership seeks to mitigate its interest
rate risk  exposure on variable  rate debt by entering into interest rate collar
agreements.  After giving effect to the refinancing of the debt that occurred in
August 1998, the  Partnership  had redeemed nearly all of the variable rate debt
outstanding  at July 31, 1998.  Moreover,  as of the date of this Form 10-K, the
Partnership  had only  $25,000,000  notional  amount  of  interest  rate  collar
agreements  effectively  outstanding.  Thus,  assuming a material  change in the
variable interest rate to the Partnership, the interest rate risk related to the
variable rate debt and the  associated  interest  rate collar  agreements is not
material to the financial statements.

     The  Partnership's  trading  activities  utilize  certain  types of  energy
commodity forward contracts and swaps traded on the  over-the-counter  financial
markets  and  futures  traded on the New York  Mercantile  Exchange  ("NYMEX" or
"Exchange") to anticipate market movements, manage and hedge its exposure to the
volatility of floating commodity prices and to protect its inventory  positions.
The Partnership's non-trading activities utilize certain over-the-counter energy
commodity  options  to limit  overall  price risk and to hedge its  exposure  to
inventory price movements.
                                       17
<PAGE>

     Market risks  associated  with energy  commodities  are monitored daily for
compliance with the Partnership's  trading policy. This policy includes specific
dollar  exposure  limits,  limits on the term of  various  contracts  and volume
limits for various energy commodities. The Partnership also utilizes loss limits
and daily  review of open  positions  to manage  exposures  to  changing  market
prices.

     Market and Credit Risk. NYMEX traded futures are guaranteed by the Exchange
and have  nominal  credit  risk.  The  Partnership  is  exposed  to credit  risk
associated  with  futures,  swaps  and  option  transactions  in  the  event  of
nonperformance  by  counterparties.   For  each  counterparty,  the  Partnership
analyzes  the  financial   condition   prior  to  entering  into  an  agreement,
establishes  credit limits and monitors the  appropriateness  of each limit. The
change in market value of Exchange-traded  futures contracts requires daily cash
settlement  in  margin   accounts   with   brokers.   Forwards  and  most  other
over-the-counter  instruments  are  generally  settled at the  expiration of the
contract term.

     Sensitivity  Analysis.  The Partnership has prepared a sensitivity analysis
to  estimate  the  exposure to market  risk of its energy  commodity  positions.
Forward  contracts,   futures,  swaps  and  options  were  analyzed  assuming  a
hypothetical  10% change in forward prices for the delivery month for all energy
commodities.  The potential loss in future  earnings from these positions from a
10% adverse  movement in market prices of the underlying  energy  commodities is
estimated at $2,707,000 as of July 31, 1998. Actual results may differ.

     Further  discussion of the risk  management  activities  and accounting for
derivative  commodity  contracts is contained in the  accompanying  notes to the
consolidated financial statements.


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.

     The General  Partner has  appointed  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.

                                       18
<PAGE>

     The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. At July 31, 1998, 3,494 full-time and 831
temporary and part-time individuals were employed by the General Partner.

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 August 31, 1998. Each
of the  persons  named  below is elected to their  respective  office or offices
annually.  Only  Mr.  Ferrell  and Mr.  Sheldon  have  entered  into  employment
agreements with the General Partner. See Employment Agreements.

                                        Director
Name                       Age          Since       Position
James E. Ferrell           59           1984        Chairman of the Board and a
                                                    Director of the General 
                                                    Partner

Danley K. Sheldon          40           1998        Chief Executive Officer, 
                                                    President and a Director 
                                                    of the General Partner

Patrick J. Chesterman      48                       Executive Vice President

James M. Hake              38                       Senior Vice President, 
                                                    Acquisitions

Kenneth G. Atchley         35                       Vice President, Chief 
                                                    Operating Officer-Western
                                                    U.S.

Boyd H. McGathey           39                       Vice President, Chief 
                                                    Operating Officer-Eastern
                                                    U.S.

Kevin T. Kelly             33                       Vice President, Chief 
                                                    Financial Officer and 
                                                    Treasurer

A. Andrew Levison          42           1994        Director of the General
                                                    Partner

Elizabeth T. Solberg       59           1998        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. He served as Chief
Executive Officer until August 1998 and as President until October 1996.

     Danley K. Sheldon--Mr.  Sheldon was named Chief Executive Officer in August
1998 and was named a director of the Company in July 1998. He has been President
of the Company since October 1996 and was Chief Financial Officer of the Company
from  January 1994 until May 1998.  He served as Treasurer  from 1989 until 1998
and joined the Company in 1986.

     Patrick J. Chesterman--Mr. Chesterman was named Executive Vice President in
April 1998 after having served as 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 was named Senior Vice  President,  Acquisitions in
August  1998.  He had been Vice  President,  Acquisitions  of the Company  since
October, 1994. He joined the Company in 1986.

     Kenneth G. Atchley--Mr.  Atchley was named Vice President,  Chief Operating
Officer-Western  U.S. in August 1998. He served as Regional Vice President since
May 1996.  After joining the Company in 1985, he held District  Manager and Area
Manager positions.
                                       19
<PAGE>

     Boyd H.  McGathey--Mr.  McGathey was named Vice President,  Chief Operating
Officer-Eastern  U.S. in August 1998. He served as Regional Vice President since
February 1997.  After joining the Company in 1989, he held District  Manager and
Area Manager positions.

     Kevin T. Kelly--Mr.  Kelly was named Chief Financial  Officer and Treasurer
in May 1998 and August  1998,  respectively.  After  joining the Company in June
1996, he served as Director of Finance and Corporate  Controller until May 1998.
Prior to joining the Company, Mr. Kelly was Manager of Project Acquisitions with
UtiliCorp United, Inc.

     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.

     Elizabeth T. Solberg---Ms. Solberg was elected a director of the Company in
July 1998.  Ms.  Solberg  is  Executive  Vice  President  and Senior  Partner of
Fleishman-Hillard,  Inc.  and has been with the firm since 1976.  She has been a
member of the board of directors  of Kansas City Life  Insurance  Company  since
1997.

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 to 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  benefits  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
1998 fiscal year.
                                       20

<PAGE>

<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>
James E. Ferrell                   1998      465,000      ---            ---             ---                    37,067 (1)
---------------------------------
   Chairman and Chief Executive    1997      480,000      ---            ---             ---                    32,126
   Officer                         1996      480,000      ---            ---             ---                    16,801

Danley K. Sheldon                  1998      225,000       50,000        ---             ---                    20,104 (1)
---------------------------------
   President and Treasurer         1997      218,221      ---           30,000           ---                    15,440
                                   1996      177,500      100,000        ---             ---                    13,972

Patrick J. Chesterman              1998      161,500       25,000        ---             ---                    15,530 (1)
---------------------------------
 Exec. Vice President              1997      132,917      ---           20,000           ---                     9,087


James A. Hake                      1998      120,000       85,000        ---             ---                    15,887 (1)
---------------------------------
   Vice President, Acquisitions    1997      120,000       90,000       15,000           ---                    13,592
                                   1996      120,000       85,000        ---             ---                     9,962

Kevin T. Kelly                     1998       99,014       50,000        ---             ---                     9,376 (1)
---------------------------------
  Vice President, Chief
Financial Officer



</TABLE>


 (1) Includes for Mr. Ferrell  contributions of $20,059 to the employee's 401(k)
     and profit  sharing plans and  compensation  of $17,008  resulting from the
     payment of life insurance premiums.  Includes for Mr. Sheldon contributions
     of $20,104 to the employee's 401(k) and profit sharing plans.  Includes for
     Mr.  Chesterman  contributions of $14,584 to the employee 401(k) and profit
     sharing plans and  compensation  of $946 resulting from the payment of life
     insurance  premiums.  Includes for Mr. Hake contributions of $15,161 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.
     Kelly  contributions of $9,376 to the employee's  401(k) and profit sharing
     plans.


     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 the grant.  The options vest  immediately or over a one to five year
period,  and  expire on the tenth  anniversary  of the date of the  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.

     There were no grants of unit options during the 1998 fiscal year to the CEO
and named executive officers.

     The  following  table  lists  information  on the CEO and  named  executive
officers'  exercised/unexercised unit options for the fiscal year ended July 31,
1998.
                                       21
<PAGE>

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

                                                                     Number of
                                                                    Securities
                                                                    Underlying
                                                                    Unexercised           Value of Unexercised
                                                                   Options/SARs        In-The-Money Options/SARs
                                                                   at FY-End (#)             at 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                  0/305,800
Patrick J. Chesterman              0              0                  0/30,000                   0/32,680
James M. Hake                      0              0                  0/51,000                   0/156,975
Kevin T. Kelly                     0              0                  0/10,000                   0/6,850
</TABLE>

   Employee Stock Ownership Plan

         On July 17,  1998,  pursuant to the Ferrell  Companies,  Inc.  Employee
Stock  Ownership  Plan, a newly formed  employee stock ownership trust purchased
all of the  outstanding  common stock of Ferrell.  The purpose of the ESOP is to
provide employees of the General Partner an opportunity for ownership in Ferrell
and  indirectly  in  the  Partnership.   Ferrell  is  expected  to  make  future
contributions  to the ESOP  which  will cause a portion of the shares of Ferrell
owned by the ESOP to be allocated to employees' accounts over time.

   Incentive Compensation Plan

         On July 17, 1998,  a  nonqualified  stock option plan was  establish by
Ferrell to allow upper middle and senior level  managers of the General  Partner
to  participate  in the equity  growth of Ferrell and,  indirectly in the equity
growth of the  Partnership.  The shares  underlying the stock options are common
shares of Ferrell.  No options  under this plan had been  granted as of July 31,
1998.

   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. With the establishment of
the ESOP in July 1998, the Company decided to suspended future  contributions to
the profit sharing plan beginning with fiscal year 1998. 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
                                       22
<PAGE>

of employees  under the terms of the 401(k)  feature of the Profit  Sharing Plan
based on such members'  deferral  elections  thereunder,  but which could not be
provided  under  the  401(k)  feature  of the  Profit  Sharing  Plan  due to the
application of certain IRS rules and regulations.

   Employment Agreements

     On July 17,  1998,  Mr. James E.  Ferrell,  as Chairman of the Board of the
General  Partner,  entered into a five year employment  agreement with automatic
one year  renewals.  He will  receive an annual  salary of $120,000  and a bonus
based on the annual increase in the equity value of Ferrell.  In addition to his
compensation, Mr. Ferrell participates in the Company's various employee benefit
plans,  with  the  exception  of the  employee  stock  ownership  plan  and  the
nonqualified stock option plan of Ferrell.

     Also on July 17, 1998, Mr. Danley K. Sheldon,  Chief  Executive  Officer of
the General  Partner,  entered  into an eight year  employment  agreement,  with
automatic one year renewals. He will receive an annual salary of $340,000 and an
annual bonus based on the earnings of the Partnership.

     Pursuant to the terms of both employment agreements, in the event of either
a  termination  without  cause or  resignation  for cause,  Mr.  Ferrell and Mr.
Sheldon are  entitled to a cash amount  equal to three times the greater of 125%
of their  current  base  salary or the average  compensation  paid for the prior
three  fiscal  years.  If a change of control of Ferrell or the General  Partner
occurs,  Mr.  Ferrell and Mr.  Sheldon will receive a cash  termination  benefit
equal to three  times the  greater of 125% of their  current  base salary or the
average three year compensation paid.

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

     Mr.  Sheldon's  agreement  also contains a non-compete  provision  for a
period of two years  following his  termination of employment.  The  non-compete
provision  provides  that he shall  not  directly  or  indirectly  own,  manage,
control,   or  engage  in  any  business  with  any  person  whose  business  is
substantially similar to the business of the Company.

   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.


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

     The  following  table sets forth certain  information  as of July 31, 1998,
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.


                                       23
<PAGE>


Ferrellgas Partners, L.P.

<TABLE>
<CAPTION>


Title of Class            Name and Address of Beneficial         Units       (1)  Percentage of
                          Owner                               Beneficially            Class
                                                                 Owned
------------------------  ---------------------------------------------------    ----------------
<S>                       <C>                                          <C>                  <C>
Common Units              ESOT                                     1,210,162 (2)             8.2
                          Goldman, Sachs & Co.                     1,635,717 (3)            11.1
                          The Goldman Sachs Group                  1,635,717 (3)            11.1
                          Danley K. Sheldon                            1,000                   *
                          Patrick J. Chesterman                          200                   *
                          James M. Hake                                  400                   *
                          Kenneth G. Atchley                           2,000                   *
                          Elizabeth T. Solberg                           200                   *
                          A. Andrew Levison                           15,000                   *
                                                                                               *
                          All Directors and Officers as a             18,800                   *
                          Group


Subordinated Units        ESOT                                    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 LaSalle  National  Bank,  the trustee for the Ferrell
Companies,  Inc.  Employee  Stock  Ownership  Trust  ("ESOT") is 125 S.  LaSalle
Street, 17th Floor, Chicago, Illinois, 60603

     Includes 1,210,162 Common Units and 16,593,721  Subordinated Units owned by
Ferrell which is 100% owned by the ESOT.

     (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 1,635,717 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 1998 all filing  requirements  applicable  to its  officers,
directors, and greater than 10% beneficial owners were met in a timely manner.


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

                                       24
<PAGE>

     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 $129,808,000 and $128,033,000 for the years
ended July 31, 1998 and 1997,  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  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 years ended July 31, 1998 and 1997,  the  Partnership,  as  Ferrell's
agent,  performed  the following  services:  a) purchased  1,089,929  barrels of
propane  during 1997 b) marketed and sold 469,820 and 619,929  barrels,  in 1998
and 1997, respectively,  and c) entered into certain hedging arrangements during
1997. The Partnership  charged  Ferrell  $66,467 and $73,078,  in 1998 and 1997,
respectively,  for its direct and indirect  expenses.  Of the 469,820 barrels of
propane sold in fiscal year 1998,  all of these barrels were sold to and used by
the Partnership at the applicable market prices (an aggregate of $7,405,200). Of
the 619,929  barrels of propane sold in fiscal year 1997,  534,929  barrels were
sold  to and  used  by the  Partnership  at the  applicable  market  prices  (an
aggregate of $13,128,765). In addition, during fiscal 1998, the Partnership sold
to  Ferrell  certain  physical  and  derivative  crude oil  commodity  contracts
totaling 4,120,000  aggregate barrels at a price of $2,548,927.  The Partnership
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
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.


                                       25
<PAGE>


     (b) Reports on Form 8-K.

The Partnership filed one Form 8-K during the quarter ended July 31, 1998.

          Form 8-K dated July 31, 1998,  reporting  that on July 17,  1998,  the
          Ferrell Companies, Inc. Employee Stock Ownership Trust acquired all of
          the  outstanding  capital stock of Ferrell  Companies,  Inc., a Kansas
          corporation,  from trusts  affiliated  with Mr. James E. Ferrell.  The
          ESOT purchased the stock of Ferrell using funds provided  primarily by
          a private  placement of $160,000,000 of debt and $40,000,000 of seller
          financed  notes.  By  acquiring  such  stock,   the  ESOT  became  the
          beneficial  owner through  Ferrell of all of the  outstanding  capital
          stock of Ferrellgas,  Inc., a Delaware corporation that is the general
          partner  of both  Ferrellgas  Partners,  L.P.  and  the  Partnership's
          operating subsidiary,  Ferrellgas, L.P. The ESOT's indirect control of
          the General  Partner gives the ESOT control of the Partnership and the
          Operating Partnership.





                                       26
<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/ Danley K. Sheldon
                                           Danley K. Sheldon
                                           President and Chief Executive Officer
                                           


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

<TABLE>
<CAPTION>

   Signature                                   Title                                   Date



<S>                                                       <C>                          <C>
   /s/  Danley K. Sheldon               President, Chief Executive Officer            10/29/98
  Danley K. Sheldon                     and Director (Principal Executive
                                        Officer)



/s/  James E. Ferrell                   Chairman of the Board                         10/29/98
  James E. Ferrell



/s/ A. Andrew  Levison                  Director                                      10/29/98
  A. Andrew Levison



/s/ Elizabeth T. Solberg                Director                                      10/29/98
  Elizabeth T. Solberg



/s/ Kevin T. Kelly                       Vice President and Chief                      10/29/98
  Kevin T. Kelly                         Financial Officer (Principal
                                         Financial and Accounting Officer)

</TABLE>

<PAGE>


                                   SIGNATURES


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


                                           FERRELLGAS PARTNERS FINANCE CORP.



                                            By     /s/ Danley K. Sheldon
                                                   Danley K. Sheldon
                                                   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:

<TABLE>
<CAPTION>

                  Signature                                   Title                                   Date



<S>                                                   <C>                                            <C>
   /s/ Danley K. Sheldon                             Chairman of the Board,                        10/29/98
  Danley K. Sheldon                                  Chief Executive Officer and
                                                     Sole Director (Principal
                                                     Executive Officer)






/s/ Kevin T. Kelly                                   Chief Financial Officer                       10/29/98
  Kevin T. Kelly                                     (Principal Financial and
                                                     Accounting Officer)


</TABLE>
<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         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.

             4.4         Ferrellgas,  L.P., Note Purchase  Agreement Dated as of
                         July 1,  1998  Re:  $109,000,000  6.99%  Senior  Notes,
                         Series A, due August 1, 2005  $37,000,000  7.08% Senior
                         Notes,  Series B, due August 1, 2006 $52,000,000  7.12%
                         Senior Notes,  Series C, due August 1, 2008 $82,000,000
                         7.24%  Senior  Notes,  Series  D, due  August  1,  2010
                         $70,000,000 7.42% Senior Notes, Series E, due August 1,
                         2013

    (9)      10.1        Agreement dated as of April 1, 1994, between BP 
                         Exploration & Oil, Inc. and Ferrellgas,
                         L.P. dba Ferrell North America

    (10)#    10.2        Ferrell Companies, Inc. Supplemental Savings Plan.

    (11)#    10.3        Ferrellgas, Inc. Unit Option Plan.

    (12)     10.4        Contribution,Conveyance and Assumption Agreement dated 
                         as of November 1, 1994, among
                         the Partnership, the Operating Partnership and 
                         Ferrellgas, Inc.

    (13)     10.5        First Amendment to Contribution, Conveyance and
                         Assumption Agreement between
                         Ferrellgas, the Partnership and the Operating 
                         Partnership.

    (14)     10.6        Second Amendment to Contribution, Conveyance and 
                         Assumption Agreement between
                         Ferrellgas, the Partnership and the Operating 
                         Partnership.

                                      E-1
<PAGE>

    (15)     10.7        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)     10.8        Amended and Restated Agreement of Limited Partnership 
                         of Ferrellgas, L.P. dated as of
                         April 23, 1996.

    (17)     10.9        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)     10.10      First 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.

             10.11       Second Amended and Restated  Credit  Agreement dated as
                         of July 2, 1998, among  Ferrellgas,  L.P.,  Ferrellgas,
                         Inc.,  Bank  of  America  National  Trust  and  Savings
                         Association,  as  administrative  agent,  and the other
                         financial institutions party thereto.

             10.12#      Ferrell Companies, Inc. 1998 Incentive Compensation 
                         Plan

             10.13#      Employment agreement between James E. Ferrell and 
                         Ferrellgas, Inc. dated July 31, 1998

             10.14#      Employment agreement between Danley K. Sheldon and 
                         Ferrellgas, Inc. dated July 31, 1998

             21.1        List of subsidiaries.

             23.1        Consent of Deloitte & Touche, LLP Certified Public
                         Accountants.

             27.1        Financial Data Schedule - Ferrellgas Partners, L.P.
                         (filed in electronic format only).

             27.2        Financial Data Schedule - Ferrellgas Partners Finance 
                         Corp. (filed in electronic format only)


     #          Management contracts or compensatory plans.




        (1)     Incorporated  by  reference  to the  same  numbered  Exhibit  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.
                                      E-2
  


<PAGE>

      (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 onForm 10-K filed on October 17, 1995.

       (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.


                                      E-3
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                                               Page

Ferrellgas Partners, L.P. and Subsidiaries
<S>                                                                                                              <C>
         Independent Auditors' Report..........................................................................F-2
         Consolidated Balance Sheets - July 31, 1998 and 1997..................................................F-3
         Consolidated Statements of Earnings - Years ended July 31, 1998, 1997 and 1996........................F-4
         Consolidated Statements of Partners' Capital - Years ended
              July 31, 1998, 1997 and 1996.....................................................................F-5
         Consolidated Statements of Cash Flows - Year ended July 31, 1998, 1997 and 1996.......................F-6
         Notes to Consolidated Financial Statements............................................................F-7


Ferrellgas Partners Finance Corp.
         Independent Auditors' Report.........................................................................F-19
         Balance Sheets - July 31, 1998 and 1997..............................................................F-20
         Statements of Earnings - Year ended July 31, 1998, 1997 and
              From the Date of inception to July 31, 1996.....................................................F-21
         Statements of Stockholder's Equity - Year ended July 31, 1998, 1997 and
              From the Date of Inception to July 31, 1996.....................................................F-22
         Statements of Cash Flows - Year ended July 31, 1998, 1997 and
              From the Date of Inception to July 31,1996......................................................F-23
         Notes to Financial Statements........................................................................F-24



</TABLE>
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

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

We have  audited the  accompanying  consolidated  balance  sheets of  Ferrellgas
Partners,  L.P. and  subsidiaries  as of July 31, 1998 and 1997, and the related
consolidated  statements of earnings,  partners'  capital and cash flows for the
years ended July 31, 1998,  1997 and 1996.  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, 1998 and 1997, and the results of their  operations
and their  cash  flows for the years  ended  July 31,  1998,  1997 and 1996,  in
conformity with generally accepted accounting principles.






DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1998










                                      F-2







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

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except unit data)

<TABLE>
<CAPTION>

                                                                    July 31,             July 31,
ASSETS                                                                1998                 1997
----------------------------------------------------------       ----------------    -----------------
                                                                                      
Current Assets:
<S>                                                                     <C>                  <C>     
  Cash and cash equivalents                                             $ 16,961             $ 14,788
  Accounts and notes receivable (net of
    allowance for doubtful accounts of $1,381 and
    $1,234 in 1998 and 1997, respectively)                                50,097               61,835
  Inventories                                                             34,727               43,112
  Prepaid expenses and other current assets                                8,706                8,906
                                                                 ----------------    -----------------
    Total Current Assets                                                 110,491              128,641

Property, plant and equipment, net                                       395,855              405,736
Intangible assets, net                                                   105,655              112,058
Other assets, net                                                          9,222               10,641
                                                                 ----------------    -----------------
    Total Assets                                                        $621,223             $657,076
                                                                 ================    =================



LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------------
Current Liabilities:
  Accounts payable                                                     $  48,017            $  39,322
  Other current liabilities                                               41,767               49,422
  Short-term borrowings                                                   21,150               21,786
                                                                 ----------------    -----------------
    Total Current Liabilities                                            110,934              110,530

Long-term debt                                                           507,222              487,334
Other liabilities                                                         12,640               12,354
Contingencies and commitments
Minority interest                                                          1,510                2,075

Partners' Capital:
  Common unitholders (14,699,678 and 14,612,580 units
    outstanding in 1998 and 1997, respectively)                           27,985               52,863
  Subordinated unitholders (16,593,721 units outstanding
    in 1998 and 1997, respectively)                                       19,908                50,337
  General partner                                                        (58,976)             (58,417)
                                                                 ----------------    -----------------
    Total Partners' Capital                                              (11,083)              44,783
                                                                 ----------------    -----------------
    Total Liabilities and Partners' Capital                             $621,223             $657,076
                                                                 ================    =================
</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,
                                                     -------------------------------------------------------
                                                           1998               1997               1996
                                                     -----------------  -----------------  -----------------

Revenues:
<S>                                                          <C>                <C>                <C>     
  Gas liquids and related product sales                      $622,423           $759,941           $612,593
  Other                                                        44,930             44,357             41,047
                                                     -----------------  -----------------  -----------------
    Total revenues                                            667,353            804,298            653,640

Cost of product sold (exclusive of
  depreciation, shown separately below)                       342,600            470,128            356,314
                                                     -----------------  -----------------  -----------------

Gross profit                                                  324,753            334,170            297,326

Operating expense                                             199,010            198,298            179,462
Depreciation and amortization expense                          45,009             43,789             37,024
Employee stock ownership plan compensation charge                 350                  -                  -
General and administrative expense                             17,497             15,831             13,221
Vehicle and tank lease expense                                 10,127              7,433              5,113
                                                     -----------------  -----------------  -----------------

Operating income                                               52,760             68,819             62,506

Interest expense                                              (49,129)           (45,769)           (37,983)
Interest income                                                 1,695              2,002              1,666
Loss on disposal of assets                                       (174)            (1,439)            (1,586)
                                                     -----------------  -----------------  -----------------
Earnings before income taxes,
  minority interest and extraordinary loss                      5,152             23,613             24,603

Minority interest                                                 209                395                291
                                                     -----------------  -----------------  -----------------

Earnings before extraordinary loss                              4,943             23,218             24,312
 
Extraordinary loss on early extinguishment of debt,
   net of minority interest of $10                                  -                  -                965
                                                     -----------------  -----------------  -----------------
 
Net earnings                                                    4,943             23,218             23,347

General partner's interest in net earnings                         49                232                233
                                                     -----------------  -----------------  -----------------
Limited partners' interest in net earnings                    $ 4,894           $ 22,986           $ 23,114
                                                     =================  =================  =================
 
Earnings per limited partner unit:
Earnings before extraordinary loss                            $  0.16           $   0.74           $   0.77
Extraordinary loss                                                                                     0.03
                                                     -----------------  -----------------  -----------------
Net earnings                                                  $  0.16           $   0.74           $   0.74
                                                     =================  =================  =================

Earnings per limited partner unit-assuming dilution:
Earnings before extraordinary loss                            $  0.16           $   0.73           $   0.77
Extraordinary loss                                                                                     0.03
                                                     -----------------  -----------------  -----------------
Net earnings                                                  $  0.16           $   0.73           $   0.74
                                                     =================  =================  =================
</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>     
August 1, 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

  Common units issued in
     connection with acquisitions          87.1                 -      2,000                -           20           2,020

   Contribution from general
     partner in connnection with
     ESOP compensation charge                 -                 -         23              320            4             347

  Quarterly distributions                     -                 -    (29,356)         (33,188)        (632)        (63,176)

  Net earnings                                -                 -      2,455            2,439           49           4,943

                                     ------------  ----------------  ----------- ---------------- ------------ ---------------
July 31, 1998                          14,699.7          16,593.7    $27,985          $19,908    $ (58,976)      $ (11,083)
                                     ============  ================  =========== ================ ============ ===============


</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,
                                                              ----------------------------------------------------
                                                                   1998              1997              1996
                                                              ----------------  ----------------  ----------------

Cash Flows From Operating Activities:
<S>                                                                    <C>              <C>               <C>    
 Net earnings                                                          $4,943           $23,218           $23,347
 Reconciliation of net earnings  to net
  cash from operating activities:
  Depreciation and amortization                                        45,009            43,789            37,024
  Employee stock ownership plan compensation charge                       350
  Minority interest                                                       209               395               291
  Extraordinary loss                                                        -                 -               965
  Other                                                                 5,236             6,056             4,478
  Changes in operating assets and liabilities net of
  effects from business acquisitions:
    Accounts and notes receivable                                       9,313             6,685            (3,988)
    Inventories                                                         8,052              (906)            7,612
    Prepaid expenses and other current assets                             200            (3,221)              765
    Accounts payable                                                    8,695            (9,078)          (10,576)
    Accrued interest expense                                             (157)           (1,171)            1,270
    Other current liabilities                                          (7,799)            9,368             3,649
    Other liabilities                                                     286               (48)              259
                                                              ----------------  ----------------  ----------------
      Net cash provided by operating activities                        74,337            75,087            65,096
                                                              ----------------  ----------------  ----------------

Cash Flows From Investing Activities:
 Business acquisitions                                                 (9,839)          (36,114)           (8,116)
 Capital expenditures                                                 (20,629)          (16,192)          (13,011)
 Cash from acquired company                                                 -                 -             9,620
 Other                                                                  4,539             3,068            (1,587)
                                                              ----------------  ----------------  ----------------
      Net cash used in investing activities                           (25,929)          (49,238)          (13,094)
                                                              ----------------  ----------------  ----------------

Cash Flows From Financing Activities:
 Distributions                                                        (63,176)          (63,044)          (62,863)
 Additions to long-term debt                                           21,094            45,463           222,268
 Reductions of long-term debt                                          (2,759)           (2,640)         (234,082)
 Net additions (reductions) to short-term borrowings                     (636)           (3,734)            5,520
 Minority interest activity                                              (798)             (818)            1,002
 Other                                                                     40               (58)               46
                                                              ----------------  ----------------  ----------------
      Net cash used in financing activities                           (46,235)          (24,831)          (68,109)
                                                              ----------------  ----------------  ----------------

Increase (decrease) in cash and cash equivalents                        2,173             1,018           (16,107)
Cash and cash equivalents - beginning of period                        14,788            13,770            29,877
                                                              ----------------  ----------------  ----------------
Cash and cash equivalents - end of period                             $16,961           $14,788           $13,770
                                                              ----------------  ----------------  ----------------

Cash paid for interest                                                $46,546           $44,516           $34,994
                                                              ================  ================  ================
</TABLE>

                 See notes to consolidated financial statements

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

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").  Ferrell has
    a 56% limited partnership interest in Ferrellgas Partners,  L.P. 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.

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


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.


                                      F-7
<PAGE>


    (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.

    (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 the  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  $123,531,000  and $109,211,000 as of July 31, 1998 and 1997,
    respectively.  The Partnership, using its best estimates based on reasonable
    and  supportable  assumptions  and  projections,  reviews for  impairment of
    long-lived assets and certain  identifiable  intangibles to be held and used
    whenever  events or  changes in  circumstances  indicate  that the  carrying
    amount of its assets might not be recoverable and has concluded no financial
    statement adjustment is required.

    (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.

     (8) Revenue Recognition:  Sales are generally recognized by the Partnership
when product is delivered or shipped to its customers.

    (9) 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.

    (10) Net earnings 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  Statement  of  Financial
    Accounting  Standard ("SFAS") No. 128, "Earnings Per Share". The only effect
    of the  application of SFAS No. 128 on the earnings per share was a decrease
    of $0.01 per unit in fiscal year 1997 to net  earnings  per limited  partner
    unit.  This  decrease  was due to  including  the  effect  of  assuming  the
    conversion  of 143,000  Unit  Options  in the  denominator  of the  dilutive
    per-unit computation.


                                      F-8
<PAGE>


     (11) 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 SFAS No. 123,  "Accounting  for
Stock-Based Compensation."

     (12)  Adoption  of  new  accounting  standards:   The  Financial  Standards
Accounting  Board recently issued the following new accounting  standards:  SFAS
No.  130  "Reporting  Comprehensive  Income",  SFAS No. 131  "Disclosures  About
Segments of an Enterprise  and Related  Information",  SFAS No. 132  "Employers'
Disclosures about Pensions and Other  Postretirement  Benefits" and SFAS No. 133
"Accounting for Derivative  Instruments and Hedging Activities".  SFAS Nos. 130,
131 and 132 are  required to be adopted by the  Partnership  for the fiscal year
ended July 31,  1999.  The adoption of SFAS Nos. 130 and 132 are not expected to
have a material  effect on the  Partnership's  financial  position or results of
operations. The Partnership is currently assessing the impact of SFAS No. 131 on
disclosure  requirements  for the next  year.  SFAS No.  133 is  required  to be
adopted  by the  Partnership  for the  fiscal  year  ended  July 31,  2000.  The
Partnership  is currently  assessing its impact on the  Partnership's  financial
position and results of operations.


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 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.  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.



                                       F-9
<PAGE>

<TABLE>
<CAPTION>

D.  Supplemental Balance Sheet Information

    Inventories consist of:

<S>                                                                                       <C>              <C> 
        (in thousands)                                                                    1998             1997
                                                                                      --------------   --------------
        Liquefied propane gas and related products                                          $26,316          $35,351
        Appliances, parts and supplies                                                        8,411            7,761
                                                                                      --------------   --------------
                                                                                            $34,727          $43,112
                                                                                      ==============   ==============
</TABLE>

        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 the date of delivery.  All fixed price  contracts  have
        terms of less than one year.  As of July 31,  1998,  in  addition to the
        inventory on hand,  the  Partnership  had  committed to take delivery of
        approximately  20,812,000  gallons  at a fixed  price for its  estimated
        future retail propane sales.

<TABLE>
<CAPTION>

    Property, plant and equipment consist of:

<S>                                                                                        <C>             <C> 
        (in thousands)                                                                     1998            1997
                                                                                       -------------   --------------
        Land and improvements                                                               $30,368          $29,849
        Buildings and improvements                                                           40,557           39,907
        Vehicles                                                                             50,810           54,879
        Furniture and fixtures                                                               22,397           23,985
        Bulk equipment and district facilities                                               66,150           59,876
        Tanks and customer equipment                                                        404,532          402,608
        Other                                                                                 5,969            3,870
                                                                                       -------------   --------------
                                                                                            620,783          614,974
        Less:  accumulated depreciation                                                     224,928          209,238
                                                                                       -------------   --------------
                                                                                           $395,855         $405,736
                                                                                      ==============    =============
</TABLE>
        Depreciation expense totaled $30,034,000,  $29,960,000, and $25,101,000,
for the years ended July 31, 1998, 1997, and 1996, respectively.

<TABLE>
<CAPTION>

    Other current liabilities consist of:

<S>                                                                                        <C>              <C> 
        (in thousands)                                                                     1998             1997
                                                                                       --------------   -------------
        Accrued insurance                                                                     $4,563          $7,327
        Accrued interest                                                                      12,914          13,071
        Accrued payroll                                                                        8,635           8,161
        Other                                                                                 15,655          20,863
                                                                                       --------------   -------------
                                                                                             $41,767         $49,422
                                                                                       ==============   =============



</TABLE>
                                      F-10
<PAGE>
<TABLE>
<CAPTION>


E.   Long-Term Debt

     Long-term debt consists of:

<S>                                                                                      <C>              <C> 
      (in thousands)                                                                     1998             1997
                                                                                     -------------     ------------
      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, 8.5% and 6.25%, due 2001 (3)                                            50,000           50,000
        Revolving credit loans, 8.5% and 6.25%, due 1999 (3)                               85,850           64,614

      Notes payable, 6.7% and 6.4% weighted average interest rates,
        respectively, due 1998 to 2007 (4)                                                 13,558           14,567
                                                                                     -------------     ------------
                                                                                          509,408          489,181
      Less:  current portion                                                                2,186            1,847
                                                                                     -------------     ------------
                                                                                         $507,222         $487,334
                                                                                     =============     ============
</TABLE>


      (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 were
             redeemed  at the  option  of the OLP on  August  5,  1998 with a 5%
             premium payable concurrent with the issuance of $350,000,000 of new
             unsecured OLP Senior Notes ("New Senior Notes").

     (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 Senior  Secured  Notes bear  interest  from the date of  issuance,
payable semi-annually in arrears on June 15 and December 15 of each year. Due to
a change of control in the ownership of the General  Partner on July 17, 1998 as
a result  of the ESOP  transaction  described  in Note A, the MLP was  required,
pursuant  to the MLP fixed  rate  Senior  Secured  Note  Indenture,  to offer to
purchase the  outstanding MLP fixed rate Senior Secured Notes at a price of 101%
of the principal amount thereof plus accrued and unpaid  interest.  The offer to
purchase  was made on July 27,  1998  and  expired  August  26,  1998.  Upon the
expiration  of the offer,  the MLP accepted  for  purchase  $65,000 of the notes
which were all of the notes tendered pursuant to the offer. The MLP assigned its
right to purchase the notes to a third party.

     (3) At July 31, 1998,  the  unsecured  $255,000,000  Credit  Facility  (the
"Credit Facility") consisted 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 outstanding balances to zero for thirty consecutive days. On August
4, 1998,  outstanding  borrowings  under the OLP Credit Facility were refinanced
with the issuance of New Senior Notes and the refinancing  with existing lenders
of the existing OLP Credit  Facility with a new  $145,000,000  revolving  credit
                                      F-11
<PAGE>

facility ("New Credit Facility").  All borrowings under the Credit Facility 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  rate at July 31,  1998 and 1997 was  8.5% on both  dates.  To  offset  the
variable rate characteristic of the Credit Facility and the New Credit Facility,
the OLP entered into interest rate collar  agreements,  expiring between October
1998 and December 2001,  with two major banks limiting the floating rate portion
of  LIBOR-based  loan interest  rates on a notional  amount of  $100,000,000  to
between 4.9% and 6.5%.

     (4)  The  notes  payable  are  secured  by  approximately   $3,729,000  and
$4,542,000 of property and equipment at July 31, 1998 and 1997, respectively.

     On July 1, 1998, the OLP entered into an agreement for the issuance of $350
     million of privately  placed  fixed rate senior notes ("New Senior  Notes")
     funded August 4, 1998 in five series with maturities ranging from year 2005
     through  2013.  The  proceeds of the  offering  were used to redeem the OLP
     fixed  rate  Senior  Notes  issued in June 1994,  and to repay  outstanding
     indebtedness under the Credit Facility.

     The OLP also  entered  into an  agreement  on July 2, 1998 with the lenders
     under the  existing  Credit  Facility for a New Credit  Facility  effective
     August 4, 1998.  The New Credit  Facility  provides  for (i) a  $40,000,000
     unsecured  working  capital  facility  subject  to an annual  reduction  in
     borrowings  to  zero  for  thirty  consecutive  days,  (ii)  a  $50,000,000
     unsecured  working  capital and  general  corporate  facility,  including a
     letter  of  credit  facility,  and (iii) a  $55,000,000  unsecured  general
     corporate and acquisition facility. The New Credit Facility matures July 2,
     2001.

     At July 31, 1998 and 1997,  $21,150,000 and $21,786,000,  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 $29,056,000 and $24,102,000,
     respectively.

     The  Senior  Secured  Notes,  the  Senior  Notes  and the  Credit  Facility
     Agreement contain various restrictive  covenants  applicable to the MLP and
     OLP and its  subsidiaries,  the most  restrictive  relating  to  additional
     indebtedness,  sale  and  disposition  of  assets,  and  transactions  with
     affiliates.  In addition,  the  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
     Partnership  fails to meet certain  coverage  tests.  The Partnership is in
     compliance with all requirements,  tests, limitations and covenants related
     to the Senior Secured Note Indenture,  the Senior Note Indenture and Credit
     Facility  agreement.  The New  Senior  Notes  and the New  Credit  Facility
     agreements have similar restrictive  covenants to the Senior Note Indenture
     and Credit Facility agreement that were replaced.

     Taking  into  account  the  effects of the New Senior  Notes and New Credit
     Facility,  the annual principal  payments on long-term debt for each of the
     next  five  fiscal  years  are  $2,186,000  in  1999,  $2,269,000  in 2000,
     $3,145,000 in 2001, $1,037,000 in 2002, and $1,114,000 in 2003.

     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-12
<PAGE>


F.   Partners' Capital

     Partners'  capital consists of 14,699,678  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.

     On August 1, 1999, the  Subordination  Period will end and the Subordinated
     Units  will  convert  to Common  Units,  provided  that  certain  remaining
     financial  tests,  which  are  related  to  making  the  Minimum  Quarterly
     Distribution on all Units, are satisfied for each of the three  consecutive
     four  quarter  periods  ending on July 31, 1999.  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.


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   $129,808,000,
     $128,033,000  and  $109,637,000 for the years ended July 31, 1998, 1997 and
     1996, respectively,  include compensation and benefits paid to officers and
     employees of the General Partner, and general and administrative costs.

     Prior to the ESOP  transaction  completed  on July 17, 1998,  Ferrell,  the
     parent of the  General  Partner  and its other  wholly-owned  subsidiaries,
     engaged in various  investment  activities  including,  but not limited to,
     commodity investments and the trading thereof. The Partnership from time to
     time acted as an agent on behalf of Ferrell to purchase and market  natural
     gas liquids and enter into  certain  trading  activities.  The  Partnership
     charged all direct and indirect  expenses incurred in performing this agent
     role to  Ferrell.  During  the years  ended  July 31,  1998 and  1997,  the
     Partnership,  as Ferrell's  agent,  performed  the following  services:  a)
     purchased  1,089,929  barrels of propane  during 1997 b) marketed  and sold
     469,820 and 619,929 barrels, in 1998 and 1997, respectively, and c) entered
     into certain  hedging  arrangements  during 1997. The  Partnership  charged
     Ferrell $66,467 and $73,078, in 1998 and 1997, respectively, for its direct
     and  indirect  expenses.  Of the 469,820  barrels of propane sold in fiscal
     year 1998, all of these barrels were sold to and used by the Partnership at
     the applicable  market prices (an aggregate of $7,405,200).  Of the 619,929
                                      F-13
<PAGE>

     barrels of propane sold in fiscal year 1997,  534,929  barrels were sold to
     and used by the  Partnership at the applicable  market prices (an aggregate
     of $13,128,765).  In addition,  during fiscal 1998, the Partnership sold to
     Ferrell  certain  physical and  derivative  crude oil  commodity  contracts
     totaling 4,120,000  aggregate barrels at a price of $2,548,927.  Management
     believes these transactions were under terms that were no less favorable to
     the Partnership  than those arranged with other parties.  Subsequent to the
     close  of the  ESOP  transaction,  Ferrell  divested  of its  wholly  owned
     subsidiaries that were engaged in these commodity and trading activities.

     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
     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 2017.  Rental  expense  under these leases  totaled
     $17,095,000,  $13,169,000,  and  $12,054,000,  for the years ended July 31,
     1998,  1997 and 1996,  respectively.  Future minimum lease  commitments for
     such leases are  $14,949,000 in 1999,  $13,128,000 in 2000,  $10,940,000 in
     2001, $7,749,000 in 2002, $3,014,000 in 2003 and $533,000 thereafter.


I.   Employee Benefits

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

     On July 17, 1998, Ferrell formed an Employee Stock Ownership Plan ("ESOP").
     Ferrell is expected to make future  contributions to the Ferrell Companies,
     Inc.  Employee Stock Ownership Trust ("ESOT") which will cause a portion of
     the  shares of  Ferrell  owned by the ESOT to be  allocated  to  employees'
     accounts over time. The  allocation of Ferrell shares to employee  accounts
     will  cause a  non-cash  compensation  charge to be  incurred  by  Ferrell,
     equivalent to the fair value of such shares  allocated.  The Partnership is
     not obligated to fund or make contributions to the ESOT. Nevertheless,  due
     to the benefit  received by the Company's  employees from  participating in
     the  ESOP,  the  non-cash  compensation  charge  is  also  recorded  by the
     Partnership.  The non-cash  compensation charge recorded by the Partnership
     for fiscal year 1998 was $350,000.

     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 were made to the plan at the discretion
     of Ferrell's Board of Directors. With the establishment of the ESOP in July
     1998,  the Company  decided to suspend future  contributions  to the profit
     sharing plan  beginning  with fiscal year 1998.  The profit  sharing  plan,
                                      F-14
<PAGE>

     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.
     These matching  contributions  are not affected by the establishment of the
     ESOP.   Contributions   for  the  years  ended  July  31,  1997  and  1996,
     respectively,  were  $3,000,000  and  $1,160,000  under the profit  sharing
     provision  and  for  the  years  ended  July  31,  1998,   1997  and  1996,
     respectively,  were $1,693,000,  $1,542,000 and $1,388,000 under the 401(k)
     provision.


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 of the MLP's  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 the grant. The
     options vest  immediately or over a one to five year period,  and expire on
     the tenth  anniversary  of the date of the grant.  Upon  conversion  of the
     Subordinated  Units  held  by  the  General  Partner  and  its  affiliates,
     outstanding  Subordinated  Unit  Options  granted will convert to the MLP's
     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  at the  grant  date for  awards  under  these  plans,
     consistent  with  the  methodology  prescribed  under  SFAS  No.  123,  the
     Partnership's  net income and earnings per share would have been reduced by
     approximately $40,000, $29,000, and $7,000, or less than $0.01 per unit for
     the 1998, 1997 and 1996 fiscal years,  respectively.  The fair value of the
     options  granted during the 1998, 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 for 1998, 1997 and 1996,
     b) average Common Unit price volatility of 16.2%,  16.9% and 16.9% was used
     as an estimate of  Subordinated  Unit  volatility for 1998,  1997 and 1996,
     respectively,  c) the risk-free interest rate used was 5.7%, 5.9% and 5.9%,
     for  1998,  1997 and 1996,  respectively  and d) the  expected  life of the
     option is 5 years for 1998, 1997 and 1996.
<TABLE>
<CAPTION>

                                                                    Number      Weighted Average       Weighted
                                                                      of         Exercise Price      Average Fair
                                                                     Units                              Value
                                                                  ------------ -------------------- ---------------
                                                                  ------------ -------------------- ---------------
<S>                        <C>                                       <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
         Granted                                                    118,500           19.47              0.47
         Forfeited                                                 (64,100)           19.16
                                                                  ------------ -------------------- ---------------
         Outstanding, July 31, 1998                                 782,000
                                                                  ------------ -------------------- ---------------
         Options exercisable, July 31, 1998                            0
                                                                  ------------ -------------------- ---------------

                                                                        Options Outstanding at July 31, 1998
                                                                  -------------------------------------------------
         Range of option prices at end of year                                     $16.80-$21.67
         Weighted average remaining contractual life                                 7.8 years

</TABLE>

                                      F-15
<PAGE>

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

     The carrying  amount of current  financial  instruments  approximates  fair
     value because of the short maturity of the instruments.  The estimated fair
     value of the Partnership's long-term debt was $524,612,000 and $507,134,000
     as of July 31,  1998 and 1997,  respectively.  The fair value is  estimated
     based on quoted market prices.

     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, 1998 and 1997, the total notional
     principal amount of these  agreements was  $100,000,000  and  $125,000,000,
     respectively,  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,
     1998  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,  Futures and Swaps Commodity Contracts. The Partnership is a party
     to certain forward,  futures and swaps contracts for trading purposes.  Net
     gains from trading activities were $7,464,000,  $5,476,000, $7,323,000, for
     the years ended July 31, 1998, 1997, and 1996, 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, Futures and Swaps)
                    -------------------------------------------    ---------------------------------------------------
                            1998                    1997                     1998                        1997
                    --------------------    -------------------    -----------------------     -----------------------
                     Asset      Liab.        Asset     Liab.         Asset       Liab.           Asset       Liab.
                    --------- ----------    -------- ----------    ----------- -----------     ----------- -----------

   Volume
<S>                  <C>      <C>            <C>      <C>            <C>        <C>              <C>        <C>      
   (gallons)         3,927    (13,444)       14,406   (13,189)       568,949    (628,573)        165,739    (187,744)

   Price ((cent)/gal)   31      49-18         38-35     50-35         35-23       35-24            40-32       43-33

   Maturity          8/98-      8/98-          8/97-     9/97-       8/98-         8/98-            8/97-       8/97-
   Dates             12/98      2/99           3/98      2/98        12/99        12/99             3/98        7/98

   Contract
   Amounts ($)       8,295    (19,757)       10,193   (13,164)       181,541    (201,497)        64,859     (75,578)

   Fair Value ($)    7,901    (19,538)       10,244   (13,071)       186,696    (203,162)        62,925     (73,217)

   Unrealized
   gain (loss) ($)   (394)       219           51        93           5,155      (1,665)         (1,934)      2,361
</TABLE>
                                      F-16
<PAGE>

    Risks related to these  contracts  arise from the possible  inability of the
    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.


L.  Business Combinations

     During the year ended July 31, 1998, the Partnership  made  acquisitions of
     businesses valued at $12,670,000. This amount was funded by $9,839,000 cash
     payments,  $2,000,000  in common  units and noncash  transactions  totaling
     $831,000 in other  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 pro forma effect of these
     transactions was not material to the results of operations.

     During the year ended July 31,  1997,  the  Company  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.
     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 pro forma effect of these  transactions was not material
     to the results of operations.

     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
                                      F-17
<PAGE>


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-18
<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,
1998, and 1997, and the related statement of earnings,  stockholder's equity and
cash flows for the years ended July 31, 1998, 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, 1998 and 1997,  and the results of its operations and its cash flows for the
years ended July 31, 1998, 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, 1998


                                      F-19
<PAGE>
                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                               July 31,             July 31,
      ASSETS                                                                     1998                 1997
      -----------------------------------------------------------------    -----------------    -----------------
                                                                                                 
<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                                                        548                  327

      Accumulated deficit                                                              (548)                (327)
                                                                           -----------------    -----------------
      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-20
<PAGE>
                       FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly owned subsidiary of Ferrellgas Partners, L.P.)

                             STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>




                                                        For the               For the                  From
                                                       year ended            year ended            inception to
                                                     July 31, 1998         July 31, 1997           July 31, 1996
                                                    -----------------     -----------------     --------------------

Revenues                                                       $  -                  $  -                     $  -

<S>                                                              <C>                   <C>                       <C>
General and administrative expense                               221                   285                       42
                                                    -----------------     -----------------     --------------------
Net loss                                                       $(221)                $(285)                    $(42)
                                                    =================     =================     ====================



</TABLE>














                       See notes to financial statements
                                      F-21

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

                       STATEMENTS OF STOCKHOLDER'S EQUITY



<TABLE>
<CAPTION>


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

<S>      <C>                            <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

   Capital contribution                 -             -                221                   -                 221

   Net loss                             -             -                  -                (221)               (221)
                             -------------  ------------  -----------------   -----------------  ------------------
   July 31, 1998                    1,000        $1,000               $548               $(548)             $1,000
                             =============  ============  =================   =================  ==================



</TABLE>


                       See notes to financial statements
                                      F-22
<PAGE>

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

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>



                                                                 For the             For the                From
                                                                year ended          year ended          inception to

                                                              July 31, 1998       July 31, 1997        July 31, 1996
                                                             -----------------   -----------------    -----------------
Cash Flows From Operating Activities:
<S>                                                                     <C>                 <C>                   <C>  
  Net loss                                                              $(221)              $(285)                $(42)
                                                             -----------------   -----------------    -----------------    
      Cash used by operating activities                                  (221)               (285)                 (42)
                                                             -----------------   -----------------    -----------------


Cash Flows From Financing Activities:
  Capital contribution                                                    221                 285                1,042
                                                                         
  Net advance from affiliate                                                0                   0                    0

                                                             -----------------   -----------------    -----------------
      Cash provided by financing activities                               221                 285                1,042
                                                             -----------------   -----------------    -----------------

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



</TABLE>


                       See notes to financial statements

                                      F-23
<PAGE>
                        FERRELLGAS PARTNERS FINANCE CORP.
            (a wholly-owned subsidiary of Ferrellgas Partners, L.P.)

                          NOTES TO FINANCIAL STATEMENTS



A.      Formation

     Ferrellgas  Partners,  Finance  Corp.  (the  "Finance  Corp."),  a Delaware
corporation,  was formed on March 28, 1996 and is a  wholly-owned  subsidiary of
Ferrellgas Partners, L.P. (the "Partnership").

        The Partnership contributed $1,000 to the Finance Corp. on April 8, 1996
        in exchange for 1,000 shares of common stock.

B.      Commitment

        On April 26, 1996, the Partnership issued  $160,000,000 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.  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 $232 associated with the current year net operating loss carryforward
        of $597,  which  expire  at  various  dates  through  July 31,  2013,  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, 1998 or the period  ended July 31, 1997 and there is
        no net deferred tax asset as of July 31, 1998 or July 31, 1997.



                                      F-24
<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, 1998 and 1997,  and Statements 
                  of Earnings and Cash Flows for the Years
                  ended July 31, 1998, 1997, and 1996........................S-3


Schedule II       Valuation and Qualifying Accounts for the 
                  Years ended July 31, 1998, 1997 and 1996...................S-6






                                      S-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


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

We have audited the consolidated  financial  statements of Ferrellgas  Partners,
L.P.  (formerly  Ferrellgas,  Inc.),  and  subsidiaries as of July 31, 1998, and
1997, and for the years ended July 31, 1998, 1997, and 1996, and have issued our
report  thereon dated  September 24, 1998. 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, 1998


                                      S-2
<PAGE>
                           FERRELLGAS PARTNERS, L.P.
                                  PARENT ONLY

                                 BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>



 ASSETS                                                   July 31, 1998       July 31, 1997
----------------------------------------------------     -----------------   -----------------
<S>                                                         <C>                 <C>          
 Cash and cash equivalents                                  $           1       $           1
 Investment in Ferrellgas, L.P.                                   148,013             203,360
 Other assets, net
                                                                    2,778               3,298
                                                         -----------------   -----------------
    Total Assets                                            $     150,792       $     206,659
                                                         =================   =================



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

Other current liabilities                                   $       1,875      $        1,876

Long term debt                                                    160,000             160,000

Partners' Capital
  Common unitholders                                               27,985              52,863
  Subordinated unitholders                                         19,908              50,337
  General partner                                                (58,976)            (58,417)
                                                         -----------------   -----------------
    Total Partners' Capital                                      (11,083)              44,783
                                                         -----------------   -----------------

    Total Liabilities and Partners' Capital                 $     150,792       $     206,659
                                                         =================   =================


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

                             STATEMENTS OF EARNINGS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                           For the Year Ended
                                                        ---------------------------------------------------------
                                                         July 31, 1998       July 31, 1997        July 31, 1996
                                                        ----------------    -----------------    ----------------

<S>                                                       <C>                   <C>               <C>           
Equity in earnings of Ferrellgas, L.P.                    $      20,462         $     38,673      $       27,508
Operating expense                                                     5                   27                   -
Interest expense                                                 15,514               15,428               4,161
                                                        ----------------    -----------------    ----------------
  Net earnings                                            $       4,943         $     23,218      $       23,347
                                                        ================    =================    ================
</TABLE>


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

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


                                                                                             For the Year Ended
                                                                         -----------------------------------------------------------
                                                                          July 31, 1998        July 31, 1997        July 31, 1996
                                                                         -----------------    -----------------   ------------------
     Cash Flows From Operating Activities:   
<S>                                                                       <C>                   <C>                <C>         
      Net earnings                                                        $         4,943       $        23,218    $     23,347
       Reconciliation of net earnings to
       net cash from operating activities:
         Amortization of capitalized financing costs                                  513                  511             161
         Equity in (earnings) loss of Ferrellgas, L.P.                            (20,671)             (39,068)        (27,508)
         Other current assets                                                           3                  879          (4,854)
         Distributions received from Ferrellgas, L.P.                              78,176               80,085          62,863
         Increase in other current liabilities                                        (1)              (2,980)           4,855
                                                                         -----------------    -----------------   ------------------
           Net cash provided by operating activities                               62,963               62,645          58,864
                                                                         -----------------    -----------------   ------------------

     Cash Flows From Financing Activities:
      Distributions to partners                                                  (63,176)             (63,044)         (62,863)
      Additions to long-term debt                                                       -                    -         160,000
      Contribution to subsidiary                                                        -                    -        (156,000)
       Net advance from affiliate                                                     213                  399               -
                                                                         -----------------    -----------------   ------------------
           Net cash provided (used) by financing activities                      (62,963)             (62,645)         (58,863)
                                                                         -----------------    -----------------   ------------------
     Increase in cash and cash equivalents                                              -                    -               1
     Cash and cash equivalents - beginning of period                                    1                    1               -
                                                                         -----------------    -----------------   ------------------
     Cash and cash equivalents - end of period                            $             1        $           1        $      1  
                                                                         =================    =================   ==================

</TABLE>


                                      S-5
<PAGE>
                    FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY

                        VALUATION AND QUALIFYING ACOUNTS
                                 (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, 1998

<S>                                               <C>              <C>                   <C>            <C>               <C>   
Allowance for doubtful accounts                   $1,234           $3,003                $0             $2,856            $1,381

Accumulated amortization:

   Intangible assets                             109,211           14,320                 0                  0           123,531

   Other assets                                    6,753            2,301                 0                  0             9,054


Year ended July 31, 1997

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

</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.


                                      S-6