
<PAGE>
                                                                Exhibit 10(c)
Selected Financial Information
                                               Years ended June 30
                                1998      1997      1996      1995      1994
-------------------------------------------------------------------------------
(in thousand, except per share amounts)
Income Statement Data:
Net sales                   $223,254  $224,733  $194,638  $180,252  $185,968
Cost of sales                214,453   213,733   190,173   159,149   148,320
-------------------------------------------------------------------------------
    Gross profit               8,801    11,000     4,465    21,103    37,648
Selling, general and
  administrative expenses     11,363     9,169     9,001    10,553    12,212
Other operating income
  (expense)                      100       370       159      (107)     (669)
-------------------------------------------------------------------------------
     Income (loss) from
          operations          (2,462)    2,201    (4,377)   10,443    24,767
Other income (loss), net         658       618     1,309    (4,225)      924
Interest expense              (1,887)  $(2,604)   (2,556)     (606)     (127)
-------------------------------------------------------------------------------
     Income (loss) before
        income taxes          (3,691)      215    (5,624)    5,612    25,564
Provision (credit) for
  income taxes                (1,455)       84    (2,218)    2,273     9,713
-------------------------------------------------------------------------------
Net Income (Loss)            $(2,236)     $131   $(3,406)   $3,339   $15,851
===============================================================================
Earnings (Loss) Per
  Common Share                $(0.23)    $0.01    $(0.35)    $0.34     $1.62
===============================================================================
Cash dividends per
  common share                                               $0.50     $0.50
Weighted average common
  shares outstanding           9,700     9,762     9,765     9,765     9,765
===============================================================================
Balance Sheet Data:
    Working capital          $39,825   $36,580   $37,113   $26,955   $21,951
    Total assets             161,978   165,330   172,785   176,749   168,146
    Long-term debt, less
      current maturities      25,536    29,933    40,933    38,908    25,000
    Stockholders' equity     106,325   108,561   109,222   112,628   114,173
===============================================================================

Midwest Grain Products, Inc. 1998 Annual Report pg. 17


<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations

Results of Operations
===============================================================================

The following table sets forth items in the Company's consolidated statements of
income  expressed as  percentages  of net sales for the years  indicated and the
percentage  change in the  dollar  amount of such  items  compared  to the prior
period:
                              Percentage of Net Sales         Percentage
                                Years Ended June 30       Increase (Decrease)
-------------------------------------------------------------------------------
                                                            Fiscal    Fiscal
                                                             1998      1997
                               1998     1997     1996     Over 1997 Over 1996
-------------------------------------------------------------------------------
Net sales                     100.0%   100.0%   100.0%         (.7)%   15.5%
Cost of sales                  96.1     95.1     97.7           .3     12.4
-------------------------------------------------------------------------------
Gross profit                    3.9      4.9      2.3        (20.0)   146.4
Selling, general
   and administrative expenses  5.1      4.1      4.6         23.9      1.9
Other operating income (loss)    .1       .2       .1        (73.0)   132.7
-------------------------------------------------------------------------------
Income (loss) from operations  (1.1)     1.0     (2.2)      (211.9)   150.3
Other income (expense)          (.6)     (.9)     (.6)        61.6     59.2
-------------------------------------------------------------------------------
Income before income taxes     (1.7)      .1     (2.8)    (1,616.7)   103.8
Provision (credit) for
  income taxes                  (.7)      .04    (1.1)    (1,832.1)   103.8
-------------------------------------------------------------------------------
Net income (loss)              (1.0)%     .06%   (1.7)%   (1,806.9)%  103.8%
===============================================================================

Fiscal 1998 Compared to Fiscal 1997
-----------------------------------

     The  Company's  net  loss  of  $2,236,000  in  fiscal  1998  represented  a
substantial decrease from the prior year's net income of $131,000.  This decline
was mainly due to the effects of increased  wheat gluten  production in the face
of adverse market conditions,  together with a steady drop in selling prices for
the Company's alcohol products.  

     Massive  imports of  artificially-priced  gluten  from the  European  Union
(E.U.) continued to place severe competitive pressures on the Company throughout
the year.  The decision to raise  production  levels was made to prepare to meet
increased customer demand based on expectations of government action to create a
more  fair  and  stable  competitive  environment.  

     On June 1, the White House  implemented  a  three-year  quota on imports of
foreign wheat gluten following a unanimous recommendation from the United States
International  Trade Commission  (ITC). The White House  additionally  announced
that international negotiations would be pursued to address the underlying cause
of the increase in imports of wheat  gluten,  particularly  from the E.U., or to
otherwise alleviate injury to the domestic industry.

                         Midwest Grain Products, Inc. 1998 Annual Report pg. 18
<PAGE>
                                       Management Discussion and Analysis
-------------------------------------------------------------------------------
                             
     During the first year of  implementation,  the quota  will  restrict  wheat
gluten imports to 126 million pounds, a reduction of approximately  30% compared
to the amount of gluten  imported by the United States during the Company's 1998
fiscal  year.  In each of the two  following  years,  imports will be allowed to
increase by 6%. Within the quota,  separate  quotas for the E.U.,  Australia and
all other  non-excluded  countries  were  assessed,  "taking  into  account  the
disproportional  growth  and the  impact of  imports  of wheat  gluten  from the
European Union," according to the ITC's recommendation.  Countries excluded from
the quota are  Canada,  Mexico,  Israel  and the  beneficiary  countries  of the
Caribbean Basin Economic Recovery Act or the Andean Trade Preferences Act.

     The quota is  consistent  with the type of remedy  requested by the Company
and the Wheat Gluten  Industry  Council (WGIC) of the U.S. That request was made
in a petition that was filed by the WGIC on September 19, 1997 under Section 201
of the Trade Act of 1974.  The  petition  was filed on the grounds that the U.S.
wheat gluten  industry  has been  seriously  injured by the surge in  low-priced
wheat gluten  imports from the E.U.  Profits  from their highly  subsidized  and
protected  wheat starch  business  have  allowed  E.U.  producers to unload huge
surpluses of wheat gluten, a co-product, in the U.S. market at prices below U.S.
production   costs.   This  has  forced   domestic   producers  to   drastically
under-utilize  production  capacities  and  relinquish  sizeable  percentages of
market  share. 

     The Company expects the import quota to help establish a more level playing
field in the U.S. wheat gluten market by offsetting  lopsided  trade  advantages
provided  by the  E.U.  to  E.U.  producers.  As a  result,  the  Company  began
increasing gluten production  levels,  particularly in the second half of fiscal
1998, to effectively supply future customer needs. In addition,  the Company has
intensified  efforts to develop and market  modified  wheat  gluten  products in
niches  that  will  be less  affected  by  foreign  competition. 

     The Company's  production of food grade alcohol for beverage and industrial
applications declined in fiscal 1998 compared to the prior year due to a decline
in demand.  The production of fuel grade alcohol,  on the other hand,  increased
compared  to fiscal  1997 as the result of  greater  utilization  of  distillery
capacity at the Company's Pekin, Illinois plant. Prices for all of the Company's
alcohol products decreased compared to the prior year's levels. Due partially to
the effects of lower costs for corn and milo,  the principal raw materials  used
in the  Company's  alcohol  production  process,  prices for food grade  alcohol
decreased.  Seasonal  factors and increased  supplies of alcohol  throughout the
industry also  contributed to this decline.  The fall in fuel alcohol prices was
caused  principally by a downturn in gasoline prices.  As the result of the rise
in total  alcohol  production,  unit sales of  distillers  feed,  the  principal
by-product  of the  distillation  process,  also  grew  compared  to a year ago.
However,  prices for this product  declined also,  contributing to the Company's
total earnings decrease.

     Conditions in the Company's premium wheat starch market remained  favorable
in fiscal 1998,  resulting in increased  production.  The largest  percentage of
this increase  occurred in the production of  non-modified  wheat starch,  which
generally is sold at a lower value than the  Company's  modified  and  specialty
varieties. As a result, the average per unit sales price for wheat starch during
the year was down  compared  to the prior  year.  Lower raw  material  costs for
wheat, however, partially offset the reduced selling price.
<PAGE>
     With  consistently  lower grain  costs,  improved  conditions  in the wheat
gluten  market,  a realization  of stable  energy costs and improved  production
efficiencies,  the Company expects to strengthen its  competitive  abilities and
improve  profitability  going  forward. 

     Net sales in fiscal 1998 were down  approximately  $1.5 million compared to
sales in fiscal 1997. The

Midwest Grain Products, Inc. 1998 Annual Report pg. 19

                                        Management's Discussion and Analysis
-------------------------------------------------------------------------------

decrease  resulted mainly from lower selling prices for all principal  products.

     The  realization  of higher fuel alcohol unit sales occurred from increased
utilization of distillery capacity at the Company's Pekin,  Illinois plant. This
volume  increase,  however,  was offset by a decline in  selling  prices,  which
tracked falling  gasoline  prices.  Sales of food grade alcohol for beverage and
industrial  applications  during  the year were down  compared  to sales for the
prior year. This was due to decreases in both unit sales and average prices. The
lower prices  reflected both a decline in demand and a reduction in raw material
prices for corn and milo.  Sales of distillers feed, a by-product of the alcohol
production  process,  fell  slightly as lower sales prices offset an increase in
total units sold.

     Wheat  gluten  sales were  higher  than sales in fiscal 1997 as the Company
increased production in preparation for satisfying market requirements resulting
from the expected realization of a fair competitive  environment.  A decrease in
wheat gluten  selling  prices  compared to the prior year,  however,  offset the
increased  volume.  Sales of wheat starch decreased  modestly compared to fiscal
1997,  as higher unit sales were largely  offset by lower  selling  prices.  The
reduced selling prices resulted  principally  from a higher  proportion of wheat
starches being sold for non-specialty,  commodity-type applications.

     The  cost of sales in  fiscal  1998  increased  by  approximately  $720,000
compared to the cost of sales in fiscal  1997.  This  occurred  primarily as the
result  of higher  raw  material,  energy,  and  maintenance  and  repair  costs
associated with increased production volumes.

     In  connection  with the purchase of raw  materials,  principally  corn and
wheat, for anticipated operating requirements, the Company enters into commodity
contracts to reduce the risk of future grain price  increases.  These  contracts
are accounted for as hedges and, accordingly,  gains and losses are deferred and
recognized in cost of sales as part of contract  costs when  contract  positions
are settled and as related  products  are sold.  For fiscal  1998,  raw material
costs  included a net income of $243,000 on  contracts  settled  during the year
compared  to a net loss of  $1,877,000  for fiscal  1997. 

     Selling,  general and  administrative  expenses in fiscal 1998 increased by
approximately $2.2 million above selling, general and administrative expenses in
fiscal 1997 due mainly to  employee-related  costs. The largest portion of those
costs  resulted  from  the  termination  of the  Atchison  plant  union  revised
retirement plan to fund a newly  established 401K plan for those same employees.
The  increase  also  resulted  from  the  addition  of  research  and  marketing
personnel,  together  with  higher  costs  related to research  and  promotional
activities,  to strengthen  the Company's  development  and sales of value-added
specialty  products made from wheat.

     The  consolidated  effective income tax rate is consistent for all periods.
<PAGE>

     The  general  effects  of  inflation  were  minimal. 

     As the result of the foregoing factors,  the Company experienced a net loss
of $2,236,000 in fiscal 1998 compared to net income of $131,000 in fiscal 1997.

Fiscal 1997 Compared to Fiscal 1996
-----------------------------------

     The  Company's  net  income  of  $131,000  in  fiscal  1997 was a  sizeable
improvement over the prior year's net loss of $3,406,000.  A greater improvement
was prevented by the intensification of competitive pressures in the Company's
vital  wheat  gluten  market.  Higher than  normal  energy  costs from late fall
through  late  winter,  and a surge in  competition  in the food  grade  alcohol
markets in the third quarter affected the

Midwest Grain Products, Inc. 1998 Annual Report pg.20

                                        Management's Discussion and Analysis
-------------------------------------------------------------------------------

Company's  alcohol  production.  In  addition,  while  average  prices  for  the
Company's  principal raw materials,  namely wheat, corn and milo, were below the
exceptionally  high levels  experienced in the prior fiscal year,  they remained
well above what  traditionally  have been  considered  normal price levels.  The
increased energy costs, which the Company began experiencing  midway through the
second  quarter,  resulted from a significant  jump in natural gas prices due to
periods of extreme cold weather  throughout  much of the U.S.  During the latter
part of the third quarter, those prices returned to more normal levels, allowing
the Company to realize  improved  energy cost  efficiencies.  

     Conditions in the wheat gluten market were adversely  affected by increased
competition from the European Union (E.U.),  whose exports of subsidized  gluten
to the United States  continued at record levels.  As a result,  the Company was
unable to adjust the selling  price of its gluten enough to  effectively  offset
production  costs.  

     While  conditions  in the  Company's  alcohol  markets  generally  remained
healthy in fiscal 1997,  prices for food grade and fuel grade  alcohol  declined
through the year from their first quarter  highs.  This primarily was due to the
effects of falling prices for corn and milo, the principal raw materials used in
the Company's alcohol  production  process. A drop in beverage alcohol prices in
the third quarter additionally was due to increased  competition  resulting from
the start-up of new distillation  capacities throughout the industry.  Increased
supplies  of fuel grade  alcohol  caused a reduction  in selling  prices in that
market  as well  during  the third  quarter.  Demand  for each  type of  alcohol
produced by the Company  increased  in the fourth  quarter,  raising  unit sales
substantially  and  causing  prices  to  stabilize  somewhat.  As the  result of
increased alcohol  production in fiscal 1997, unit sales of distillers feed, the
principal by-product of the distillation  process,  grew significantly in fiscal
1997 compared to fiscal 1996.  

     Demand for the Company's  premium wheat starch was solid throughout  fiscal
1997,  resulting in increased  utilization of capacity at Midwest Grain's Pekin,
Illinois  plant,  where a new starch  production  facility was  completed in the
first quarter of fiscal 1996. 
<PAGE>

     Net sales in fiscal 1997 were  approximately  $30.1 million higher than net
sales in fiscal 1996.  The increase  principally  resulted from  increased  unit
sales of most of the  Company's  principal  products.  The lower sales in fiscal
1996 were  partially  caused by reduced  production  resulting  from an extended
maintenance  and repair shutdown at the Company's  Pekin,  Illinois plant during
the entire month of June.  

     Sales of all alcohol  increased by aproximately 20% over fiscal 1996 mainly
as the  result of higher  unit sales and higher  prices for the  Company's  food
grade industrial  alcohol and fuel grade alcohol.  Sales of distillers feed, the
principal  by-product of the alcohol  process,  rose by  approximately  21%, due
mainly to higher  production  and sales of  alcohol  and an  improvement  in the
selling  price  compared  to the prior year.  

     Sales of vital wheat  gluten were  approximately  even with sales in fiscal
1996,  as the Company  continued to minimize  gluten  production  in the face of
greatly  increased  competition  from  European  Union  producers.  Sales of the
Company's premium wheat starch grew approximately 14% above sales in fiscal 1996
as the result of greater unit sales and a modest price improvement.  

     The cost of sales in fiscal 1997 increased by approximately $23.6 million
above the cost of sales in fiscal 1996. This occurred partially as the result of
a $16.7 million rise in raw material costs for grain, as more grain was required
to satisfy increased  production needs. In addition,  the Company  experienced a
jump of approximately $4.7 million in

Midwest Grain Products, Inc. 1998 Annual Report pg. 21

                                        Management's Discussion and Analysis
-------------------------------------------------------------------------------

energy costs due principally to higher than normal prices for natural gas during
the second  and third  quarters,  and a rise of  approximately  $1.2  million in
maintenance and repair costs. The remainder of the increase in the total cost of
sales compared to fiscal 1996 was mainly  attributable to costs  associated with
increased  product sales,  principally in the food grade alcohol area.  

     Selling,   general  and   administrative   expenses  in  fiscal  1997  were
approximately even with selling,  general and administrative  expenses the prior
year.  This  principally  was the result of the  continuation of an intense cash
management program which was implemented in fiscal 1996 and included  reductions
in  compensation  as well as in costs  for  management  and  employee  incentive
programs.  

     The consolidated  effective income tax rate was consistent for all periods.
The general  effects of inflation  were minimal.  

     As the result of the foregoing factors,  the Company experienced net income
of $131,000 in fiscal 1997 compared to a net loss of $3,406,000 in fiscal 1996.
<PAGE>

Quarterly Financial Information
===============================================================================

Generally,  the  Company's  sales have not been seasonal  except for  variations
affecting  fuel grade  alcohol,  beverage  alcohol and gluten  sales.  In recent
years,  demand for fuel grade alcohol has tended to increase during the fall and
winter to satisfy clean air standards  during those  periods.  Beverage  alcohol
sales tend to peak in the fall as  distributors  order  stocks  for the  holiday
season, while gluten sales tend to increase during the second half of the fiscal
year as demand  increases  for hot dog buns and  similar  bakery  products.  The
Company may experience more  significant  fluctuations in quarterly sales during
the next two years due to the annual  quotas on gluten  imports if  exporters to
the United States do not pro rate  shipments  throughout the year. The following
table shows quarterly  information for each of the years ended June 30, 1998 and
1997.



                                           Quarter Ending
                     Sept. 30      Dec. 31    March 31     June 30      Total
-------------------------------------------------------------------------------

(in thousands, except per share amounts)

Fiscal 1998
-------------------------------------------------------------------------------
   Sales              $57,623     $55,847     $53,310     $56,474   $223,254
   Gross profit         2,611       3,819       2,319          52      8,801
   Net income (loss)     (235)        107        (438)     (1,670)    (2,236)
   Earnings (loss)
     per share           (.02)        .01        (.05)       (.17)      (.23)

Fiscal 1997
-------------------------------------------------------------------------------
   Sales              $53,173     $55,249     $54,449     $61,862   $224,733
   Gross profit         2,063       4,889       2,474       1,574     11,000
   Net income (loss)     (346)      1,205           3        (731)       131
   Earnings (loss)
     per share           (.04)         .12         .00       (.08)       .01
===============================================================================
Midwest Grain Products, Inc. 1998 Annual Report pg. 22

<PAGE>

                                     Management Discussion and Analysis
===============================================================================

Market Risk
------------------------------------------------------------------------------

     The Company  produces its products from wheat,  corn and milo and, as such,
is sensitive to changes in commodity  prices.  Grain futures  and/or options are
used as a hedge to protect against  fluctuations in the market.  The table below
provides  information  about the Company's  inventory and futures contracts that
are sensitive to changes in grain prices. For inventory,  the table presents the
carrying  amount and fair value at June 30,  1998.  For futures  contracts,  the
table presents the notional  amounts in bushels,  the weighted  average contract
prices,  and the total  dollar  contract  amounts by  expected  maturity  dates.
Contract amounts are used to calculate the contractual  payments and quantity of
corn to be exchanged under the futures contracts.

                                                     As of June 30, 1998
-------------------------------------------------------------------------------
                                              Carrying Amount      Fair Value
-------------------------------------------------------------------------------
(in thousands)
Inventories
  Corn                                                 $1,205          $1,222
  Milo                                                    579             613
  Wheat                                                 1,320           1,320
-------------------------------------------------------------------------------
                                            Expected Maturity      Fair Value
-------------------------------------------------------------------------------
Contracts
  Corn futures (long)
     Contract volumes (bushels)                   3.6 million
     Price per bushel                                   $2.66
     Contract amount                             $9.6 million    $9.3 million
  Wheat options (long)
     Contract volumes (bushels)                   2.0 million
     Price of option per bushel                         $0.20
     Contract amount                                 $400,000        $320,000
  Wheat options (short)
     Contract volumes (bushels)                   2.0 million
     Price of option per bushel                       $0.1375
     Contract amount                                 $275,000        $150,000
===============================================================================

Midwest Grain Products, Inc. 1998 Annual Report pg. 23
<PAGE>


                                     Management's Discussion and Analysis
===============================================================================

Liquidity and Capital Resources
===============================================================================

The  following  table is presented as a measure of the  Company's  liquidity and
financial condition:
-------------------------------------------------------------------------------
                                                                June 30
                                                         1998            1997
-------------------------------------------------------------------------------
(in thousands)

Cash and cash equivalents                              $4,723          $6,005
Working capital                                        39,825          36,580
Amounts available under lines of credit                30,000          29,000
Notes payable and long-term debt                       28,896          30,933
Stockholders' equity                                  106,325         108,561
===============================================================================

     During  fiscal  1998,  the  Company  generated  a  positive  cash flow from
operations,  which was used to reduce  its debt and  partially  pay for  capital
additions. Working capital also improved. Short-term liquidity has been impacted
by higher inventory  requirements to prepare to satisfy customer needs for wheat
gluten  resulting  from an eventual  reduction in import  supplies.  The Company
anticipates  even higher  inventory levels during the first half of 1999 to meet
customer  needs.  

     At June 30, 1998,  the Company had $4.4 million  committed to  improvements
and replacements of existing  equipment.  

     Since 1996,  the Company has  recognized  the need to ensure its operations
will not be adversely impacted by Year 2000 software failures.  New hardware and
software has been acquired and installed  for the core  financial  applications.
All core financial modules,  except order entry, have been tested  successfully.
The order entry module is in final  modification  and  testing.  The total costs
incurred to date approximate $200,000.  Conversion to the new system is expected
to  be  completed   during  fiscal  1999.  The  Company  expects  no  additional
significant costs to achieve Year 2000 compliance for these applications. Due to
the  stage of  completion  and  testing  of these  applications,  as well as the
non-complexity of the systems, the Company fully anticipates being compliant far
in advance of December  31,  1999.  

     The company also has  surveryed  its plant  operations  to determine  which
electrical and other instrumentation equipment relies on date sensitive software
and hardware. For those applications which have been identified, the Company has
received  bids to modify  the  equipment.  In some  cases,  testing  of  certain
equipment  has  already  been  completed.  The  cost to  convert  and  test  the
identified  processes  is  expected  to  be  less  than  $100,000.  The  Company
anticipates  having the  conversions  completed  and tested  during fiscal 1999.
Should these  conversions not be completed on a timely basis,  the Company would
be able to produce all products except  specialty and modified wheat glutens and
starches.  

<PAGE>

     The Company is also in the process of surveying  key vendors and  customers
regarding their abilities to achieve the Year 2000  compliance.  Initial results
of the surveys  indicate these companies are  knowledgeable  of Year 2000 issues
and are in the  process of  complying  or have  already  complied.  

     The Company  continues to maintain a strong working capital  position and a
low  debt-to-equity  ratio,  while  generating  strong earnings before interest,
taxes and depreciation.  Management  believes this strong financial position and
available lines of credit will allow the Company to effectively supply the
increased customer needs for vital wheat gluten when foreign quotas are reached,
as well as its other products.

Forward-Looking Information
===============================================================================

This report contains forward-looking information. Forward-looking statements are
identified  by or  are  associated  with  such  words  as  "intend",  "believe,"
"expect,"  "anticipate,"  "hopeful,"  "should," "may," and similar  expressions.
They reflect  management's  current  beliefs and  estimates  of future  economic
circumstances,  industry  conditions,  Company performance and financial results
and are not guarantees of future performance. The forward-looking statements are
based on many assumptions and factors  including those relating to grain prices,
gasoline  prices,  energy costs,  product pricing,  competitive  environment and
related market conditions, operating efficiencies, access to capital and actions
of  governments.  Any  changes  in the  assumptions  or  factors  could  produce
materially different results than those predicted and could impact stock values.

Midwest Grain Products, Inc. 1998 Annual Report pg. 24

<PAGE>

Independent Accountant's Report
-------------------------------------------------------------------------------


Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas

     We have audited the  accompanying  consolidated  balance  sheets of MIDWEST
GRAIN PRODUCTS,  INC. as of June 30, 1998 and 1997, and the related consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years in the period  ended June 30, 1998.  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,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of MIDWEST
GRAIN  PRODUCTS,  INC.  as of June 30,  1998 and 1997,  and the  results  of its
operations  and its cash flows for each of the three  years in the period  ended
June 30, 1998, in conformity with generally accepted accounting principles.


                                                       s/Baird, Kurtz & Dobson
                                                          BAIRD, KURTZ & DOBSON

Kansas City, Missouri
August 4, 1998

Midwest Grain Products, Inc. 1998 Annual Report pg. 25


<PAGE>



Financial Review
===============================================================================

Consolidated Statements of Operations
Years Ended June 30, 1998, 1997 and 1996
===============================================================================
                                                  1998       1997       1996
-------------------------------------------------------------------------------
(in thousands, except per share amounts)

Net sales                                     $223,254   $224,733   $194,638
Cost of sales                                  214,453    213,733    190,173
-------------------------------------------------------------------------------
Gross profit                                     8,801     11,000      4,465
Selling, general & administrative expenses      11,363      9,169      9,001
-------------------------------------------------------------------------------
                                                (2,562)     1,831     (4,536)
Other operating income                             100        370        159
-------------------------------------------------------------------------------
Income (loss) from operations                   (2,462)     2,201     (4,377)
Other income (loss), net                           658        618      1,309
Interest expense                                (1,887)    (2,604)    (2,556)
-------------------------------------------------------------------------------
Income (loss) before income taxes               (3,691)       215     (5,624)
Provision (credit) for income taxes             (1,455)        84     (2,218)
-------------------------------------------------------------------------------
Net income (loss)                              $(2,236)      $131    $(3,406)
===============================================================================
Earnings (loss) per common share                $(0.23)     $0.01     $(0.35)
===============================================================================

See Notes to Consolidated Financial Statements

Midwest Grain Products, Inc. 1998 Annual Report pg. 26

<PAGE>
                                                      Financial Review
===============================================================================
 Consolidated Balance Sheets
 June 30, 1998 and 1997
-------------------------------------------------------------------------------
                                                                 1998      1997
-------------------------------------------------------------------------------
(in thousands)
Assets
Current Assets
   Cash and cash equivalents                                  $4,723     $6,005
   Receivables (less allowance for doubtful accounts;
      1998 and 1997-$285)                                     26,369     26,276
   Inventories                                                20,430     15,000
   Prepaid expenses                                              753        988
   Deferred income taxes                                       2,343      1,688
   Income taxes receivable                                     1,334        227
-------------------------------------------------------------------------------
Total Current Assets                                          55,952     50,184
-------------------------------------------------------------------------------
Property & equipment, at cost                                218,590    213,813
   Less accumulated depreciation                             112,976     99,099
-------------------------------------------------------------------------------
Property & equipment, net                                    105,614    114,714
-------------------------------------------------------------------------------
Other assets                                                     412        432
-------------------------------------------------------------------------------
Total Assets                                                $161,978   $165,330
===============================================================================
Liabilities and Stockholders' Equity
Current Liabilities
   Notes payable                                              $1,000     $1,000
   Current maturities of long-term debt                        2,360
   Accounts payable                                            9,072      8,196
   Accrued expenses                                            3,695      4,408
-------------------------------------------------------------------------------
      Total Current Liabilities                               16,127     13,604
-------------------------------------------------------------------------------
Long-term debt                                                25,536     29,933
-------------------------------------------------------------------------------
Post-retirement benefits                                       6,520      6,245
-------------------------------------------------------------------------------
Deferred income taxes                                          7,470      6,987
-------------------------------------------------------------------------------
Stockholders' equity
   Capital stock
      Preferred, 5% non-cumulative, $10 par value; authorized
      1,000 shares; issued and outstanding 437 shares              4          4
      Common, no par; authorized 20,000,000 shares;
        issued 9,765,172 shares                                6,715      6,715
   Additional paid-in capital                                  2,485      2,485
   Retained earnings                                          97,913    100,149
-------------------------------------------------------------------------------
                                                             107,117    109,353
Treasury stock, at cost
   Common; 65,000 shares                                        (792)      (792)
-------------------------------------------------------------------------------
Total stockholders' equity                                   106,325    108,561
-------------------------------------------------------------------------------
Total liabilities and stockholders' equity                  $161,978   $165,330
===============================================================================
See Notes to Consolidated Financial Statements
Midwest Grain Products, Inc. 1998 Annual Report pg. 27
<PAGE>
Financial Review
===============================================================================

Consolidated Statements of Stockholders' Equity
  Years Ended June 30, 1998, 1997 and 1996
===============================================================================
                                       Additional
                     Preferred  Common  Paid-In  Retained  Treasury
                         Stock   Stock  Capital  Earnings    Stock     Total
-------------------------------------------------------------------------------
(in thousands)

Balance, June 30, 1995      $4  $6,715   $2,485  $103,424           $112,628
1996 net loss                                      (3,406)            (3,406)
-------------------------------------------------------------------------------
Balance, June 30, 1996       4   6,715    2,485   100,018            109,222
Purchase of treasury stock                                  $(792)      (792)
1997 net income                                       131                131
-------------------------------------------------------------------------------
Balance, June 30, 1997       4   6,715    2,485   100,149    (792)   108,561
1998 net loss                                      (2,236)            (2,236)
-------------------------------------------------------------------------------
Balance, June 30, 1998      $4  $6,715   $2,485  $ 97,913   $(792)  $106,325
===============================================================================

See Notes to Consolidated Financial Statements

Midwest Grain Products, Inc. 1998 Annual Report pg. 28


<PAGE>

Financial Review
===============================================================================

Consolidated Statements of Cash Flows
  Years Ended June 30, 1998, 1997 and 1996
===============================================================================
                                                      1998     1997     1996
-------------------------------------------------------------------------------
(in thousands)

Cash Flows From Operating Activities
   Net income (loss)                                $(2,236)    $131  $(3,406)
   Items not requiring (providing) cash:
      Depreciation                                   13,892   14,041   13,854
      Gain on sale of assets                             (2)     (18)     (41)
      Deferred income taxes                            (172)     236      611
Changes in:
      Accounts receivable                               (93)  (7,911)   3,185
      Inventories                                    (5,430)   4,913   (5,223)
      Accounts payable                                  847    1,578        4
      Income taxes (receivable) payable              (1,107)   2,836     (725)
      Other                                            (183)     618   (1,238)
-------------------------------------------------------------------------------
   Net cash provided by operating activities           5,516  $16,424    7,021
-------------------------------------------------------------------------------
Cash Flows From Investing Activities
   Additions to property & equipment                  (4,765)  (3,491)  (5,516)
   Proceeds from sale of equipment                         4      105       71
   Proceeds from notes receivable                                          919
<PAGE>

-------------------------------------------------------------------------------
   Net cash used in investing activities              (4,761)  (3,386)  (4,526)
-------------------------------------------------------------------------------
Cash Flows From Financing Activities
   Purchase of treasury stock                                    (792)
   Principle payments on long-term debt               (2,037  (10,000)
   Proceeds from issuance of long-term debt                              2,025
   Dividends paid                                                       (1,221)
-------------------------------------------------------------------------------
   Net cash provided by (used in) financing 
      activities                                      (2,037) (10,792)     804
-------------------------------------------------------------------------------
Increase (Decrease) in Cash & Cash Equivalents        (1,282)   2,246    3,299
Cash & Cash Equivalents, Beginning of Year             6,005    3,759      460
-------------------------------------------------------------------------------
Cash & Cash Equivalents, End of Year                  $4,723   $6,005   $3,759
===============================================================================

See Notes to Consolidated Financial Statements

Midwest Grain Products, Inc. 1998 Annual Report pg. 29

<PAGE>

Notes to Consolidated Financial Statements
===============================================================================
Note 1: Nature of Operations and Summary of Significant Accounting Policies

     Nature of Operations.  The activities of Midwest Grain  Products,  Inc. and
its subsidiaries consist of production of vital wheat gluten and specialty wheat
proteins,  premium wheat starch,  alcohol products and flour mill products.  The
Company  sells its products on normal  credit terms to customers in a variety of
industries  located  primarily   throughout  the  United  States.   Through  its
wholly-owned  subsidiaries,  the Company operates in Atchison, Kansas and Pekin,
Illinois (Midwest Grain Products of Illinois, Inc.). Additionally, Midwest Grain
Pipeline,  Inc., another  wholly-owned  subsidiary,  supplies natural gas to the
Company's  Atchison  plant.  

     Use of Estimates.  The  preparation  of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  Actual results could differ from those estimates.

     Principles of Consolidation.  The consolidated financial statements include
the  accounts  of  Midwest  Grain  Products,  Inc.  and  all  subsidiaries.  All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.  

     Inventories.  Inventories  are stated at the lower of cost or market on the
first-in,  first-out  (FIFO)  method.  In  connection  with the  purchase of raw
materials,  principally corn and wheat, for anticipated operating  requirements,
Midwest Grain Products,  Inc. enters into commodity contracts to reduce the risk
of future grain price  increases.  These  contracts,  including those terminated
early,  are  accounted  for as hedges  and,  accordingly,  gains and  losses are
deferred and  recognized  in cost of sales as part of product cost when contract
positions are settled and as related  products are sold.  If grain  requirements
fall below anticipated needs and open contract levels, then gains and losses are
recognized  immediately for the excess open contract  levels.  At June 30, 1998,
Midwest Grain Products, Inc. had entered into contracts hedging future wheat and
corn prices through the second  quarter of fiscal 1999.  

     Property and Equipment.  Depreciation is computed using both  straight-line
and accelerated methods over the following estimated useful lives: 

   Buildings and improvements      20-30 years  
   Transportation  equipment         5-6 years  
   Machinery  and equipment        10-12 years

     The Company  capitalizes  interest costs as a component of  construction in
progress,  based on the weighted  average  rates paid for  long-term  borrowing.
Total  interest  incurred each year was: 

                                                 Years Ended June 30, 
                                                  1998   1997   1996 
-------------------------------------------------------------------------------
(in thousands)  
Interest  costs  capitalized                                   $  364 
Interest costs charged to expense              $1,887  $2,604   2,556 
-------------------------------------------------------------------------------
                                               $1,887  $2,604  $2,920
===============================================================================
<PAGE>


     Earnings Per Common Share. Earnings per common share data is based upon the
weighted  average number of common shares  totaling  9,700,172 at June 30, 1998,
9,761,967  at June 30,  1997 and  9,765,172  at June 30,  1996.  The  effect  of
employee stock options, which were the only potentially dilutive securities held
by the Company,  was  anti-dilutive  at June 30,  1998.  

     Cash  Equivalents.  The  Company  considers  all  liquid  investments  with
maturities  of  three  months  or  less to be cash  equivalents.  

     Income Taxes.  Deferred tax  liabilities  and assets are recognized for the
tax effect of the differences  between the financial  statement and tax bases of
assets and liabilities.  A valuation allowance is established to reduce deferred
tax assets if it is more likely  than not that a deferred  tax asset will not be
realized.

Midwest Grain Products, Inc. 1998 Annual Report pg. 30


<PAGE>
Notes to Consolidated Financial Statements

                                 Notes to Consolidated Financial Statements
===============================================================================

Note 2: Inventories
   Inventories consist of the following:
                                                                 June 30,
                                                             1998       1997
-------------------------------------------------------------------------------
(in thousands)
Whiskey, alcohol and spirits                               $6,884     $4,017
Unprocessed grain                                           6,398      5,803
Operating supplies                                          3,554      3,105
Gluten                                                      2,382        757
By-products and other                                       1,212      1,318
-------------------------------------------------------------------------------
                                                          $20,430    $15,000
===============================================================================

Note 3: Property and Equipment 

     Property and equipment  consists of the  following:  

                                                                June 30, 
                                                             1998       1997 
-------------------------------------------------------------------------------
(in thousands)  

Land,  buildings and  improvements                        $17,411    $17,411  
Transportation equipment                                    1,180      1,081 
Machinery and equipment                                   196,903    193,923  
Construction in progress                                    3,096      1,398  
-------------------------------------------------------------------------------
                                                          218,590    213,813 
Less  accumulated  depreciation                           112,976     99,099 
-------------------------------------------------------------------------------
                                                         $105,614   $114,714 
===============================================================================

Note 4: Accrued  Expenses  

    Accrued expenses consist of the  following:  

                                                              June 30,  
                                                           1998        1997 
-------------------------------------------------------------------------------
(in  thousands)  

Excise  taxes                                             $ 239       $ 642
Employee  benefit  plans (Note 10)                          973         768  
Salaries  and wages                                         784         963 
Property taxes                                              525         593  
Insurance                                                   454         723 
Interest                                                    696         696 
Other  expenses                                              24          23 
-------------------------------------------------------------------------------
                                                         $3,695      $4,408
===============================================================================
<PAGE>

Note 5: Long-Term Debt Long-term debt consists of the following:
                                                                June 30,
                                                           1998       1997
-------------------------------------------------------------------------------
(in thousands)

Senior notes payable                                    $25,000    $25,000
Line of credit                                            2,000      4,000
Other                                                       896        933
-------------------------------------------------------------------------------
                                                         27,896     29,933
Less current maturities                                   2,360
-------------------------------------------------------------------------------
Long-term portion                                       $25,536    $29,933
===============================================================================

     The unsecured  senior notes payable are payable in annual  installments  of
$2,273,000 from 1999 through 2008 with the final principal payment of $2,270,000
due in 2009.  Interest  is  payable  semiannually  at 6.68%  per  annum  for the
fifteen-year  term of the notes. 

     At June 30, 1998, the Company had a $27 million unsecured revolving line of
credit  expiring on November 1, 1999,  with  interest at 1% below prime on which
there was $2.0 million and $4.0 million in borrowings at June 30, 1998 and 1997,
respectively.  All other terms remain the same. The Company had three additional
lines of credit totaling $6.0 million  expiring on dates through April 30, 1999,
with  interest  rates  varying  from prime to 1% below prime on which there were
$1.0 million in borrowings  at both June 30, 1998 and 1997.  

     In  connection  with  the  above  borrowings,   the  Company,  among  other
covenants, is required to maintain certain financial ratios, including a current
ratio of 1.5 to 1, minimum consolidated  tangible net worth of $78 million and a
debt  service  coverage  ratio of 1.5 to 1. 

     The fair value of the senior notes  payable,  based upon the borrowing rate
of 7.10% at June 30, 1998,  was  $24,700,000.  

     Aggregate  annual  maturities  of  long-term  debt at June 30,  1998 are as
follows: 

(in thousands) 

1999                                               $ 2,360 
2000                                                 4,433 
2001                                                 2,422 
2002                                                 2,273 
2003                                                 2,273
Thereafter                                          14,135 
-------------------------------------------------------------------------------
                                                   $27,896
===============================================================================

Midwest Grain Products, Inc. 1998 Annual Report pg. 31


<PAGE>
Notes to Consolidated Financial Statements

Note 6: Income Taxes 

     The  provisions  (credit) for income  taxes is comprised of the  following:

                                                   Years  Ended  June 30,  
                                                   1998    1997    1996 
-------------------------------------------------------------------------------
(in  thousands)  

Income  taxes  currently
   payable (receivable)                          $(1,627) $(152) $(2,829) 
Income taxes deferred                                172    236      611
-------------------------------------------------------------------------------
                                                 $(1,455) $  84  $(2,218)
===============================================================================

     The tax effects of temporary differences related to deferred taxes shown on
the  consolidated  balance  sheets  are as  follows:  
                                                             June  30,  
                                                           1998    1997  
-------------------------------------------------------------------------------
(in thousands)  

Deferred  tax  assets:   
     Accrued  employee  benefits                          $  101  $  110
     Post-retirement  liability                            2,543   2,436  
     Insurance  accruals                                     578     831  
     Federal operating loss  c
        arryforwards                                         828 
     State  operating loss  carryforwards                    826     447
     Alternative  minimum  tax                             1,644     723 
     Other                                                   504     383  
-------------------------------------------------------------------------------
                                                           7,024   4,930  
-------------------------------------------------------------------------------
Deferred  tax liabilities:   
     Accumulated   depreciation                          (11,823)  (9,860)  
     Deferred  gain  on
        involuntary   conversion                            (328)    (369)  
-------------------------------------------------------------------------------
                                                        $(12,151)$(10,229)  
-------------------------------------------------------------------------------
Net  deferred  tax liability                            $ (5,127)$ (5,299) 
===============================================================================

     The above net  deferred tax  liability  is  presented  on the  consolidated
balance  sheets as  follows:  
                                                               June 30,  
                                                            1998      1997 
-------------------------------------------------------------------------------
(in  thousands)  

Deferred  tax asset-current                              $ 2,343   $ 1,688 
Deferred tax  liability-long-term                         (7,470)   (6,987)
-------------------------------------------------------------------------------
Net deferred tax liability                               $(5,127)  $(5,299)
===============================================================================
<PAGE>



     No  valuation  allowance  has been  recorded  at June 30,  1998 or 1997.  

     A reconciliation  of the provision for income taxes at the normal statutory
federal rate to the provision (credit) included in the accompanying consolidated
statements of operations is shown below: 

                                                       Years Ended June 30, 
                                                       1998   1997    1996 
-------------------------------------------------------------------------------
(in thousands) 

"Expected"  provision(credit)  
     at federal statutory rate (34%)                $(1,255)  $73   $(1,912) 
Increases (decreases)
     resulting from: 
       Effect of state income taxes                   (195)     9      (236)  
     Other                                              (5)     2       (70)  
-------------------------------------------------------------------------------
Provision  (credit)  for income  taxes             $(1,455)   $84   $(2,218) 
===============================================================================

Note 7: Capital Stock 

     The Common  Stock is entitled to elect four out of the nine  members of the
Board of Directors, while the Preferred Stock is entitled to elect the remaining
five directors. Holders of Common Stock are not entitled to vote with respect to
a merger,  dissolution,  lease,  exchange  or sale of  substantially  all of the
Company's assets,  or on an amendment to the Articles of  Incorporation,  unless
such action would increase or decrease the authorized shares or par value of the
Common or Preferred  Stock, or change the powers,  preferences or special rights
of the Common or  Preferred  Stock so as to affect the  holders of Common  Stock
adversely.

Midwest Grain Products, Inc. 1998 Annual Report pg. 32



<PAGE>
Notes to Consolidated Financial Statements

Note 8: Other Operating Income (Expense)

Other operating income (expense) consists of the following: :

                                                       Years Ended June 30,
                                                     1998      1997      1996
-------------------------------------------------------------------------------
(in thousands)

Truck operations                                    $ (95)     $342     $136
Warehousing and
  storage operations                                    6       (13)     (32)
Miscellaneous                                         (11)       41       55
-------------------------------------------------------------------------------
                                                     $100      $370     $159
===============================================================================

Note 9: Energy Commitment

     During  fiscal 1995,  the Company  negotiated a  fifteen-year  agreement to
purchase steam heat and electricity from a utility for its Illinois  operations.
Steam heat is being purchased for a minimum  monthly charge of $114,000,  with a
declining fixed charge for purchases in excess of the minimum usage. Electricity
purchases will occur at fixed rates through May 31, 2002. In connection with the
agreement,  the Company  leased  land to the utility  company for 15 years so it
could construct a co-generation  plant at the Company's Illinois  facility.  The
Company has also agreed to  reimburse  the utility for the net book value of the
plant if the lease is not renewed for an additional 19 years.  The estimated net
book value of the plant would be $10.6 million at that date.  

Note 10:  Employee Benefit  Plans  

     Pension  Plan.  Prior to June 30, 1998,  the Company had a  noncontributory
defined  benefit  pension  plan  covering  union  employees.  The plan  provided
benefits based on the participants'  years of service.  

     During 1998,  the Company  terminated the plan and  transferred  the assets
into a newly  formed  401(k)  profit  sharing  plan.  The pension cost for 1998,
including the cost of termination,  amounted to $694,000.  
<PAGE>

     Pension cost for 1997 and 1996  included the  following  components:  

                                                          Years Ended June 30, 
                                                           1997      1996 
-------------------------------------------------------------------------------
(in thousands) 

Service cost-benefits earned during year                  $  43      $ 54  
Interest  cost  on  projected  benefit  obligation          158       150  
Actual investment  income earned on plan assets            (358)     (257)  
Amortization of transition
   liability and difference  between 
   actual and expected  return on plan assets               219       133 
-------------------------------------------------------------------------------
Pension cost                                               $ 62      $ 80
===============================================================================

The funded status of the plan was as follows for June 30, 1997:
(in thousands)

Accumulated benefit obligation,including
  vested benefits of $2,141                                $2,151
Plan assets at fair value                                  $2,349
Projected benefit obligation for
  participants'  service  rendered  to date                 2,151
-------------------------------------------------------------------------------
Plan  assets  in  excess  of projected benefit obligation     198
Unrecognized  gains                                          (333)
Unrecognized  prior service cost                               51
Unrecognized net obligation at July 1, 1987 being
  recognized over the participants' average
  remaining service period                                     88
-------------------------------------------------------------------------------
Pension asset                                              $    4
===============================================================================

     Plan assets were invested in cash equivalents,  U.S. Government securities,
corporate bonds, fixed income funds and common stocks.

     The discount rate used in  determining  the actuarial  present value of the
projected benefit  obligation was 7.5%. The expected long-term rate of return on
the plan's assets was 8.0%.

Midwest Grain Products, Inc. 1998 Annual Report pg. 33
<PAGE>
Notes to Consolidated Financial Statements

Employee Stock Ownership Plans.

     The  Company and its  subsidiaries  have  employee  stock  ownership  plans
covering  all  employees  after  certain   eligibility   requirements  are  met.
Contributions to the plans totaled $785,000, $726,000 and $374,000 for the years
ended June 30, 1998, 1997 and 1996, respectively.  Contributions are made in the
form of cash and/or additional shares of common stock.

     401(k) Profit Sharing Plans.  During 1998, the Company and its subsidiaries
formed  401(k)  profit  sharing  plans  covering  all  employees  after  certain
eligibility  requirements  are met.  Contributions  for 1998  totaled  $215,000.

     Post-Retirement  Benefit  Plan.  The Company and its  subsidiaries  provide
certain   post-retirement  health  care  and  life  insurance  benefits  to  all
employees. The liability for such benefits is unfunded.

     The status of the Company's plans at June 30, 1998 and 1997 was as follows:

                                                               June 30,
                                                           1998        1997
-------------------------------------------------------------------------------
(in thousands)
Accumulated post-retirement benefit obligation:
  Retirees                                                $3,561      $3,395
  Active plan participants                                 1,891       1,650
-------------------------------------------------------------------------------
Unfunded accumulated obligation                            5,452       5,045
Unrecognized actuarial gain                                1,068       1,200
-------------------------------------------------------------------------------
Accrued post-retirement benefit cost                      $6,520      $6,245
===============================================================================

     Net post-retirement benefit cost included the following components:

                                                                June 30,
                                                            1998        1997
-------------------------------------------------------------------------------
(in thousands)
Service cost                                                $101        $100
Interest cost                                                346         353
(Gain) loss amortization                                     (34)        (23)
-------------------------------------------------------------------------------
                                                            $413        $430
===============================================================================

     The weighted average annual assumed rate of increase in the per capita cost
of covered  benefits  (i.e.,  health care cost trend rate) is assumed to be 9.5%
(compared to 9.75% assumed for 1997)  reducing to 8.0% over seven years and 6.0%
over 15 years. A one  percentage  point increase in the assumed health care cost
trend rate would have increased the accumulated  benefit  obligation by $350,000
at June 30, 1998, and the service and interest cost by $42,000 for the year then
ended.

     A  weighted  average  discount  rate of 7.25% was used in  determining  the
accumulated benefit obligation.
<PAGE>
     Stock  Options.  The  Company  has  three  stock  option  plans,  the Stock
Incentive  Plan of 1996 ("The 1996  Plan"),  the Stock  Option  Plan for Outside
Directors ("The Directors Plan"), and the 1998 Stock Incentive Plan for Salaried
Employees  ("The  Salaried  Plan").  These  Plans  permit the  issuance of stock
awards,  stock options and stock  appreciation  rights to selected employees and
outside directors of the Company. The Company accounts for these plans under APB
Opinion  No. 25,  under  which no  compensation  cost has been  recognized.  Had
compensation cost been determined consistent with FASB Statement No. 123, the
Company's  1998 and 1997 net  income  and  earnings  per share  would  have been
reduced to the following pro forma amounts:
                                                           1998        1997
-------------------------------------------------------------------------------
Net Income (loss):
  As Reported                                            $(2,236)      $ 131
  Pro Forma                                              $(2,575)      $( 82)
Basis Earnings Per Share:
  As Reported                                            $  (.23)      $ .01
  Pro Forma                                              $  (.26)      $(.01)
Diluted EPS:
  As Reported                                            $  (.23)      $ .01
  Pro Forma                                              $  (.26)      $(.01)

Midwest Grain Products, Inc. 1998 Annual Report pg. 34

Notes to Consolidated Financial Statements

     Under the 1996 Plan,  the  Company  may grant  stock  incentives  for up to
450,000 shares of the Company's common stock to key employees.  The term of each
award is  determined  by the  committee of the Board of  Directors  charged with
administering  the 1996 Plan. Under the terms of the 1996 Plan,  options granted
may be either nonqualified or incentive stock options and the exercise price may
not be less than the fair value on the date of the grant. Through June 30, 1998,
the  Company  has  granted  options  to  purchase  256,000  shares  that  become
exercisable in yearly increments through January,  2002. Options granted through
June 30, 1998 have  exercise  prices  equal to fair market  value on the date of
grant.

     Under the Directors  Plan, each  non-employee or "outside"  director of the
Company  receives on the day after each annual meeting of stockholders an option
to purchase  1,000 shares of the Company's  common stock at a price equal to the
fair market value of the  Company's  common stock on such date.  Options  become
exercisable  on the 184th day  following  the date of grant and expire not later
than five years after the date of grant. Subject to certain adjustments, a total
of 90,000 shares are reserved for annual grants under the Plan. Through June 30,
1998, the Company had granted  options to purchase  14,000 shares,  all of which
were  exercisable as of June 30, 1998.

     Under the Salaried Plan,  the Company may grant stock  incentives for up to
300,000 shares of the Company's  common stock to full-time  salaried  employees.
The Salaried  Plan provides  that the amounts,  recipients,  timing and terms of
each award be determined by the Committee of the Board of Directors charged with
administering  the Salaried Plan.  Under the terms of the Salaried  Plan,  stock
options  granted may be either  nonqualified  or incentive stock options and the
exercise  price  may not be less than the fair  value on the date of the  grant.
Through  June 30,  1998,  the Company has  granted  options to purchase  171,360
shares,  which become  exercisable in yearly  increments  through  March,  2003.
Options granted through June 30, 1998, have exercise prices equal to fair market
value on the date of grant.
<PAGE>
     A summary of the status of the  Company's  three stock option plans at June
30, 1998 and 1997 and changes during the years then ended is presented below:


                                   1998                    1997
-------------------------------------------------------------------------------
                                       Weighted               Weighted
                                        Average               Average
                                       Exercise               Exercise
                             Shares     Price       Shares     Price
-------------------------------------------------------------------------------
Outstanding, Beginning
  of Year                   183,500     $14.68      90,000     $14.00
Granted                     257,860      13.60      93,500      15.32
Exercised
-------------------------------------------------------------------------------
Outstanding,End of Year     441,360     $14.04     183,500     $14.68
===============================================================================

These are comprised as follows:
                                                               Shares
                                               Remaining     Exercisable
                                              Contractual        at
                                   Exercise      Life         June 30,
                         Shares      Price      (Years)         1998
-------------------------------------------------------------------------------
1996                     90,000     $14.00        2.5          48,500
Plan                     86,500     $15.25        3.5          24,250
                         79,500     $13.75        4.5
Directors'                7,000     $16.25        3.25          7,000
Plan                      7,000     $14.25        4.25          7,000
Salaried Plan           171,360     $13.50        4.67
-------------------------------------------------------------------------------
                        441,360                                86,750
===============================================================================

     The fair value of each option  grant is  estimated on the date of the grant
using the  Black-Scholes  option pricing model.  The following  weighted-average
assumptions  were used for the year ended June 30, 1998: Risk free interest rate
of 5.50%; expected dividend yield of 0%; expected volatility of 33%.

Midwest Grain Products, Inc. 1998 Annual Report pg. 35

<PAGE>
Notes to Consolidated Financial Statements

Note 11: Operating Leases

     The Company has several noncancellable  operating leases for railcars which
expire from July 1998 through  November 2001. The leases  generally  require the
Company to pay all service costs  associated with the railcars.  Rental payments
include minimum rentals plus contingent amounts based on mileage.

     Future minimum lease payments at June 30, 1998 are as follows:

(in thousands)
1999                                        $2,025
2000                                           881
2001                                           398
2002                                           263
2003                                           157
-------------------------------------------------------------------------------
Future minimum lease payments               $3,724
===============================================================================

     Rental  expense for all  operating  leases with terms longer than one month
totaled $1,488,554, $1,438,466 and $1,546,000 for the years ended June 30, 1998,
1997 and 1996, respectively.

     Minimum future rentals receivable under noncancellable  operating subleases
at June 30, 1998, were $187,560.

Note 12:  Significant

Estimates and Concentrations  Generally accepted  accounting  principles require
disclosure of certain significant  estimates and current  vulnerabilities due to
certain  significant  concentrations.  Those matters include the following:

     * A  majority  of the  Company's  labor  force  is  covered  by  collective
bargaining  agreements which expire August 31, 1999 at the Atchison plant and on
November 1, 2000 at the Pekin plant.

     * Under its self-insurance  plan, the Company accrues the estimated expense
of health care and  workers'  compensation  claims  costs based on claims  filed
subsequent  to  year-end  and an  additional  amount  for  incurred  but not yet
reported claims based on prior experience. An accrual for such costs of $454,000
is included in the accompanying 1998 financial statements. Claims payments based
on actual claims ultimately filed could differ materially from these estimates.

     * During the years  ended June 30,  1998,  1997 and 1996,  the  Company had
sales to one  customer  accounting  for  approximately  10.5%,  8.2% and  10.7%,
respectively of consolidated sales.
<PAGE>
Note 13. Additional Cash Flows Information

                                                      Years Ended June 30,
                                                  1998       1997       1996
-------------------------------------------------------------------------------
(in thousands)
Noncash Investing and Financing Activities:
Purchase of property and equipment in
  accounts payable                            $     29   $    211   $    12
Additional Cash Payment Information:
Interest paid (net of amount capitalized)        1,887      1,909     2,585
Income taxes paid (refunded)                      (178)    (2,986)    2,105
===============================================================================

Note 14: Contingencies

     There  are  various  legal  proceedings   involving  the  Company  and  its
subsidiaries.  Management  considers  that the  aggregate  liabilities,  if any,
arising  from such  actions  would  not have a  material  adverse  effect on the
consolidated financial position or operations of the Company.

Midwest Grain Products, Inc. 1998 Annual Report pg. 36






