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                                   FORM 10-K



                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549



(Mark One)



  X               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                  SECURITIES EXCHANGE ACT OF 1934



            For the fiscal year ended December 31, 1997



                                      OR



                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

                  SECURITIES EXCHANGE ACT OF 1934



                  For the transition period from             to      



                       Commission File Number :  1-7183



                                TEJON RANCH CO.                    

            (Exact name of Registrant as specified in its Charter)



          Delaware                                   77-0196136      

(State or other jurisdiction              (IRS Employer Identification

 of incorporation or organization)         Number)



                    P.O. Box 1000, Lebec, California 93243

               (Address of principal executive office)



Registrant's telephone number, including area code:(805) 327-8481



          Securities registered pursuant to Section 12(b) of the Act:



                                                Name of Each Exchange on

Title of Each Class                           Which Registered       

Common Stock                                    American 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 (229.405 of this chapter) 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 of Registrant's Common Stock, $.50 par value

per share, held by persons other than those who may be deemed to be affiliates

of Registrant on March 19, 1998 was $347,279,086 based on the closing price on

that date on the American Stock Exchange.



      The number of Registrant's outstanding shares of Common Stock on March

19, 1998 was   12,685,994 shares.



DOCUMENTS INCORPORATED BY REFERENCE:



      Portions of the Proxy Statement for the Annual Meeting of Stockholders

to be held on May 11, 1998 relating to the directors and executive officers of

Registrant are incorporated by reference into Part I, Item 4, and Part III.



                                                      Total Pages -  168

                                                      Exhibit Index - Page 60











                                    PART I



Item 1. Business



      Throughout Item I-"Business," Item 2-"Properties," Item 3-"Legal

Proceedings," and Item 7-"Management's Discussion and Analysis of Financial

Condition and Results of Operations," Registrant has made forward-looking

statements regarding future developments in the cattle industry, the

Registrant's plans for future plantings of permanent crops, future yields and

prices for the Registrant's crops, future prices, production and demand for

oil and other minerals, future development of the Registrant's property, and

potential losses to the Company as a result of pending environmental

proceedings.  These forward-looking statements are subject to factors beyond

the control of Registrant (such as weather and market forces) and, with

respect to the Registrant's future development of its land, the availability

of financing and the ability to obtain various governmental entitlements.  No

assurance can be given that actual future events will be consistent with the

forward-looking statements made in this Annual Report.



      Registrant owns approximately 270,000 contiguous acres of land located

in Kern and Los Angeles Counties in the State of California on which it is

engaged principally in production and sale of beef cattle, farming, and

leasing of land for oil, gas and mineral production and commercial purposes. 

Registrant is also engaged in planning the future uses of its lands.  



      The following table shows the revenues, operating profits and

identifiable assets of each of Registrant's industry segments for the last

three years:





                 FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

                       (Amounts in thousands of dollars)

                                                       



                                          1997       1996           1995  

Revenues (1)



Livestock                            $   24,555  $   4,573      $   6,748 

Farming                                   9,173      9,107          7,973 

Resource Management                       2,696      2,508          2,188 

Commercial and Land Use                   3,403      1,464          1,271 

Segment Revenues                         39,827     17,652         18,180 

Interest Income                           1,159      1,308          1,374 

Total Revenues                        $  40,986  $  18,960      $  19,554 



Operating Profits



Livestock                             $   1,499  $     412      $      41 

Farming                                   2,627      3,134          1,811 

Resource Management                       1,328      1,356          1,241 

Commercial and Land Use                   1,003       (841)        (1,262)

Segment Profits (2)                       6,457      4,061          1,831 



Interest Income                           1,159      1,308          1,374 

Corporate Expense                        (2,346)    (2,266)        (2,046)

Interest Expense                           (747)      (295)          (436)

Operating Profits                     $   4,523  $   2,808      $     723 

Identifiable Segment

  Assets  (3)

Livestock                             $  24,215  $   5,554      $   5,533 

Farming                                  10,176     10,545         10,370 

Oil and Minerals                            363        259            258 

Commercial and Land Use                   5,933      2,874          2,713 

Corporate                                23,006     28,137         26,329 



Total Assets                          $  63,693  $  47,369      $  45,203 





(1)   Intersegment sales were insignificant.



(2)   Segment Profits are revenues less operating expenses, excluding interest

      and corporate expenses.



(3)   Identifiable assets by segment include both assets directly identified

      with those operations and an allocable share of jointly-used assets. 

      Corporate assets consist primarily of cash and cash equivalents,

      refundable and deferred income taxes and buildings and improvements.



Livestock Operations



      Registrant conducts a beef cattle range operation upon those portions of

its ranch which are not devoted to farming, commercial or other purposes. 

This range operation depends primarily upon forage from natural vegetation. 

The beef cattle activities include both commercial cow-calf operations (the

maintenance of a cattle herd whose offspring are used to replenish the herd,

with excess numbers being sold commercially) and the use of stocker cattle

(cattle purchased at light weights for growing on available range forage

before being resold).  At December 31, 1997, Registrant's cattle herd numbered

approximately 30,975 of which approximately 22,882 head were stockers and the

remainder were in the breeding herd.  At December 31, 1996, Registrant's

cattle herd numbered approximately 15,316 of which approximately 8,350 head

were stockers.  Registrant's range cattle are either sold to stocker and

feedlot operators or fed at Registrant's feedlot in Texas and sold to packers. 

As to the sale of cattle, Registrant is in direct competition with other

commercial cattle operations throughout the United States.  The prices

received for Registrant's cattle are primarily dependent upon the commodity

market's perception of supply and demand at the time cattle are sold.  In an

attempt to reduce the market risks of its livestock activities, Registrant

usually hedges future sales of cattle in the futures and options markets or

obtains fixed prices for future delivery through contracts with cattle buyers,

feedlots, or packing houses.  Registrant purchased a feedlot in 1997 in order

to further vertically integrate its beef operations.



      During the last low in the cattle cycle a number of companies in the

cattle industry began to explore in depth various forms of strategic alliances

within the production, feeding and meat-packing segments of the cattle

business.  Registrant believes there will be dramatic shifts in the form of

cattle marketing in the United States.  To be successful in the cattle

industry in the future Registrant believes that the producers of beef must

become more consumer oriented.  To achieve this goal Registrant is beginning a

program to vertically integrate its cattle operations.  Vertical integration

will allow Registrant to control the quality of the product through the

production process to the end users.  To vertically integrate Registrant must

control the feeding of cattle and create strategic alliances with other

producers to supply beef products to end users.  To begin the process of

vertical integration within the beef industry, Registrant has purchased the

assets of a cattle feedlot that is located in western Texas.  This feedlot

will allow Registrant to control the feeding and sales of cattle.  The

purchase of the feedlot occurred on March 10, 1997.



      Cattle prices over the last year were steadily improving until late 1997

and early 1998 when the impact of the Asian financial crisis hit the cattle

commodity markets.  With beef being the largest dollar agricultural export and

Asia receiving much of the beef exported, prices fell significantly during

December 1997 through early February 1998.  Not only have prices declined in

the beef market, but prices for hides, which are used in the production of

leather, have also declined.  Hide prices have declined almost 30% over this

time frame.  It is anticipated that prices later in 1998 will improve when

compared to current levels due to fewer head of cattle in feedlots.  The

increase in price, however, will be less than normally anticipated due to the

decline in Asia's economies.  Overall, Registrant believes it will see lower

prices during 1998, which will impact cattle sales revenues.





Farming Operations



      In the San Joaquin Valley, Registrant farms permanent crops including

the following acreage:  wine grapes-1,528, almonds-1,366, pistachios-738 and

walnuts-295.  Included in these acreage figures are: 308 acres of pistachio

trees planted in 1994, with the first harvestable crop expected in 1998; 72

acres of Rubired grapes planted in 1996, with the first harvestable crop

expected in 1998; 152 acres of almonds planted in 1996, with the first

harvestable crop expected in 1999; and 36 acres of Cabernet Sauvignon and Ruby

Cabernet wine grapes planted in early 1997, with the first harvestable crop

expected in 1998.  During 1997, Registrant began land preparation for the

development of 300 acres of almonds which were planted in early 1998 and 300

acres of almonds to be planted in 1999.  Registrant's objective in planting

new trees is to offset the normal yield decline as its older plantings reach

productive maturity and to improve revenues from farming operations in future

years.  As certain of Registrant's permanent plantings age to the point of

declining yields, Registrant will evaluate the advisability of replanting such

crops, or replacing them with different plantings, depending upon market

conditions.



      Registrant sells its farm commodities to several commercial buyers.  As

a producer of these commodities, Registrant is in direct competition with

other producers within the United States and throughout the world.  Prices

received by Registrant for its commodities are determined by total industry

production and demand levels.  Registrant attempts to improve price margins by

producing high quality crops through cultural practices and by obtaining

better prices through marketing arrangements with handlers.



      In 1997, almonds produced were sold to two domestic commercial buyers,

with one of the buyers receiving approximately 70% of the crop.



      The California almond industry is subject to a federal marketing order

which empowers the Secretary of Agriculture to set the percentage of almonds

which can be sold during any crop year and the percentage of almonds to be

held in reserve in order to assist in the orderly marketing of the crop. 

During 1997 and 1996 the saleable percentage was set at 100% of the total

almond crop.



      In 1997, Registrant's pistachios were sold to one customer. 

Registrant's 1997 walnuts were sold to two customers, each receiving

approximately 50% of the crop.  During 1997 the majority of wine grapes were

sold to one winery.



      Yields from Registrant's farming operations were below 1996 yields with

the exception of grapes.  While the California almond industry produced a near

record crop, Registrant's almond production was 12% below 1996 due to the

timing of rains and cold temperatures during the critical pollination period. 

Prices for almonds declined during 1997 due to the increased level of

production for the year within the industry.  The combination of lower yields

and prices caused revenues to decline approximately 40%.



      Grape yields in 1997 were 29% greater than 1996 production, and 1997

grape revenues were 25% above  the 1996 crop.  Pistachios were in the "off

year" of their alternate bearing cycle and, while the yields were 20% below

the 1996 crop, they were much higher than previous "off year" yields. 

Pistachio revenue in 1997 was flat when compared to 1996 pistachio revenues. 

Prices for pistachios increased slightly when compared to the prior year due

to crop yields being slightly below the previous year's level.  Registrant's

1997 walnut crop yield was 39% below last year's production, and revenues from

walnuts fell by approximately 39%.  Prices for walnuts remained fairly stable

due to flat production for the industry.  Registrant's crop was below

expectation due to below-normal chilling hours during the dormancy period and

to high production from the trees over the last three years causing stress to

the trees.



      Overall 1997 crop revenues were less than expected due mainly to lower

than expected almond and walnut production.  See "Management's Discussion and

Analysis of Financial Statements and Results of Operations".  Demand for

Registrant's crops is expected to remain good throughout 1998.  Management

expects further price pressure on both nuts and grapes as new production

within California comes online.  Registrant has some price protection with

regard to its wine grapes because it has three years remaining on a contract

with a winery that provides the better of a minimum price or market price for

its grape shipments.  Nut crop markets are particularly sensitive to the size

of each year's world crop.  Large crops in California and abroad can rapidly

depress prices.



      1997 was an excellent water year with 100% of Registrant's water

entitlement being available from the State Water Project.  In addition, there

was sufficient runoff from local mountain streams throughout the year,

allowing Registrant to capture and utilize this water to offset some of the

higher priced State Water Project water.  Because of the abundant water,

Registrant was able to bank (percolate into the underground) some of its

excess supply for future use and was able to exchange some of its 1997 water

deliveries for deliveries for banking purposes in future years plus a

favorable exchange fee.  The State Department of Water Resources has announced

its 1998 water supply at 100% of full entitlement.  This is only a tentative

commitment, however, and is subject to change.  This level of supply, if it

ultimately turns out to be available, will cover all of the Registrant's

farming needs.



      See discussion of water contract entitlement and long-term outlook for

water supply under Part I, Item 2, "Properties-Farmland".



Resource Management



      The Resource Management Division is made up of Registrant's oil and

mineral leases, game management program, film location activities, and the

quarter horse breeding program.  These are all lines of business which are

based on the use of ranch lands and resources but are not of the size to

warrant separate divisions such as livestock, farming and real estate.



      Registrant leases certain portions of its land to oil companies for the

exploration for, and production of, oil and gas but does not itself engage in

any such exploratory or extractive activities.



      As of December 31, 1997, approximately 9,645 acres were committed to

producing oil and gas leases from which the operators produced an average of

approximately 392 barrels of oil, 221 MCF of dry gas, and 10 gallons of wet

gas per day during 1997.  Approximately 1,600 acres were also held under

exploratory leases.  Registrant's share of production based upon its average

royalty rate during the last three years has been 49, 66, and 62 barrels of

oil per day for 1997, 1996, and 1995, respectively.  Approximately 264

producing oil wells were located on the leased land as of December 31, 1997. 

An additional 66 wells during 1997 have been shut-in and non-productive. 

Shut-in wells occur as oil revenues received by the operators lag behind the

cost of keeping the wells in production.  Low prices in the oil market have

been a disincentive to exploratory leasing and drilling on Registrant's lands. 

No new wells were drilled on Registrant's lands during 1997.



      Prices for Kern County's heavy crude oil dropped throughout 1997,

hitting a low of $6.75 per barrel during March 1998.  These reduced prices for

early 1998 will negatively impact Registrant's royalties from the producing

wells.  Registrant attempts to require lessees to honor their lease

obligations to legally and properly abandon non-producing wells in an

environmentally sound manner, but its success at this is mixed.



      Estimates of oil and gas reserves on Registrant's properties are unknown

to Registrant.  Registrant does not make such estimates and does not file

reports as to reserve estimates with governmental agencies.  Registrant's

lessees do not make information concerning reserves available to Registrant.



      Registrant has approximately 2,440 acres under lease to National Cement

Company of California, Inc. ("National") for the purpose of manufacturing

portland cement from limestone deposits found on the leased acreage.  National

owns and operates on the property a cement manufacturing plant having a design

capacity of 600,000 tons of cement per year.  The manufacturing plant is

currently being redesigned to have a production capacity of 1,000,000 tons. 

The amount of payment which Registrant receives under the lease is based upon

shipments from the cement plant.  The term of this lease expires in 2007, but

National has remaining options to extend the term for two additional

successive increments of 20 years each and one final increment of 19 years. 

For information as to proceedings under environmental laws relating to the

cement plant, see Item 1-"Legal Proceedings".



      Approximately 433 acres of Registrant's land are leased to owners and

operators of sand and gravel screening and rock crushing plants under two

leases with rental payments based on the amount of sand and gravel removed and

sold.  Registrant is actively searching for a new lessee for a third area of

the ranch where rock aggregate deposits have been extracted in the past.



      The quarter horse program consists of the breeding of quality blood line

quarter horses, the sale of horses, the boarding and training of horses, and

the management of horse events.  The quarter horse program will continue to

direct its efforts to the improvement of Registrant's breeding mares and the

hosting of competitive events to enhance the revenues of the operation.



      Registrant also provides filming location services and a game management

program, which is a hunting program that is managed in close cooperation with

California Department of Fish and Game.



Real Estate



      Registrant leases to various tenants lands which are used for a full-

service truckstop facility, a truck wash, four auto service stations with

convenience stores, four full-service restaurants, four fast-food operations,

a motel, two antique shops, a United States Postal Service facility, several

microwave repeater locations and radio and cellular transmitters/relay sites. 

In addition, there is a 1,400-acre site leased to a major aeronautical firm

for testing facilities.



      The Real Estate Division continues to focus substantial attention on

additional development along the Interstate 5 corridor, where the Company owns

approximately 16 miles of frontage, with commercial land around four separate

interchanges.  The land planning process in previous years had identified the

Interstate 5 corridor as an area of focus in near term planning and

entitlement activities.  (See Part I, Item 2, "Properties-Land Use Planning".)



      During 1997, new commercial activity included the opening of a new

Country Side Inn hotel at the Grapevine Center during March 1997 and the

establishment of a new 350-acre Tejon Industrial Complex ("Industrial

Complex") at the I-5/Laval Road interchange.  The first project in the

Industrial Complex was announced during December 1997.  Registrant created a

joint venture with Petro Stopping Centers for the purpose of developing a

major Travel Plaza on 50 acres of land in the Industrial Complex. 

Construction of the Travel Plaza is scheduled to begin in the second quarter

of 1998 and is expected to be completed before the end of the fourth quarter

of 1998.  Negotiations for two new commercial leases at the Grapevine Center

have been initiated and are expected to close by the end of the second quarter

of 1998.



      Within the commercial leasing area, Registrant is in direct competition

with other landowners who have highway interchange locations along Interstate

5 within California.



Customers



      During 1997, 1996 and 1995 the following customers accounted for more

than 10% of Registrant's consolidated revenues: Golden State Vintners, a

purchaser of grapes (14% in 1997, 21% in 1996, and 18% in 1995), Harris Ranch

(18% in 1996), and Timmerman Cattle (26% in 1995).



Employees



      At December 31, 1997, Registrant had 88 full-time employees.



                       Executive Officers of Registrant



      The following table shows, as to each executive officer of Registrant,

the offices held as of March 23, 1998, the period the offices have been held,

and the age of the executive officers.  All of such officers serve at the

pleasure of the board of directors.



Name                    Offices                 Held Since        Age



Robert A. Stine   President and Chief           1996              51

                        Executive Officer, Director



Matt J. Echeverria      Senior Vice President,  1987              47

                        Livestock



John A. Wood            Vice President, Farming 1978              60



Dennis Mullins          Vice President,         1993              45

                        Public Affairs, Secretary

                        and General Counsel



Allen E. Lyda           Vice President,         1990              40

                        Finance, Treasurer

                        and Assistant Secretary



David Dmohowski         Vice President,         1991              50

                        Land Planning



James Taylor            Vice President,         1997              59

                        Real Estate



      A description of present and prior positions with Registrant, and

business experience for the past five years is given below.



      Mr. Stine has been employed by Registrant since May 1996, serving as

President and Chief Executive Officer and as a Director.  Mr. Stine served as

the Chief Executive Officer of the Collins Companies from 1986 to April 1995.



      Mr. Echeverria has served as Vice President since 1987 and was elected

Senior Vice President in 1995.  He also served as acting Chief Executive

Officer of Registrant from May 1995 to May 1, 1996.



      Mr. Wood has served Registrant as Vice President since 1978.



      Mr. Mullins has been employed by Registrant since 1993, serving as Vice

President, Public Affairs, Secretary and General Counsel.  From January 1992

to January 1993 he served as General Counsel of the United States General

Services Administration in Washington, D.C.



      Mr. Lyda has been employed by Registrant since 1990, serving as Vice

President, Finance and Treasurer.  He was elected Assistant Secretary in 1995.

      

      Mr. Dmohowski has been employed by Registrant since January 1991,

serving as Vice President, Land Planning.



      Mr. Taylor has been employed by Registrant since  May 1997, serving as

Vice President, Real Estate.    From 1992 to 1997, he was a principal partner

and President of Urban Assist, Inc., a planning and project management company

located in Irvine, California.



Item 2.   Properties



      Registrant owns approximately 270,000 acres of contiguous land located

approximately 60 miles north of Los Angeles and approximately 15 miles east of

Bakersfield.  The land is undeveloped, except for certain limited farming and

commercial uses.  Included in the land are portions of the San Joaquin Valley,

foothills, portions of the Tehachapi Mountains and portions of the western end

of the Antelope Valley.  A number of key transportation and utility

facilities, including Interstate 5 (a major north-south federal highway in

California), U.S. Highway 58, California Highways 138 and 223, the California

Aqueduct, the Southern Pacific-Santa Fe Railway Line and various transmission

lines for electricity, oil, natural gas and communication systems cross

Registrant's lands.



      For information as to Registrant's livestock, farming, resource

management and real estate operations on the land, see Part I, Item 1 -

"Livestock Operations," "Farming Operations," "Oil and Minerals," and "Real

Estate."



Land Use Planning



      Registrant has continued to engage in planning activities related to 

future uses of its lands.  Over the last two years Registrant initiated

planning programs intended to guide decision making relating to future

development on the Ranch with special focus on the important Interstate 5

corridor.  During 1997 Registrant retained a team of experts to evaluate the

market feasibility of developing a major destination land use at the Grapevine

Center.  Evaluation and marketing studies continue to proceed forward for this

project.  Evaluations are also being conducted with various groups to

determine the development potential of a rural ranch estates program in the

central canyon areas near Tejon Lake.  Planning and market research for this

product will continue during 1998.  Since the prospects and timing of

residential and recreational projects are dependent on market demand, the

timing of any significant residential and/or recreational development is

uncertain.  Registrant is evaluating the environmental and regulatory factors

that might affect its ability to secure value-enhancing entitlements for

potential land development.  The results of this evaluation will help

Registrant in formulating long-range entitlement strategies.  The timing of

any extensive development of Registrant's property and its nature and extent

are expected to be dependent upon market demand, the availability of adequate

development capital and the obtaining of appropriate governmental permits and

approvals.



      Approximately 250,000 acres of Registrant's land are located in Kern

County, California. The Kern County General Plan for this land contemplates

continued commercial, resource utilization, farming, grazing and other

agricultural uses, as well as certain new developments and uses, including

housing and recreational facilities.  While the County General Plan is

intended to provide general guidelines for land use and development, it is

subject to amendment to accommodate changing circumstances and needs.  In

addition to the General Plan, ranch lands will require specific zoning and

site plan approvals prior to actual development.



      Registrant has not yet made specific proposals to the County to

implement any part of its proposed land use concept, except at the Grapevine

and Laval Road Interchanges on Interstate 5.  Along the Interstate 5 corridor,

Registrant is aggressively pursuing additional commercial activity in order to

meet the needs of the 50,000 vehicles per day that travel through the ranch. 

To meet this built-in customer base, Registrant is investigating several

potential opportunities that can expand current commercial activities.



      The remainder of Registrant's land, approximately 20,000 acres, is in

Los Angeles County.  This area of the ranch is accessible from Interstate 5

via Highway 138 and lies 30 miles west of the Antelope Valley communities of

Palmdale and Lancaster.  Los Angeles County has adopted general plan policies

which contemplate future limited residential development of portions of this

land, subject to further assessments of environmental and infrastructure

constraints.  No specific land use proposals have been made by Registrant to

the County.  Registrant continues to monitor regional planning issues and

continues to develop its liaison with Los Angeles County government and other

regulatory agencies in order to preserve future development opportunities.  



      In addition to its agricultural contract water entitlements, Registrant

has an entitlement to obtain from the California State Water Project

sufficient water to service a substantial amount of future residential and/or

commercial development.  Portions of the property also have available ground

water; this would be sufficient to support low density residential development

in the Tejon Lake area and significant commercial development in the

Interstate 5 corridor.



      Portions of Registrant's property consist of mountainous terrain, and

much of the property is not presently served by developed roads or by utility

or water lines.  Any significant development of the property would involve the

construction of roads, utilities and other expensive infrastructure and would

have to be done in a manner which accommodates a number of environmental

concerns, including endangered species and wetlands issues, that may limit

development of portions of the property.



      Due to the property's location and its undeveloped state, from time to

time unsolicited proposals are made for governmental or quasi-public uses of

portions of the property or neighboring lands by entities, some of which may

have the power of eminent domain.  For the most part Registrant opposes such

uses because, to the extent that any such proposals may be implemented through

the use of the power of eminent domain or otherwise, the flexibility to

develop some of Registrant's other lands could be correspondingly limited. 

Registrant completed negotiations with a company concerning the construction

of a major oil pipeline over the Ranch during December 1995.  The pipeline

will follow an alignment of other oil pipelines which are along the Interstate

5 corridor.  Final governmental approvals were received by the pipeline

company in 1996, and construction commenced in 1997.  The pipeline company

purchased its easement from Registrant in November 1997 for $2,050,000. 

Registrant's lands are also being evaluated as a possible route for a high

speed rail system between Los Angeles and San Francisco.



Farmland



      Although changing crop market conditions and the cost and availability

of irrigation water bear on the economic feasibility of farming on

Registrant's lands, portions of the land located in the San Joaquin Valley are

suitable for farming a wide variety of tree, vine and row crops.



      Existing long-term contracts with the Wheeler Ridge-Maricopa Water

Storage District ("Wheeler Ridge") provide for water deliveries from the

California State Water Project ("Project") to certain farmland in the San

Joaquin Valley belonging to Registrant.  The long-term water supply picture in

the state is uncertain, however, not only due to recurring droughts, but also

because of existing and likely additional restrictions placed on water

exported from the Sacramento-San Joaquin River Delta ("Delta") to protect

allegedly endangered species and improve water quality in the Delta. 

Reserving water flowing into the Delta for environmental purposes has been

required.  The reserved water then flows into the San Francisco Bay and is

unavailable for beneficial use.  The impact of these regulations could be

severe during drought years when the supply of water for all uses is limited. 

Pursuant to an interim agreement that has been extended and now expires in

late 1998 among the federal agencies, the concerned state agencies,

environmental groups, and water users, a maximum of 1.1 million acre feet of

water has been reserved for such environmental uses.  This water would

otherwise be available for beneficial use by state and federal water project

participants.  However, there is no assurance that this interim agreement will

be made permanent or that the final agreement now in the final stages of

development will limit water used for environmental purposes to a comparable

amount.



      Registrant's total water entitlement substantially exceeds its permanent

crop needs.  If a  100% allocation is made by the Project to the Kern County

Water Agency, of which Wheeler Ridge is a sub-unit, then deliveries from

Wheeler Ridge will be sufficient for Registrant's 1998 crops.  Longer term,

however, year-to-year uncertainty of the water supply and potentially higher

costs for water may jeopardize the financial viability of Wheeler Ridge by

forcing marginal operators out of business and shifting a greater portion of

the financial burden imposed by long term fixed costs and defaulted water

assessments upon the remaining growers.  High water costs prevent farmers from

raising annual crops.  Farmers also may be unable to obtain conventional

financing for the higher value permanent crops because of the unpredictability

of a water supply to nourish the trees and vines.  These effects have been

mitigated by the set of agreements among the State and nearly all Project 

water users known as the "Monterey Agreement".  The Monterey Agreement should

improve the reliability of water supply to agricultural users in drought years

by eliminating the priority for urban use that resulted in agriculture's

allocation being reduced to as low as zero in dought years, and should improve

the financial viability of Wheeler Ridge and similarly situated water

districts by allowing for the sale of substantial water entitlement to urban

users.  A number of such water transfers have occurred, and interest in

further transfers has been expressed by urban water agencies.



      Registrant's contracts with Wheeler Ridge, as of December 31, 1997,

provide for annual water entitlement to approximately 5,488 acres of

Registrant's lands.  Existing Wheeler Ridge water delivery facilities are

capable of delivering the contract water entitlement amounts to all of that

acreage.  The water contracts require  annual payments related to the Project

and Wheeler Ridge  fixed costs, whether or not water is used or available. 

Payments made under these contracts in 1997 by Registrant totaled

approximately $1,215,000.



      In 1995, Registrant transferred 4,021 acre feet of entitlement from

Wheeler Ridge to Tejon-Castaic Water District ("TCWD"), which lies entirely

within the boundaries of Registrant's lands.  TCWD contributed 900 acre feet

of entitlement to the Kern Water Bank Authority in order to join the Authority

and obtain water banking rights.  The Kern Water Bank provides Registrant with

a supplemental source of water for agricultural and development uses in

drought years.  The remaining 3,121 acre feet retained by TCWD are now more

directly under the control of Registrant and would be available for future

development purposes in the San Joaquin Valley or in other areas of the Ranch. 

This water could also be used for farming purposes in the same manner it was

used before the transfer with the consent of Wheeler Ridge and the Kern County

Water Agency.



      Lands benefiting from Wheeler Ridge are subject to contingent assessment

liens under the California Water Storage District Law. These liens are senior

in priority to any mortgages on the property.  The liens secure Wheeler Ridge

bonds issued to finance construction of water distribution facilities.  Lien

enforcement can involve foreclosure of the liens and the resulting loss of the

lands subject to the liens.  These liens will be enforced only if Wheeler

Ridge revenues from water contracts and other regular revenue sources are not

sufficient to meet Wheeler Ridge obligations.  Lien assessments are levied by

Wheeler Ridge based on estimated benefits to each parcel of land from the

water project serving the land.  Lands belonging to Registrant are presently

subject to such contingent liens totaling approximately $817,000.  Since

commencement of operations in 1971, Wheeler Ridge has had sufficient revenues

from water contract payments and other service charges to cover its

obligations without calls on assessment liens, and Wheeler Ridge has advised

Registrant that it does not anticipate the need to make any calls on

assessment liens.



      Under California law, lands located in a water storage district may be

reassessed at the request of the district board of directors or at the request

of 10% or more of the district landholders.  As a result of any reassessment,

which is based upon relative benefits from district facilities to each land

parcel, the lien assessments may be redistributed and may increase or decrease

for any particular parcel.  Additional projects, if any, which might result in

new assessment liens, must be approved by landowners of more than one-half of

the land (based on valuation) in the district as well as by the California

Department of Water Resources.



Item 3.   Legal Proceedings



      Registrant leases land to National Cement Company of California, Inc.

("National") for the purpose of manufacturing Portland cement from limestone

deposits found on the leased acreage.  See "Business-Resource Management."  In

August 1997, National ceased burning hazardous waste as supplemental fuel in

the cement plant located on the land leased from Registrant.  The fuel was

obtained, transported, stored and processed by National's subtenant, Systech

Environmental Corporation ("Systech").  Systech has removed the above-ground

improvements from its former sublease premises and is in the process of

preparing a formal closure plan under the Resource Conservation and Recovery

Act ("RCRA").  After this closure plan is approved by the California

Department of Toxic Substances Control, Systech will undertake the site

investigation and (if needed) cleanup work specified in the closure plan.



      A number of contaminated sites have been discovered on the land leased

to National, including several landfills containing industrial waste, a

storage area for drums containing lubricants and grease, an underground plume

of chlorinated hydrocarbons, and diesel fuel which leaked from a pipeline. 

Because the waste in some or all of the sites has contaminated groundwater,

the California Regional Water Quality Control Board for the Lahontan Region

(the "Regional Water Board") has issued investigation and cleanup orders with

respect to certain of the sites.  These orders, which have different

provisions depending on the site involved, generally require National, Lafarge

Corporation ("Lafarge"), the predecessor in interest to National under the

existing lease, and the Registrant to investigate and clean up soil and

groundwater contamination in the vicinity of the sites.  Although Registrant

did not deposit any of the contaminants, the orders state that Registrant, as

a landowner, will be responsible for complying with the orders if Lafarge and

National fail to perform the necessary work.  Civil fines for violations of a

Regional Water Board order can be as high as $10,000 per day for each day the

violation occurs and as high as $15,000 per day for each day a discharge of

pollutants and a violation of the order occurs.



      Lafarge has undertaken the investigation and remediation of the

landfills and has completed the removal of contaminated soils above the

groundwater level from them.  Additional work is required to alleviate

groundwater contamination resulting from the landfills.  The order issued by

the Regional Water Board with respect to the drum storage area has been

dismissed because of the low level of petroleum contamination.  Lafarge has

completed a substantial amount of the site investigation with respect to the

chlorinated hydrocarbons.  Lafarge is undertaking additional investigation

work as directed by the Regional Water Board, and is developing a feasibility

study evaluating different remediation options.  The plume of chlorinated

hydrocarbons covers an extensive area and has migrated off of the leased

premises in one direction.  With respect to the diesel pipe leak, Lafarge has

performed some site investigation and requested that the Regional Water Board

approve closure of the site without requiring any remediation.  Registrant

opposed the request, and in December 1996, the Regional Water Board denied

Lafarge's request.  Registrant believes that Lafarge will be directed or

ordered to undertake further site investigation.  There appears to be

significant contamination along the length of the pipeline, and portions of

the contamination appear to be located under the cement plant itself, which

means that remediation, if possible, may be more difficult and expensive.



      On October 9, 1997, the Regional Water Board named National and Lafarge

as primarily responsible parties in a cleanup and abatement order and named

National as the primarily responsible party in a cease and desist order and

waste discharge requirements.  Those orders require investigation and certain

remedial activities related to the cement kiln dust piles on the premises but

do not require the removal or disposal of the piles.  The Regional Water Board 

named Registrant secondarily responsible on these three orders relating to the

kiln dust piles, which means that Registrant could be ordered to perform the

obligations of National or Lafarge under the orders if either of them should

fail to do so.  Registrant has appealed these orders but the appeals are

currently stayed pending Lafarge's and National's compliance.  



      The United States Environmental Protection Agency ("USEPA") has proposed

to regulate all kiln dust nationwide under the hazardous waste program, but

with a tailored set of standards.  The proposed rules would mostly involve

careful groundwater monitoring and possibly covering dust piles so they do not

blow in the wind.  Measures of this type are already being taken by National

on the cement plant site.  Kiln dust from cement plants using supplemental

fuels like the plant operated by National will not be treated any differently

under this program.  The cement industry filed comments opposing the proposed

rules for kiln dust and is engaged in a legislative effort to secure the

management of kiln dust as a non-hazardous waste.  The industry has also

proposed an enforceable agreement between the cement manufacturers and USEPA

with respect to the management of kiln dust in lieu of regulations. USEPA is

considering this approach. In 1995, the California Legislature enacted

legislation classifying kiln dust as a non-hazardous waste if it is managed

on-site under regulations administered by a regional water quality control

board and it would otherwise be classified as hazardous solely because of its

extreme pH content.  Registrant believes this legislative reclassification

will apply to the kiln dust pile currently used by National but not to older

piles created by Lafarge and its predecessors, which are believed to contain

chromium bricks.  If the chromium bricks are present, that could provide an

independent basis for classifying the kiln dust as a hazardous waste.



      Under the lease between Registrant and National, the tenant is obligated

to indemnify Registrant for costs and liabilities arising directly or

indirectly out of the use of the leased premises by the tenant.  All

obligations under this indemnity provision arising after the assignment of the

lease to National (which occurred in November 1987) were assumed by National,

and Lafarge has liability for all obligations under the indemnity provisions

arising before the assignment.  National's obligation is guaranteed by its

parent, National Cement Company, Inc.  Registrant believes that all of the

matters described above in this Item 3 are included within the scope of the

National and Lafarge indemnity obligations.  While National has to date

generally  honored its indemnity obligations by reimbursing Registrant for

most of the costs and expenses for which National has been invoiced, Lafarge

has recently repudiated its indemnity obligations.  Registrant is currently

evaluating whether it needs to file suit against Lafarge in order to enforce

its rights under the indemnity.



      Registrant has been advised that National and Lafarge have reached an

agreement to share cleanup responsibilities.  This agreement settled a lawsuit

between National and Lafarge.  Registrant believes that under this agreement

Lafarge is responsible for cleanup of the industrial waste landfills, the

diesel release and the chlorinated hydrocarbon plume.



      To date Registrant is not aware of any failure by Lafarge or National to

comply with the orders of the Regional Water Board or to pursue the cleanup of

the Additional Landfills as instructed by Regional Water Board staff. 

Registrant has not been ordered by the Regional Water Board to perform any of

the investigative, characterization, remediation or removal activities. 

However, Registrant has been compelled to become involved in reviewing the

investigative reports and cleanup recommendations made by Lafarge and its

consultants and in monitoring the Regional Water Board proceedings and

Lafarge's activities.



      Registrant believes that Lafarge and National have sufficient resources

to perform any reasonably possible or reasonably likely obligations relating

to these matters.  Publicly available financial information with respect to

Lafarge indicates that it had a net worth of approximately $1.2 billion as of

September 30, 1997.  National and its parent/guarantor are subsidiaries of a

large French company, and so far as Registrant is aware, no separate financial

statements are publicly available with respect to either company.  However,

Registrant has held discussions with National which indicate sufficient

resources are available to satisfy any reasonably likely obligations relating

to the above matters.  Thus, Lafarge and National appear not to have violated

any Regional Water Board orders and appear to have the financial strength to

carry out any future orders that may be approved by the Regional Water Board. 

Therefore, Registrant believes that it is remote that any cleanup orders

issued by the Regional Water Board will have a material effect on Registrant. 

If, however, National and Lafarge do not fulfill their cleanup

responsibilities and Registrant is required at its own cost  to perform the

landfill, kiln dust, diesel release and underground plume remedial work likely

to be mandated by the regulatory agencies, the amount of any such expenditure

by Registrant could be material.



      As an unrelated matter, Registrant has recently become aware that soils

contaminated by gasoline, diesel fuel, and heavy metals are present on the

premises along the Interstate 5 corridor leased by Truckstops of America for a

truck stop and gas station.  Registrant has become actively engaged in the

regulatory oversight activities of the Kern County Environmental Health

Services Department, which has named Registrant as a secondarily responsible

party with respect to the underground diesel storage tanks that have leaked,

and of the Central Valley Regional Water Quality Control Board.  Registrant

has demanded the cleanup of the contaminated soils.  This demand has been made

on the current tenant, the company that owns all Truckstops of America truck

stops nationally, the former tenant, and the guarantors of the lease, Standard

Oil Company of Ohio and BP Oil & Exploration, Inc.  Registrant has entered

into settlement discussions with the foregoing parties, all potential

defendants, is currently working with them on a jointly approved investigation

plan, and is hopeful that this dispute can be resolved without resorting to

litigation.  Because of the financial strength  of Standard Oil Company of

Ohio and BP Oil & Exploration, Inc., Registrant believes it is remote that

this matter will have a material effect on Registrant.



Item 4.   Submission of Matters to a Vote of Security Holders



      1.    1998 Stock Incentive Plan.



      2.    Non-Employee Director Stock Incentive Plan.



      The above are covered in the definitive Proxy Statement to be filed by

Registrant with the Securities and Exchange Commission with respect to its

1998 Annual Meeting of Stockholders.  Refer to "Approval of 1998 Stock

Incentive Plan", "Approval of Non-Employee Director Stock Incentive Plan", and

Appendices A and B of Proxy Statement.



                                    PART II



Item 5.   Market for Registrant's Common Equity and Related Stockholder

Matters.



      Registrant's Common Stock is traded on the American Stock Exchange.  The

following table shows the high and low sale prices for Registrant's Common

Stock on the American Stock Exchange for each period during the last two

years, as reported by the American Stock Exchange.



                                  1997                    1996



                                                  



 Quarter                    High         Low        High         Low

 First                       18          14        16-7/8      14-1/4



 Second                      19        15-1/8      19-1/4      15-3/8



 Third                       45        17-3/4        18        15-1/4

 Fourth                    33-3/4      23-7/8        17          14





      As of March 11, 1998, there were 750 owners of record of Registrant's

Common Stock.



      Registrant paid cash dividends of $.05 per share in each of the years

1997 and 1996.  Two and one-half cents per share was paid in June and December

of each year.



Item 6.   Selected Financial Data.



                            Years Ended December 31

                       (In thousands of dollars, except

                              per share amounts)

                                                    



                      1997         1996        1995      1994      1993



Operating Revenues,

Including Interest 

Income               $40,986(1)    $18,960   $19,554     $16,943   $19,535    



Net Income             3,032(1)      1,685       434(2)    1,527     2,972(3)



Total Assets          63,693        47,369    45,203      44,920     47,111   



Long-term Debt         3,925         1,800     1,800       1,950      3,550   



Income Per Share         .24(1)        .13       .03(2)      .12        .23(3)

Cash Dividends

Declared and Paid Per

Share                   0.05          0.05      0.05        0.05       0.05   



      (1)   Includes receipt of one time payment of $2,050,000 ($1,353,000 net

            of tax, or $.11 per share) from a pipeline company for the

            acquisition of easement rights.



      (2)   Net income from continuing operations was reduced by $400,000

            ($240,000 after tax or $.02 per share) due to the charge-off of

            almond trees destroyed by 1995 winter storms.



      (3)   Net income from continuing operations was enhanced by the

            recognition of a $1,054,000 ($632,000 after tax or $.05 per share)

            refund from a local water district.



Item 7.   Management's Discussion and Analysis of Financial Condition and

Results of Operations



      This Management's Discussion and Analysis of Financial Condition and

Results of Operations includes a number of forward-looking statements that are

subject to many uncertainties and may turn out not to be accurate.  These

forward-looking statements are subject to factors beyond the control of the

Company (such as weather and market forces) and with respect to the Company's

future development of its land, the availability of financing and the ability

to obtain various governmental entitlements.  No assurance can be given that

actual future events will be consistent with the forward-looking statements

made in this Annual Report.



Results of Operations



      As reflected in the accompanying financial statements, net income was

$3,032,000 in 1997, $1,685,000 in 1996, and $434,000 in 1995.



      Net income for 1997 increased when compared to 1996 due to higher

operating profits within the Livestock Division and increased easement sales

within the Real Estate Division.



      Net income for 1996 increased when compared to 1995 due to improved

operating profits within the Livestock, Farming, and Real Estate Divisions. 

Changes in revenues and expenses of Registrant's industry segments for years

1997 and 1996 are summarized below.

      

Livestock.  Livestock net operating income of $1,499,000 in 1997 was an

increase of $1,087,000 when compared to 1996 net operating income.  The growth

in net operating income is due primarily to an increase in cattle sales

revenue ($5,972,000) and net operating income provided by the cattle feedlot

that was purchased early in 1997 ($801,000).  These favorable variances were

partially offset by an increase in cost of sales on cattle sold of

approximately $5,386,000.  Cattle sales revenue grew during 1997 due to an

increase in volume of cattle sold and higher prices on the cattle sold. 

During 1997, 3,115 additional head of cattle were sold and the weights at

which the cattle were sold averaged approximately 300 pounds per head greater

than in 1996.  Cost of sales increased due to owning the cattle for longer

periods of time during 1997 than in past years.  Registrant, with the purchase

of the feedlot, has changed its operating procedures and is holding and owning

the cattle through the feeding phase in order to have more direct control over

the quality of beef the cattle are producing.  By holding the cattle for a

longer period of time, the weights on the cattle will increase and Registrant

will receive more for the animal but the cost of sales also increases due to

the costs of feeding for the additional period of ownership.

     

      Registrant continued to use the futures and options markets to protect

the future selling price of cattle and purchase prices of feed.  Without the

ability to hedge cattle and feed positions, Registrant would have sustained a

net loss on the sale of its cattle during 1996.  During 1997, due to the

increase in cattle prices throughout most of the year, Registrant recognized

approximately $360,000 in losses on hedge positions.  Gains on hedge positions

totaled approximately $578,000 during 1996.  Many of these gains were due to

the continuing decline of cattle prices during 1996, especially during the

first half of 1996.  Registrant's goal in hedging its cattle and feed costs is

to protect or create a range of selling prices and feed prices that in years

like 1996 and 1995, allow Registrant to recognize a profit on the sale of

cattle once all costs are deducted.  The risk in hedging cattle prices is that

in those years that prices increase the hedge may limit or cap potential gains

from the increase in price or can add additional costs for feed if grain

prices fall dramatically.



      Cattle prices improved throughout 1997 until late 1997 and early 1998

when the impact of the Asian financial crisis hit the cattle commodity

markets.  With beef being the largest dollar agricultural export and Asia

receiving much of the beef exported, prices fell significantly during December

1997 through February 1998.  Not only have prices declined in the beef market,

but prices for hides, which are used in the production of leather, have also

declined.  Hide prices have declined almost 30% over this time period.  It is

anticipated that prices later in 1998 will improve when compared to current

levels due to fewer head of cattle being in feedlots for sale.  The increase

in prices is expected to be less than would normally be expected due to the

economic problems in Asia.  Overall, Registrant believes it will see lower

prices during 1998, which will impact cattle sales revenues.



      On March 10, 1997, Registrant purchased the assets of a feedlot that is

located in western Texas.  Registrant will operate this feedlot for its use as

well as that of other customers who want to feed cattle.  The feedlot was

purchased for $3.5 million, has a cattle head capacity of 35,000 and covers

approximately 650 acres.  Registrant believes that by controlling the feeding

phase of its cattle before sending them to packing houses, a better quality

product will be produced providing higher margins to Registrant.  During 1997,

the feedlot produced approximately $14,000,000 in revenues and a net operating

profit of $801,000.  Registrant believes that the revenues generated by the

new feedlot operation will continue to be material to future earnings.   In

connection with the purchase of the feedlot Registrant began a program in 1997

to expand the cattle herd. At December 31, 1997 Registrant had 30,975 head of

cattle, which is approximately 16,000 head more than in 1996.  This will allow

Registrant to provide additional cattle for the feedlot operation and

potentially increase the earnings from its cattle operations.   Registrant is

also becoming involved in a strategic alliance with other select producers and

a packer to produce a high-grade beef product to be sold to steak restaurants

and higher end grocery stores.  The strategic alliance was formed in order for

the producers of cattle to gain higher margins on the beef they produce and

sell.



      Livestock operating profits of $412,000 in 1996, grew $371,000 when

compared to 1995 operating profits.  The growth in operating profits is due to

a decrease in cost of sales ($2,553,000) which was partially offset by reduced

cattle sales revenue ($2,091,000).  Cost of sales declined during 1996 due to

cattle being placed in feedlots for periods of time shorter than in 1995 and

to better grazing conditions during 1996.  During 1995, Registrant delayed the

sale of approximately 7,000 head of cattle from May 1995 to October 1995 and

placed these cattle in feedlots during the summer months of 1995.  The expense

associated with four extra months of feedlot costs during 1995 is the primary

reason for the favorable 1996 cost of sales variance.  The reduction in cattle

sales revenue is due primarily to fewer pounds of cattle being sold in 1996

than in 1995.  During 1996, more head of cattle were sold, 10,527 head of

cattle compared to 9,551 head of cattle in 1995, but at weights which were

approximately 370 pounds per head less than in 1995 when cattle were held in

feedlots for four extra months.  As in 1995 cattle prices per pound continued

to be depressed throughout 1996.  



      See Part I, Item 1 -"Business-Livestock Operations" for a further

discussion of Registrant's livestock operations for 1997 and future

expectations.



Farming.  Farming operating profits of $2,627,000 in 1997 are $507,000 less

than 1996 operating profits.  The decline in 1997 operating profits is due to

a drop in almond revenues ($1,069,000), lower walnut revenues ($377,000) and

higher cultural costs ($940,000).  These unfavorable variances were partially

offset by increased grape revenues ($980,000), the receipt in 1997 of revenues

associated with the 1996 crop ($693,000) and lower fixed water costs

($240,000).



      The decrease in almond revenues during 1997 was due to a decrease in

production of 12% when compared to 1996 and a decrease in prices of

approximately 47%.  Registrant's production fell during 1997 due to the timing

of rains and cold weather during the critical pollination period. Prices

declined due to the California almond industry producing a near record crop. 

Walnut revenues declined due to a 39% drop in production during 1997.  The

decline in walnut production was due primarily to below normal chilling hours

that are required by walnut trees for adequate dormancy during the winter

months.  Grape revenues increased primarily due to an increase in production

of 29% when compared to 1996.  Production increased due to favorable summer

weather.  The additional revenue received in 1997 related to the 1996 harvest

was due to 1996 final market prices for grapes and almonds being higher than

originally forecasted by the grape and almond industries.  Cultural costs

increased due to higher chemical costs, expenses associated with crops coming

into production that were capitalized in prior years and increased harvest

costs due to the high grape production.

  

      Overall 1997 crop revenues were higher than expected due mainly to

higher wine grape production and the receipt in 1997 of revenues associated

with the 1996 crop.  Almond, walnut, and pistachio demand is expected to

remain good during 1998 and the near future.  Industry expectations are that

statewide nut crop yields should continue to improve, which may negatively

impact prices.  In addition, industry projections show a continuation of new

almond and pistachio plantings that could impact prices once full production

begins.  Registrant's 1998 almond crop as well as the crops of other producers

within California may be negatively impacted by the winter rain and winds

caused by "El Nino" storms during February 1998 and March 1998 that arrived

during the critical bee pollination period.  This potential decline in

production could help stabilize prices on almonds at current levels.  In 1996

Registrant signed a five year contract with a winery that provides the better

of a minimum price or market price for grapes each year.  This contract is

beneficial to the Registrant because it helps minimize future price

fluctuations.  Within the grape industry there continues to be new land

developed, which could depress prices in the future once all new developments

are in full production.  Pricing pressure on grapes did begin during 1997 due

to high industry production and should continue into 1998.  All of

Registrant's crops are particularly sensitive to the size of each year's world

crop.  Large crops in California and abroad can rapidly depress prices.   For

a further discussion of the 1997 farming year refer to Part I, Item 1 -

"Business - Farming Operations".



      Farming operating profits increased $1,323,000 in 1996 to $3,134,000,

which was a 73% increase over 1995 operating profits.  In comparison to 1995,

net operating income increased due to higher pistachio revenues ($608,000),

higher grape revenues ($434,000), higher almond revenues ($127,000), and the

charge-off of destroyed almond trees of $400,000, which occurred during 1995. 

Partially offsetting these favorable variances was an increase in fixed water

costs of $168,000 and in cultural costs of $152,000.  The increase in cultural

costs was primarily due to higher harvesting costs.



      Grape revenues grew $434,000 in 1996 due to increases in prices.  On

average the price received by Registrant increased approximately $61.00 per

ton of grapes.  The almond revenue increase during 1996 was due to a 13%

increase in production.  The increase in production was partially offset by

almond prices falling 7% when compared to 1995 prices.  Pistachio revenues

were $608,000 higher in 1996 due to an increase in production.  Pistachio

production increased approximately 157% because 1996 was the "on" production

year in the alternate year bearing cycle.  Walnut revenues increased $51,000

during 1996 due to prices rising approximately 8% during 1996.



Resource Management.  Resource Management net operating income of $1,328,000

in 1997 was $28,000, or 2% below 1996 net operating income.  The decrease in

net operating income during 1997 was due to lower revenues from oil and gas

royalties, increases in professional service fees and an increase in staffing

costs.  These unfavorable variances were partially offset by increased

sand/rock aggregate royalties, cement royalties, and game management permits. 

Oil and gas royalties declined due to lower prices for crude oil within

California and the continuing decline of oil exploration activities on ranch

lands.  Professional service fees and staffing costs increased due to the

ongoing monitoring of the activities of oil and gas lessees and monitoring of

environmental activities at the National Cement lease site.  Sand/rock and

cement royalties increased during 1997 due to the growth of construction

within Southern California and Kern County.  Game management permit revenues

increased due to an expansion of services offered and an increase in hunting

programs.  The Resource Management division has been very profitable over the

last several years.  However, oil and gas royalties are expected to be

adversly affected over the next few years by the fact than little or no new

oil and gas exploration is taking place on Registrant's lands and oil prices

during early 1998 are at the lowest levels in 18 years.  Registrant does

expect royalties from cement production to grow over the next few years due to

increased construction activity and to the cement manufacturing plant being

renovated and production capacity being increased.   See Part I, Item 1 -

"Business - Resource Management", for a further discussion of 1997 activities

and future expectations.



      Resource Management operating profits of $1,356,000 in 1996 were

$115,000, or 9% greater than 1995 operating profits.  The increase in

operating profits during 1996 was primarily due to the growth of filming

location fees and higher oil and gas royalties and cement royalties.  These

increases were partially offset by lower sand/rock aggregate royalties and

increased professional service fees.  Filming location fees increased due to a

much more aggresive marketing program which increased the number of films and

commercials that used Registrant's lands for location film shoots.  Oil and

gas royalties increased due to an increase in oil prices throughout 1996, and

cement royalties were higher due to increases in production because of the

growth in construction within Southern California.  Sand/rock royalties

declined due to winter weather during early 1996 which delayed the start of

several construction projects.  Professional service fees increased due to the

monitoring of environmental activities at the National Cement site.  



Real Estate.  Real Estate operating profits of $1,003,000 in 1997 is a

$1,844,000 increase when compared to 1996's operating loss.  The increase

during 1997 is due primarily to the receipt of a one time payment of 

$2,050,000 ($1,353,000 net of tax) in revenue from a pipeline company for the

acquisiton of easement rights.  This increase is partially offset by higher

professional service and planning fees ($154,000) and higher staffing costs

($75,000).  Professional service fees increased due to market evaluations

being conducted to determine the feasibility of developing a destination land

use at Grapevine Center and a rural ranch estates program.  Staffing costs

increased due to the hiring of a new Vice President of Real Estate.  See Part

I, Item 1, "Business - Commercial and Land Use" and Part I, Item 2,

"Properties - Land Planning", for a further discussion of 1997  and 1998

activity and future planning activities. 



      The 1996 operating loss of  $841,000 was a $421,000 improvement over

1995's operating loss of $1,262,000.  The improvement in 1996 was due to a

decrease in professional service fees ($573,000) and a gain from the sale of

land ($184,000).  Partially offsetting the above favorable variances was an

increase in fixed water costs of $325,000.  Registrant's commercial lease

revenue during 1996 was flat when compared to 1995 lease revenues. 

Professional service fees declined due to the timing of planning activities on

Registrant's lands related to the Interstate 5 corridor and the absence of any

costs during 1996 related to the proposed major crude oil pipeline through

Registrant's land.  The costs associated with the pipeline were incurred

during 1995.  Fixed water costs grew due to the transfer of  additional state

water project water that can be used in the future for municipal and

industrial uses.  In addition to the cost of this additional water, a local

water district charged Registrant for costs related to a water banking

program. 



      Interest.  Interest income declined to $1,159,000 during 1997 from

$1,308,000 in 1996 due to a $3,000,000 reduction in funds invested.  

Investment funds declined due to the purchase of the feedlot, capital 

expenditures, an increase in the cattle herd, and the payment of dividends.  



      Interest income in 1996 fell $66,000, or 5%, when compared to 1995

interest income.  The reduction during 1996 is due primarily to lower average

invested dollars throughout 1996 when compared to 1995.  On average $20.3

million was invested during 1996 while $21.3 million was invested during 1995. 

Investment funds declined due to capital expenditures and the payment of

dividends.



      Interest expense for 1997 was $747,000, an increase of $452,000 over

1996.  The growth in interest expense was due to the addition of long-term

debt associated with the purchase of the cattle feedlot ($2,375,000

outstanding) and the short-term funding of the growth in the cattle herd.  The

feedlot also borrows on a short-term basis to provide cattle and feed

financing for its outside customers.  The cost of this borrowing approximates

the bank's prime interest rate.  The feedlot then charges its customers the

national prime interest rate plus one to one and one-half percent for any

financings it does.  See Note 5 to the Audited Consolidated Financial

Statements for a further discription of short-term and long-term debt.



      Interest expense declined in 1996 to $295,000 from $436,000 in 1995. 

Interest expense during 1996 was attributable to the remaining balance of

long-term debt used to finance Registrant's 758-acre almond and 897-acre wine

grape developments, which were developed in 1981, and use of Registrant's

working capital line of credit.  The increase in expense during 1995 was due

to Registrant increasing the usage of short-term lines of credit which became

necessary because of delays in the sale of cattle and the timing of 1995 crop

proceeds.



Corporate Expenses.   Corporate expenses for 1997 were $2,346,000, an increase

of  $80,000 when compared to 1996 corporate expenses.  The increase is due to

higher professional service charges and staffing costs.  Staffing costs

increased due to to the fact that Registrant's new Chief Executive Officer

joined Registrant in May 1996 and served the full year of 1997.  Professional

service fees increased due to costs associated with consulting contracts with

an investment banking firm.



      Corporate expenses for 1996 were $220,000, or 11%, higher than corporate

expenses for 1995.  The increase in costs is primarily due an increase in

staffing costs ($122,000) and employee relocation costs ($108,000). These

variances were partially offset by a reduction in professional service fees

($85,000).  The increase in staffing costs and relocation costs was primarily

related to the hiring of a new Chief Executive Officer in May 1996.



      Inflation.  Inflation can have a major impact on Registrant's operations. 

The farming operations are most affected by escalating costs and unpredictable

revenues (due to an oversupply of certain crops) and very high irrigation

water costs.  High fixed water costs related to Registrant's farm lands will

continue to adversely affect earnings.



      Prices received by Registrant for many of its products are dependent

upon prevailing market conditions and commodity prices.  Therefore, it is

difficult for Registrant to accurately predict revenue, just as it cannot pass

on cost increases caused by general inflation, except to the extent reflected

in market conditions and commodity prices.



Impact of Accounting Change.  In June 1997, the FASB issued SFAS No. 130

"Reporting Comprehensive Income" and SFAS No. 131 "Disclosure about Segments

of an Enterprise and Related Information" which are effective for fiscal years

beginning after December 15, 1997.  Accordingly, Registrant plans to adopt

SFAS No. 130 and SFAS No. 131 with the fiscal year beginning January 1, 1998. 

SFAS No. 130 and SFAS No. 131 do not have any impact on the financial results

or financial condition of Registrant, but will result in the disclosure of the

components of comprehensive income.



Impact of Year 2000.  During early 1997, Registrant completed the conversion

to new accounting and financial software that identifies the date by using

four digits for the year.  Registrant at this time believes that the new

software installed will eliminate its internal exposure to Year 2000 problems. 





      Registrant is in the process of initiating formal communications with

all of its significant suppliers and large customers to determine the extent

to which Registrant's systems are vulnerable to those third parties' failure

to remediate their own Year 2000 issues.  No assurances can be given that the

systems of other companies on which Registrant's systems rely will be timely

converted and will not have an adverse effect on the Registrant's systems.



Financial Condition.  Registrant's cash, cash equivalents and short-term

investments totaled approximately $18,165,000 at December 31, 1997, a decrease

of 13% from the corresponding amount at the end of 1996.  Working capital at

the end of 1997 was $24,518,000, which is comparable to 1996's working

capital.  Working capital uses during the year were for capital expenditures,

expansion of the cattle herd, purchase of the cattle feedlot and the payment

of dividends.  Registrant has a revolving line of credit of $6,000,000 that as

of December 31, 1997, had a balance of $5,897,000 bearing interest at the rate

of 8.25%.  Registrant also has an outstanding short-term borrowing with an

investment banking firm with a balance of $4,827,000 at December 31, 1997 at

an interest rate of 6.50%.  The feedlot Registrant acquired also has a short-

term revolving line of credit with a local bank for $4,000,000.  The

outstanding balance at December 31, 1997 was $1,231,000, with an interest rate

approximating the Bank's prime lending rate of 8.25%.  The revolving lines of

credit are used as a short-term cash management tools and for the financing of

customer cattle and feed receivables at the feedlot.



      The principal uses of cash and cash equivalents during 1997, 1996, and

1995 consisted of capital expenditures, expansion of the cattle herd, purchase

of the cattle feedlot, purchase of land, payments of long-term debt and the

payment of dividends.  



      The accurate forecasting of cash flows by Registrant is made difficult

due to the fact that commodity markets set the prices for the majority of

Registrant's products and the fact that the cost of water changes

significantly from year-to-year as a result of changes in its availability.  

Registrant, based on its past experience, believes it will have adequate cash

flows over the next twelve months to fund internal operations.



      During 1998, $8,994,000 has been budgeted for capital expenditures,

which includes new equipment and improvements to existing facilities. 

Registrant is currently expanding its farming operations with two new farming

developments, will continue the expansion of the cattle herd, and is investing

approximately $5.7 million in the infrastructure and off-site improvements

related to the Travel Plaza joint venture and industrial park.  These new

projects will be funded from current cash resources and Registrant's excess

borrowing capacity.



      Registrant has traditionally funded its growth and capital additions

from internally generated funds.  Management believes that the combination of

short-term investments, excess borrowing capacity, and capital presently

available to it will be sufficient for its near term operations.



Item 8.   Financial Statements and Supplementary Data.



      The response to this Item is submitted in a separate section of this

Report.



Item 9.   Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure.



      Not applicable.





                                   PART III





Item 10.   Directors and Executive Officers of the Registrant.



      Information as to the directors of Registrant is incorporated by

reference from the definitive proxy statement to be filed by Registrant with

the Securities and Exchange Commission with respect to its 1998 Annual Meeting

of Stockholders.  Information as to the Executive Officers of Registrant is

set forth in Part I, Item 1 under "Executive Officers of Registrant."



Item 11.   Executive Compensation.



      Information required by this Item is incorporated by reference from the

definitive proxy statement to be filed by Registrant with the Securities and

Exchange Commission with respect to its 1998 Annual Meeting of Stockholders.



Item 12.   Security Ownership of Certain Beneficial Owners and Management.



      Information required by this Item is incorporated by reference from the

definitive proxy statement to be filed by Registrant with the Securities and

Exchange Commission with respect to its 1998 Annual Meeting of Stockholders.



Item 13.   Certain Relationships and Related Transactions.



      Information required by this Item is incorporated by reference from the

definitive proxy statement to be filed by Registrant with the Securities and

Exchange Commission with respect to its 1998 Annual Meeting of Stockholders.



                                    PART IV



Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.



(a)  Documents filed as part of this report:          Page Number



1.   Consolidated Financial Statements:



      1.1      Report of Independent Auditors            37

      

      1.2      Consolidated Statements of Financial

               Position - December 31, 1997 and 1996     38



      1.3      Consolidated Statements of Income -

               Years Ended December 31, 1997, 1996

               and 1995                                  40

      

      1.4      Consolidated Statements of Stockholders'

               Equity - Three Years Ended 

               December 31, 1997                         41



      1.5      Consolidated Statements of Cash Flows -

               Years Ended December 31, 1997, 1996

               and 1995                                  42



      1.6      Notes to Consolidated Financial

               Statements                                43



2.    Supplemental Financial Statement Schedules:



               None.



3.    Exhibits:



      3.1      Restated Certificate of 

               Incorporation                             *



      3.2      By-Laws                                   *



      10.1     Water Service Contract with 

               Wheeler Ridge-Maricopa Water 

               Storage District (without exhibits),

               amendments originally filed under 

               Item 11 to Registrant's 

               Annual Report on Form 10K                 **





      10.3     Lease Agreement for Mr. San Olen          **



      10.4     Asset Purchase Agreement dated 

               March 10, 1997 for purchase of feedlot

               assets                                    ***



      10.5     Petro Travel Plaza Operating Agreement    62



      10.6     Amended and Restated Stock Option 

               Agreement Pursuant to the 1992 

               Employee Stock Incentive Plan             114



      10.7     Severance Agreement                       123



      10.8     Director Compensation Plan                135



      10.9     Non-Employee Director Stock 

               Incentive Plan                            138



      10.9(1)Stock Option Agreement Pursuant

               to the Non-Employee Director 

               Stock Incentive Plan                      142



      10.10    1998 Stock Incentive Plan                 148



      10.10(1)Stock Option Agreement Pursuant

                to the 1998 Stock Incentive Plan         153



      10.11    Employment Contract - Robert L. Stine     160



      22       List of Subsidiaries of Registrant        166



      23       Consent of Ernst & Young LLP              167



      27       Financial Data Schedule (Edgar)           168



(b)   Report on Form 8-K filed during the last quarter of the period covered

      by this report:



      None.



(c)  Exhibits

      

      *        This document, filed with the Securities Exchange Commission in

               Washington D.C. (file number 1-7183) under Item 14 to

               Registrant's Annual Report on Form 10-K for year ended December

               31, 1987, is incorporated herein by reference.









      **       This document, filed with the Securities Exchange Commission in

               Washington D.C. (file Number 1-7183) under item 14 to

               Registrant's Annual Report on Form 10-K for year ended December

               31, 1994, is incorporated herein by reference.



      ***      This document, filed with the Securities Exchange Commission in

               Washington D.C. (file Number 1-7183) under item 14 to

               Registrant's Annual Report on Form 10-K for year ended December

               31, 1996, is incorporated herein by reference.

      

(d)            Financial Statement Schedules -- The response to

               this portion of Item 14 is submitted as a separate

               section of this report.



                                  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.





                                TEJON RANCH CO.



DATED:  March 20, 1998              BY:                             

                                            Robert A. Stine

                                            President and Chief Executive

Officer

                                    (Principal Executive Officer)







DATED:  March 20, 1998                      BY:                         

                                            Allen E. Lyda

                                            Vice President, Finance &

Treasurer

                                            (Principal Financial and 

                                             Accounting Officer)









      Pursuant to the requirements of the Securities Exchange Act of 1934,

this report has been signed below by the following persons on behalf of the

Registrant and in the capacities and on the date indicated.



      Name                 Capacity             Date          





                           Director             March 23, 1998

Otis Booth, Jr.



                           Director             March 23, 1998

Craig Cadwalader



                           Director             March 23, 1998

Dan T. Daniels



                           Director             March 23, 1998

Rayburn S. Dezember



                           Director             March 23, 1998

Robert F. Erburu  



                           Director             March 23, 1998

Clayton W. Frye, Jr.



                           Director             March 23, 1998

Donald Haskell



                           Director             March 23, 1998

Norman Metcalfe



                           Director             March 23, 1998

Robert Ruocco



                           Director             March 23, 1998

Robert A. Stine



                           Director             March 23, 1998

Martin Whitman



                           Director             March 23, 1998

Phillip L. Williams









                          Annual Report on Form 10-K



                   Item 8, Item 14(a)(1) and (2),(c) and (d)



        List of Financial Statements and Financial Statement Schedules



                             Financial Statements 



                               Certain Exhibits



                         Year Ended December 31, 1997



                                Tejon Ranch Co.



                               Lebec, California























                       Form 10-K - Item 14(a)(1) and (2)



                       Tejon Ranch Co. and Subsidiaries



        Index to Financial Statements and Financial Statement Schedules





ITEM 14(a)(1) - FINANCIAL STATEMENTS



The following consolidated financial statements of Tejon Ranch Co. and

subsidiaries are included in Item 8:

                                                                  Page

      Report of Independent Auditors                              37

      Consolidated Balance Sheets -

        December 31, 1997 and 1996                                38

      Consolidated Statements of Income -

        Years Ended December 31, 1997, 1996 and 1995              40

      Consolidated Statements of Stockholders' Equity -

        Three Years Ended December 31, 1997                       41

      Consolidated Statements of Cash Flows -

        Years Ended December 31, 1997, 1996 and 1995              42

      Notes to Consolidated Financial Statements                  43



ITEMS 14(a)(2) - FINANCIAL STATEMENT SCHEDULES



All  schedules for which provision is made in the applicable accounting

regulation of the Securities and Exchange Commission are not required under

the related instructions or are inapplicable, and therefore have been omitted.











                        Report of Independent Auditors







Stockholders and Board of Directors

Tejon Ranch Co.



We have audited the consolidated balance sheets of Tejon Ranch Co. and

subsidiaries as of December 31, 1997 and 1996, and the related consolidated

statements of income, stockholders' equity, and cash flows for each of the

three years in the period ended December 31, 1997.  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 financial statements referred to above present fairly, in

all material respects, the consolidated financial position of Tejon Ranch Co.

and subsidiaries at December 31, 1997 and 1996, and the consolidated results

of their operations and their cash flows for each of the three years in the

period ended December 31, 1997, in conformity with generally accepted

accounting principles.  









                                                ERNST & YOUNG LLP





Los Angeles, California

February 11, 1998









                       Tejon Ranch Co. and Subsidiaries



                          Consolidated Balance Sheets





                                                        December 31

                                                          1997         1996

                                                        

 Assets

 Current assets:

   Cash and cash equivalents                     $     976,000$     693,000

   Marketable securities                            17,189,000   20,127,000

   Accounts receivable                               8,448,000    4,303,000

   Inventories                                      12,222,000    3,430,000

   Prepaid expenses and other current assets         1,659,000    1,319,000



 Total current assets                               40,494,000   29,872,000





 Property and equipment, net                        21,778,000   16,270,000



 Other assets:

   Breeding herd, net of accumulated

 depreciation of $134,000 in                         1,147,000    1,054,000

     1997 and $133,000 in 1996

   Other assets                                        274,000      173,000

                                                     1,421,000    1,227,000



 Total assets                                      $63,693,000  $47,369,000



See accompanying notes.









                                                      December 31



                                                       1997              1996 

                                                            



Liabilities and Stockholders' equity 

Current liabilities:

  Trade accounts payable                       $ 2,889,000         $  488,000 

  Other accrued liabilities                         390,000           569,000 

  Current deferred income                           292,000           265,000 

  Income taxes payable                                  ---           856,000 

  Short-term note                                11,955,000         2,808,000 



  Current portion of long-term debt                 450,000           200,000 

Total current liabilities                        15,976,000         5,186,000 



Long-term debt, less current portion              3,925,000         1,800,000 



Deferred income taxes                             3,304,000         2,651,000 



Commitments and contingencies



Stockholders' equity:

  Common Stock, $.50 par value per share:

    Authorized shares - 30,000,000



    Issued and outstanding shares -

       and 12,682,244 in 1996                     6,343,000         6,341,000 

  Additional paid-in capital                        385,000           387,000 

  Unrealized gains on available-for-sale

    securities, net of taxes                        109,000             7,000 

  Defined benefit plan-funding                           ---         (256,000)

adjustment, net of taxes

  Retained earnings                              33,651,000        31,253,000 



Total stockholders' equity                       40,488,000        37,732,000 

Total liabilities and stockholders'             $63,693,000       $47,369,000 

See accompanying notes









                       Tejon Ranch Co. and Subsidiaries



                       Consolidated Statements of Income



                                                    Year Ended December 31

                                                                   

                                                  1997              1996              1995

 Revenues:



   Livestock                              $ 24,555,000       $ 4,573,000       $ 6,748,000

   Farming                                   9,173,000         9,107,000         7,973,000

   Resource Management                       2,696,000         2,508,000         2,188,000

   Real Estate                               3,403,000         1,464,000         1,271,000

   Interest income                           1,159,000         1,308,000         1,374,000

                                            40,986,000        18,960,000        19,554,000





 Costs and expenses:

   Livestock                                23,056,000         4,161,000         6,707,000

   Farming                                   6,546,000         5,973,000         6,162,000

   Resource Management                       1,368,000         1,152,000           947,000

   Real Estate                               2,400,000         2,305,000         2,533,000

   Corporate expenses                        2,346,000         2,266,000         2,046,000



   Interest expense                            747,000           295,000           436,000

                                            36,463,000        16,152,000        18,831,000

 Income before income taxes                  4,523,000         2,808,000           723,000

 Income taxes                                1,491,000         1,123,000           289,000

 Net income                                $ 3,032,000       $ 1,685,000      $    434,000





 Net income per share, basic                     $0.24             $0.13             $0.03

 Net income per share, diluted                   $0.24             $0.13             $0.03





 See accompanying notes.









                       Tejon Ranch Co. and Subsidiaries

                Consolidated Statements of Stockholders' Equity

                      Three years ended December 31, 1997





                                Additional  Unrealized  Benefit Plan

                       Common     Paid-In      Gains       Funding     Retained

                        Stock     Capital    (Losses)    Adjustment    Earnings        Total

                                                                  



 Balance,  January

 1, 1995               $6,341,000$387,000     $(372,000)         ---  $30,402,000   $36,758,000 





   Net income                 ---     ---           ---          ---      434,000       434,000 

 Cash dividends

 paid- $.05 per

 share                        ---     ---           ---          ---     (634,000)     (634,000)



 Change in

 unrealized gains

 (losses) on                  ---     ---       411,000          ---          ---       411,000 

 available-for-sale

 securities, net of

 a  tax benefit of

 $164,000



 Balance December

 31, 1995               6,341,000 387,000        39,000          ---   30,202,000    36,969,000 

   Net income                 ---     ---           ---          ---    1,685,000     1,685,000 



 Cash dividends

 paid-                        ---     ---           ---          ---     (634,000)     (634,000)

   $.05 per share



 Defined benefit

 plan funding                 ---     ---           ---     (256,000)         ---      (256,000)

 adjustments,net of

 taxes of $170,000

 Changes in

 unrealized gains

 (losses) on                  ---     ---       (32,000)         ---          ---       (32,000)

 available-for-sale

 securities, net of 

 taxes of $21,000



 Balance December       6,341,000 387,000         7,000     (256,000)  31,253,000    37,732,000 

 31, 1996



   Net Income                 ---     ---           ---          ---    3,032,000     3,032,000 

 Cash dividends

 paid-

   $.05 per share             ---     ---           ---          ---     (634,000)     (634,000)



 Defined benefit

 plan funding                 ---     ---           ---      256,000          ---       256,000 

 adjustments, net

 of taxes of

 $170,000



 Changes in

 unrealized gains

 (losses) on                  ---     ---       102,000          ---          ---       102,000 

 available-for-sale

 securities, net of 

 taxes of $73,000



 Exercise of stock          2,000  (2,000)          ---          ---          ---           --- 

 options

 Balance, December     $6,343,000 $385,000   $  109,000   $      ---  $33,651,000   $40,488,000 

 31,1997





 See accompanying notes.







                       Tejon Ranch Co. and Subsidiaries



                     Consolidated Statements of Cash Flows

                                                    Year ended December 31

                                                  1997              1996              1995

                                                                     



 Operating activities

 Net income                              $  3,032,000      $  1,685,000       $   434,000 

 Items not affecting cash:



   Depreciation and amortization            1,729,000         1,221,000         1,017,000 

   Deferred income taxes                      585,000           134,000          (196,000)



   (Gains) losses on sales of                   3,000                ---           (7,000)

   investments



   Current deferred income                     27,000          (208,000)           71,000 

 Changes in certain current assets

   and current liabilities:



   Accounts receivable                     (4,145,000)          184,000        (2,362,000)

   Inventories                             (8,434,000)         (603,000)          301,000 

   Prepaid expenses and other                (100,000)          (93,000)           57,000 

   current assets



   Trade accounts payable and other         2,222,000          (355,000)         (251,000)

   accrued liabilities

   Income taxes payable                      (856,000)          592,000          (292,000)

 Net cash provided by (used in)            (5,937,000)        2,557,000        (1,228,000)

 operating activities

 Investing activities

 Acquisition of Champion Feeders           (3,874,000)               ---               ---

 Maturities of marketable                   8,415,000         9,859,000         8,754,000 

 securities

 Funds invested in marketable              (5,310,000)       (9,784,000)       (4,657,000)

 securities

 Net change in breeding herd                 (174,000)         (168,000)         (125,000)

 Property and equipment                    (3,600,000)       (2.343,000)       (3,263,000)

 expenditures

 Net book value of property and                    ---              ---           528,000 

 equipment disposals

 Other                                       (125,000)           36,000           (24,000)

 Net cash provided by (used in)            (4,668,000)       (2,400,000)        1,213,000 

 investing

 Financing activities

 Proceeds from revolving line of           30,435,000        15,824,000         9,792,000 

 credit

 Payments on revolving line of            (21,288,000)      (14,698,000)       (9,017,000)

 credit

 Borrowing of long-term debt                2,500,000               ---         2,000,000 

 Repayments of long-term debt                (125,000)              ---        (2,150,000)

 Cash dividends paid                         (634,000)         (634,000)         (634,000)

 Net cash provided by (used in)            10,888,000           492,000            (9,000)

 financing activities

 Increase (decrease) in cash and              283,000           649,000           (24,000)

 cash equivalents

 Cash and cash equivalents at                 693,000            44,000            68,000 

 beginning of year

 Cash and cash equivalents at end        $    976,000      $    693,000       $    44,000 

 of year



 See accompanying notes



                       Tejon Ranch Co. and Subsidiaries



                  Notes to Consolidated Financial Statements



                               December 31, 1997



1.    Summary of Significant Accounting Policies



Principles of Consolidation



The consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries.  All intercompany transactions have been

eliminated in consolidation.



Cash Equivalents



The Company considers all highly liquid investments, with a maturity of three

months or less when purchased, to be cash equivalents.  The carrying amount

for cash equivalents approximates fair value.



Marketable Securities



The Company considers those investments not qualifying as cash equivalents,

but which are readily marketable, to be marketable securities.  The Company

classifies all marketable securities as available-for-sale, which are stated

at fair value with the unrealized gains (losses), net of tax, reported in a

separate component of stockholders' equity.



Credit Risk



The Company grants credit to customers, principally large cattle purchasers,

feedlot customers, co-ops, wineries, nut marketing companies, and lessees of

Company facilities, all of which are located in California.  The Company

performs periodic credit evaluations of its customer's financial condition and

generally does not require collateral.



During 1997, 1996 and 1995 the following customers accounted for more than 10%

of the Company's consolidated revenues, Golden State Vintners (14% in 1997,

21% in 1996, and 18% in 1995), Harris Ranch (18% in 1996), and Timmerman

Cattle (26% in 1995).



Farm Inventories



Costs of bringing crops to harvest are capitalized when incurred.  Such costs

are expensed when the crops are sold.  Farm inventories held for sale are

valued at the lower of cost (first-in, first-out method) or market.



Cattle Inventories and Breeding Herd



Cattle raised on the Ranch are stated at the accumulated cost of developing

such animals for sale or transfer to a productive function and purchased

cattle are stated at cost plus development costs.  All cattle held for sale

are valued at the lower of cost (first-in, first-out method) or market and are

included in the caption inventories.  Purchased bulls and cows, included in

the breeding herd and used for breeding, are depreciated using the straight-

line method over five to seven years.



Commodity Contracts Used to Hedge Price Fluctuations



The Company enters into futures and option contracts to hedge its exposure to

price fluctuations on its stocker cattle and its cattle feed costs.  The goal

of the Company is to protect or create a future price for its cattle and feed

that will provide a profit once the cattle are sold and all costs are

deducted.  Realized gains, losses, and costs associated with closed contracts

are included in prepaid assets and are recognized in cost of sales expense at

the time the hedged cattle are sold or feed is used.



Property and Equipment



Property and equipment accounts are stated on the basis of cost, except for

land acquired upon organization in 1936 which is stated on the basis (presumed

to be at cost) carried by the Company's predecessor.  Depreciation is computed

using the straight-line method over the estimated useful lives of the various

assets.   Buildings and improvements are depreciated over a 10 year to 27.5

year life.  Machinery and equipment is depreciated over a 3 year to 10 year

life depending on the type of equipment.  Vineyards and orchards are generally

depreciated over a 20 year life with irrigation systems over a 10 year life. 

Oil, gas and mineral reserves have not been appraised, so no value has been

assigned to them.



Vineyards and Orchards



Costs of planting and developing vineyards and orchards are capitalized until

the crops become commercially productive.  Interest costs and depreciation of

irrigation systems and trellis installations during the development stage are

also capitalized.  Revenue from crops earned during the development stage are

credited against development costs.  Depreciation commences when the crops 

become commercially productive.



At the time crops are harvested and delivered to buyers and revenues are

estimatable, revenues and related costs are recognized, which traditionally

occurs during the third and fourth quarters of each year.  Orchard revenues

are based upon estimated selling prices, whereas vineyard revenues are

recognized at the contracted selling price.  Estimated prices for orchard

crops are based upon the quoted estimate of what the final market price will

be by marketers and handlers of the orchard crops.  Actual final orchard crop

selling prices are not determined for several months following the close of

the Company's fiscal year due to supply and demand fluctuations within the

orchard crop markets.  Adjustments for differences between original estimates

and actual revenues received are recorded during the period in which such

amounts become known.  The net effect of these adjustments increased farming

revenue $693,000 in 1997, decreased farming revenue $129,000 in 1996,

increased farming revenue by $124,000 in 1995.



The California Almond Board has the authority to require producers of almonds

to withhold a portion of their annual production from the marketplace.  At

December 31, 1997, 1996 and 1995, no such withholding was mandated.



Net Income Per Share



Effective December 31, 1997, the Company adopted SFAS 128 "Earnings Per Share"

which replaced primary and fully diluted earnings per share with basic and

diluted earnings per share.

Basic net income per share is based upon the weighted average number of shares

of common stock outstanding during the year (12,683,497 in 1997,12,682,244 in

1996 and 12,682,244 in 1995).  Diluted net income per share is based upon the

weighted average number of shares of common stock outstanding, and the average

shares outstanding assuming the issuance of common stock for stock options

using the treasury stock method (12,726,729 in 1997, 12,683,760 in 1996, and

12,684,105 in 1995).  The weighted average of dilutive stock options were

43,232 in 1997, 1,516 in 1996, and 1,861 in 1995.



In March 1992, the Company's Board of Directors adopted the 1992 Stock Option

Plan providing for the granting of options to purchase a maximum of 230,000

shares of the Company's common stock to employees, advisors, and consultants

of the Company.  Since the adoption of the Plan, the Company has granted

options to purchase 179,000 shares at a price equal to fair market value at

date of grant.  



Long-Lived Assets



In accordance with Statement of Financial Accounting Standards ("SFAS") No.

121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived

Assets to be Disposed Of", the Company records impairment losses on long-lived

assets held and used in operations when indicators of impairment are present

and the undiscounted cash flows estimated to be generated by those assets are

less than their related carrying amounts.  SFAS No. 121 had no impact on the

Company's consolidated financial position and results of operations in the

current year.



Environmental



Environmental expenditures that relate to current operations are expensed or

capitalized as appropriate.  Expenditures that relate to an existing condition

caused by past operations and which do not contribute to current or future

revenue generation are expensed.  Liabilities are recorded when environmental

assessments and/or remedial efforts are probable and the costs can be

reasonably estimated.  Generally, the timing of these accruals coincides with

the completion of a feasibility study or the Company's commitment to a

formal plan of action. No liabilities for environmental costs have been 

recorded at December 31, 1997, 1996 or 1995.



Use of Estimates



The financial statements have been prepared in conformity with generally

accepted accounting principles and, as such, include amounts based on informed

estimates and judgments of management.  Actual results could differ from these

estimates.



New Accounting Pronouncements



In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"

and SFAS No. 131" Disclosure about Segments of an Enterprise and Related

Information" which are effective for fiscal years beginning after December 15,

1997.  Accordingly, the Company plans to adopt SFAS No. 130 and SFAS No. 131

with the fiscal year beginning January 1, 1998.  SFAS No. 130 and SFAS No. 131

do not have any impact on the financial results or financial condition of the

Company, but will result in the disclosure of the components of comprehensive

income.



2.    Marketable Securities



Statement of Financial Accounting Standard (SFAS) No. 115, Accounting for

Certain Investments in Debt and Equity Securities, requires that an enterprise

classify all debt securities as either  held-to-maturity, trading, or

available-for-sale.  The Company has elected to classify its securities as

available-for-sale and therefore, is required to  adjust securities to fair

value at each reporting date.



The following is a summary of available-for-sale securities at December 31:



                                     1997                           1996

                                       Estimated Fair                  Estimated Fair

                              Cost          Value          Cost            Value

                                                               



Marketable securities:

  U.S. Treasury

    and agency

    notes                    $9,770,000     $9,947,000    $13,156,000       $13,158,000



  Corporate notes             7,237,000      7,242,000      6,960,000         6,969,000

                            $17,007,000    $17,189,000    $20,116,000       $20,127,000







As of December 31, 1997, the cumulative fair value adjustment to stockholders'

equity is an unrealized gain of $109,000, net of a tax expense of $73,000. 

The Company's gross unrealized holding gains equal $220,000, while gross

unrealized holding losses equal $38,000.  On 

December 31, 1997, the average maturity of U.S. Treasury and agency securities

was one year and corporate notes was 1.7 years.  Currently, the Company has no

securities with a weighted average life of greater than five years.  During

1997, the Company recognized losses of $3,000 on the sale of $2.0 million of

securities, carried at historical cost adjusted for amortization and

accretion.  There were no sales of securities during 1996.   



Market value equals  quoted market price, if available. If a quoted market

price is not available, market value is estimated using quoted market prices

for similar securities.  The Company's investments in corporate notes are with

companies with a credit rating of A or better.



3.    Inventories



Inventories at December 31, 1997 and 1996 consist principally of cattle held

for sale.



4.    Property and Equipment



Property and equipment consists of the following at December 31:



                                                              

                                                         1997            1996

 Land and land improvements                         $   4,040,000      $  3,877,000 



 Buildings and improvements                            10,875,000         7,639,000 

 Machinery, water pipelines, furniture, fixtures,

 and other equipment                                    6,480,000         4,254,000 

 Vineyards and orchards                                16,478,000        15,068,000 



                                                       37,873,000        30,838,000 

 Less allowance for depreciation                      (16,095,000)      (14,568,000)

                                                     $ 21,778,000      $ 16,270,000 





5.    Line of Credit and Long-Term Debt



The Company may borrow up to $6,000,000 on a short-term unsecured revolving

line of credit at interest rates approximating the bank's prime rate (8.25% at

December 31, 1997).  The revolving line expires in September 1999.  At

December 31, 1997, there was $5,897,000 of outstanding debt under the line of

credit agreement.  The Company also has an outstanding short-term borrowing

with an investment banking company, with an outstanding balance of $4,827,000

at December 31, 1997, at an interest rate of 6.50%.  The Company's acquired

feedlot also has a short-term revolving line of credit with a local bank for

$4,000,000.  The outstanding balance at December 31, 1997 was $1,231,000, 

with the interest rate approximating the bank's prime lending rate of 8.25%.



At December 31, 1996, the Company had outstanding short-term borrowing under a

line of credit with a banking company.  The short-term borrowing was in the

amount of $2,808,000 at an interest rate of 8.25%.



Long-term debt consists of the following at December 31:



                                                          

                                                        1997         1996

Notes payable to a bank                           $4,375,000    $2,000,000 



Less current portion                                (450,000)     (200,000)

                                                  $3,925,000    $1,800,000 



One note payable with an outstanding balance of $2,000,000 to a bank provides

for interest at an average rate of 7.91% per annum, payable monthly, on

amounts outstanding.  Principal is payable in semi-annual installments of

$100,000, with the remaining balance due December 31, 1999.  Amounts borrowed

under the agreement are unsecured.



The second note payable with an outstanding balance of $2,375,000 to a bank

provides for interest at an average rate of 8.57% per annum, payable monthly,

on amounts outstanding.  Principal is payable quarterly in amounts of $62,500,

with the remaining balance due 

December 31, 2003.  Amounts borrowed are secured by land and assets of the

acquired feedlot.  



The line of credit and long-term debt instruments listed above approximate

fair value.  



Interest paid approximated interest expense incurred for each of the three

years in the period ended December 31, 1997.



Maturities of long-term debt at December 31, 1997 are $450,000 in 1998,

$2,050,000 in 1999, and $250,000 per year for 2000 through 2002 and $1,125,000

thereafter.



6.    Common Stock and Stock Option Information



The Company has elected to follow Accounting Principles Board Opinion No 25,

"Accounting for Stock Issued to Employees" (APB 25) and related

interpretations in accounting for its employees', advisors', and consultants'

stock options because, as discussed below, the alternative fair value

accounting provided for under SFAS No. 123, "Accounting for Stock-Based

Compensation," requires use of option valuation models that were not developed

for use in valuing employee stock options.  Under APB 25, because the exercise

price of stock options granted by the Company equals the market price of the

underlying stock on the date of grant, no compensation expense is recognized.  



The 1992 Stock Option Plan provides for the granting of options to purchase a

maximum of 230,000 shares of the Company's common stock at 100% of the fair

market value as of the date of grant.  The compensation committee of the board

of directors administers the plan.  179,000 options have been granted under

the 1992 Stock Option Plan with 159,000 options at a grant price of $16 per

share and 20,000 options at a grant price of $15 per share.



During 1996, 100,000 shares were granted at an exercise price of $17.88, which

was the market price at the date of grant.  These options have a ten-year

period to exercise and vest over a one-to-five-year period from the date of

grant.  These options along with 59,000 options granted in 1992 at $20 per

share were subsequently amended in 1997.  On April 7, 1997 159,000 shares were

amended to lower the previously existing exercise price to $16.00 per share,

which was the market price at the amended date of grant.  These options have a

ten-year period to exercise and vest over a one-to-five-year period from the

grant date.  The exercise period and vesting period of these options run from

the original grant date.  The original grant date for 59,000 options is 1992

and 100,000 options have an original grant date of May 1, 1996.



Pro forma information regarding net income and earnings per share is required

by SFAS No. 123, and has been determined as if the Company had accounted for

its stock options under the fair value method of the statement.  The fair

value for these options was estimated at the date of grant using a Black-

Scholes option pricing model with the following weighted average assumptions

for 1997:  Risk-free interest rate of 5.80%; dividend rate of .20%; volatility

factor of the expected market price of the Company's common stock of .35; and

a weighted average expected life of the options of five years from the option

grant date.



The Black-Scholes option valuation model was developed for use in estimating

the fair value of traded options that have no vesting restrictions and are

fully transferable. In addition, option valuation models require the input of

highly subjective assumptions including the expected stock price volatility.

Because the Company's stock options have characteristics significantly

different from those of traded options, and because changes in the subjective

input assumptions can materially affect the fair value estimate, in

managements opinion, the existing models do not necessarily provide a reliable

single measure of the fair value of its stock option plan.



For proposes of pro forma disclosures, the estimated fair value of the options

is amortized to expense over the options' vesting periods.  The Company's pro

forma information follows:



                                     1997              1996

                                          



 Pro forma net income          $      2,940,000  $      1,634,000



 Pro forma net income per                 $0.23             $0.13

 share, diluted





A summary of the Company's stock option activity, and related information for

the years ended December 31, follows:





                                              1997                    1996

                                            Weighted-               Weighted-

                                             Average                 Average

                                            Exercise                Exercise

                                Options      Prices      Options     Prices

                                                         



 Outstanding beginning of        179,000   $    17.84     93,000   $    17.70

 year



 Granted                         159,000        16.00    100,000        17.88

 Exercised                        (6,822)       15.33        ---          ---



 Forfeited                      (159,000)       18.66    (14,000)       11.88



 Outstanding end of year         172,178                         

                                           $    15.91    179,000   $    17.84



 Weighted-average fair

 value of options granted    $      6.34               $    6.31 





The above options were exercised with a net 3,750 shares of common stock

issued by the Company as 3,072 of the options were given back by the grantees

as consideration for the exercise price of the options.



Exercise prices for options outstanding as of December 31, 1997 ranged from

$15.00 to $16.00.  The weighted-average remaining contractual life of those

options is approximately six years.



7.    Commodity Contracts Used to Hedge Price Fluctuations



The Company uses commodity derivatives to hedge its exposure to price

fluctuations on its purchased stocker cattle and its cattle feed costs.  The

objective is to protect or create a future price for stocker cattle that will

protect a profit or minimize a loss once the cattle are sold and all costs are

deducted and protect the Company against a disastrous cattle market decline. 

To help achieve this objective the Company uses both the futures commodity

markets and options commodity markets.  A futures contract is an obligation to

make or take delivery at a specific future time of a specifically defined,

standardized unit of a commodity at a price determined when the contract is

executed.  Options are contracts that give their owners the right, but not the

obligation, to buy or sell a specified item at a set price on or before a

specified date.  The Company continually monitors any open futures and options

contracts to determine the appropriate hedge based on market movement of the

underlying asset.  The options and futures contracts used typically expire on

a quarterly or semi-annual basis and are structured to expire close to or

during the month the stocker cattle and feed are scheduled to be sold or

purchased.  The risk associated with hedging for the Company is that hedging

limits or caps the potential profits if cattle prices begin to increase

dramatically or can add additional costs for feed if grain prices fall

dramatically.  



Payments received and paid related to outstanding options contracts are

deferred in prepaid and other current assets and were approximately $12,000 at

December 31, 1997.  Futures contracts are carried off-balance sheet until the

contracts are settled because there is no exchange of cash until settlement. 

Realized gains, losses, and costs associated with closed contracts are 

included in prepaid and other assets and will be recognized in cost of sales

expense at the time the hedged stocker cattle are sold.  At December 31, 1997

there was $181,000 of hedging costs associated with closed contracts included

in prepaid and other assets.  During 1997, the Company recognized

approximately $360,000 in net losses from hedging activity as an increase in

cost of sales.  In 1996 and 1995, the Company recognized approximately

$577,000 and $215,000, respectively, in net gains from hedging activity as a

reduction in cost of sales.



The following table identifies the futures contract amounts and options

contract costs outstanding at December 31, 1997:



        Cattle Hedging                                            Estimated 

       Activity Commodity                         Original        Fair Value     Estimated

         Future/Option                          Contract/Cost   at Settlement    Gain(Loss)

          Description          No. Contracts    (Bought) Sold     (Buy) Sell   at Settlement

                                                                    



  Corn futures bought              1,220         $ (3,637,000)   $ 3,346,000      $(291,000)

  1,000 bushels per contract



  Cattle options bought              50               (12,000)        38,000         26,000 

  40,000 lbs. per contract





The above futures contracts and options contracts expire between February 1998

and September 1998.  Estimated fair value at settlement is based upon quoted

market prices at December 31, 1997.



8.    Income Taxes



The Company accounts for income taxes using SFAS No. 109, Accounting for

Income Taxes.  SFAS No. 109 is an asset and liability approach that requires

the recognition of deferred tax assets and liabilities for the expected future

tax consequences of events that have been recognized in the Company's

financial statements or tax returns.



The provision for income taxes consists of the following at December 31:



                                                  1997        1996        1995

Federal:

                                                           



  Current                                   $ 691,000   $ 746,000   $ 176,000 

  Deferred                                    486,000     106,000      70,000 

                                            1,177,000     852,000     246,000 



State:

  Current                                     182,000     248,000      65,000 

  Deferred                                    132,000      23,000     (22,000)



                                              314,000     271,000      43,000 

                                           $1,491,000  $1,123,000   $ 289,000 





The reasons for the difference between total income tax expense and the amount

computed by applying the statutory Federal income tax rate (34%) to income

before taxes are as follows at December 31:







                                             1997         1996          1995

                                                            

Income tax at the statutory rate           $1,538,000    $955,000    $  246,000 

State income taxes, net of Federal            123,000     179,000        29,000 

benefit

Other, net                                   (170,000)   (11,000)        14,000 



                                           $1,491,000 $1,123,000     $  289,000 





Deferred income taxes result from temporary differences in the financial and

tax bases of assets and liabilities.  The net current deferred asset is

included with prepaid expenses and other assets on the statement of financial

position.  Significant components of the Company's deferred tax 

liabilities and assets are as follows at December 31:





Deferred tax assets:                                 1997           1996

                                                              

  Accrued expenses                                   $  126,000     $  147,000



  Prepaid revenues                                       44,000        147,000

  Other                                                  65,000         50,000

Total deferred tax assets                               235,000        344,000

Deferred tax liabilities:



  Depreciation and amortization                       1,458,000      1,460,000

  Involuntary conversion-land                         1,339,000        363,000

  Other                                                 507,000        828,000



Total deferred tax liabilities                        3,304,000      2,651,000

Net deferred tax liabilities                         $3,069,000     $2,307,000







The Company made net payments of income taxes of $1,317,000, $531,000 and

$721,000 during 1997, 1996 and 1995, respectively.



9.    Operating Leases



The Company is lessor of certain property pursuant to various commercial lease

agreements having terms ranging up to 60 years.  The cost and accumulated

depreciation of buildings and improvements subject to such leases were

$2,699,000 and $998,000, respectively, at 

December 31, 1997.  Income from commercial rents, included in real estate

revenue was $985,000 in 1997,  $928,000 in 1996, and $936,000 in 1995.  Future

minimum rental income on noncancelable operating leases as of December 31,

1997 is:  $1,035,000 in 1998, $921,000 in 1999, $830,000 in 2000, $826,000 in

2001, $826,000 in 2002, and $5,718,000 for years thereafter.



10.   Commitments and Contingencies



A total of 6,200 acres of the Company's land is subject to water contracts

requiring minimum future annual payments for as long as the Company owns such

land.  The estimated minimum payments for 1998 are $1,300,000, whether or not

water is available or is used.  Minimum payments made under these contracts

were approximately $1,215,000 in 1997, $1,277,000 in 1996, and $1,109,000 in

1995.  Approximately 4,600 acres of these lands are subject to contingent

assessments of approximately $817,000 to service water district bonded

indebtedness, if water district revenues are insufficient to cover bond

interest and redemptions when due.



The Company leases land to National Cement Company of California, Inc.

(National) for the purpose of manufacturing portland cement from limestone

deposits on the leased acreage.  National, Lafarge Corporation (the parent

company of the previous operator) and the Company have been ordered to cleanup

and abate an old industrial waste landfill site and the cement kiln dust pile

on the leased premises.  The cleanup order for the kiln dust piles now

requires only site stabilization measures of the sort previously undertaken by

National, and does not call for transporting the large piles offsite.  Under

both orders, the Company is secondarily liable and will be called upon to

perform work only if National and Lafarge fail to do so.  Under the lease

agreements with National and Lafarge, both companies are required to indemnify

the Company for any costs and liabilities incurred in connection with the

cleanup order.  Due to the financial strength of National and Lafarge, the

Company believes that a material effect to the Company is remote at this time.



11.   Retirement Plan



The Company has a retirement plan which covers substantially all employees. 

The benefits are based on years of service and the employee's five year final

average salary.  Contributions are intended to provide for benefits

attributable to service both to date and expected to be provided in the

future.  The Company funds the plan in accordance with the Employee Retirement

Income Security Act of 1974 (ERISA).



The following accumulated benefit information is as of December 31:



                                                           1997           1996

                                                                 

Accumulated actuarial present value of benefit

obligation, including vested benefits of $2,254,000

in 1997 and $2,060,000 in 1996                            $2,315,000     $2,084,000 



Projected benefit obligation for service rendered to       2,820,000      2,466,000 

date

Plan assets at fair value                                  2,323,000      1,947,000 

Projected benefit obligation in excess of Plan assets       (497,000)      (519,000)



Items not yet recognized in earnings:

Unrecognized net gain from past experience different

from that assumed and effects of changes in                1,036,000      1,084,000 

assumptions

Unrecognized net transition asset being amortized

over approximately 17 years                                 (118,000)      (138,000)

Adjustment required to recognize minimum liability               ---       (564,000)



Prepaid (accrued) pension cost                            $  421,000     $ (137,000)







In accordance with the provisions of Financial Accounting Standard No. 87, the

Company recorded a minimum pension liability representing the excess of the

accumulated benefit obligation over the fair value of plan assets and accrued

pension liabilities during 1996.  The liability was offset by intangible

assets to the extent possible.  Because the asset recognized may not exceed

the amount of unrecognized past service cost, the balance of the liability at

the end of 1996 was reported as a separate reduction of stockholders' equity,

net of applicable deferred income taxes.



Plan assets consist of equity, debt, and short-term money market investment

funds.  The weighted-average discount rate and rate of increase in future

compensation levels used in determining the actuarial present value of

projected benefits obligation was 6.5% in 1997 and 1996.  The expected long-

term rate of return on plan assets was 7.5% in 1997 and 1996.



Total pension and retirement expense was as follows for each of the years

ended December 31:



                                                     1997        1996       1995



  Cost components:

                                                              



  Service cost-benefits earned during the period   $(81,000)  $(74,000)  $ (80,000)

  Interest cost on projected benefit obligation    (155,000)  (136,000)   (136,000)



  Actual return on plan assets                      543,000    (89,000)    305,000 



  Net amortization and deferral                    (422,000)   214,000    (209,000)



  Total net periodic pension cost                 $(115,000)  $(85,000)  $(120,000)







12.   Business Segments



The Company operates principally in four industries: livestock, farming,

resource management, and real estate use.  The livestock segment includes the

production and sale of beef cattle and operation of a feedlot.  The farming

segment involves those operations related to permanent crops, leasing

farmland, and the supervision of farming activities.  The resource management

and the real estate segments collect rents and royalties from lessees of

Company-owned properties, and the real estate operation entitles and develops

Company-owned properties. 



Information pertaining to the Company's business segments follows for each of

the years ended December 31





                                        1997          1996          1995

Segment profits:

                                                       

  Livestock                          $ 1,499,000   $   412,000      $ 41,000 

  Farming                              2,627,000     3,134,000     1,811,000 

  Resource management                  1,328,000     1,356,000     1,241,000 

  Real Estate                          1,003,000      (841,000)   (1,262,000)

Segment profits                        6,457,000     4,061,000     1,831,000 

Interest income                        1,159,000     1,308,000     1,374,000 



Corporate expenses                    (2,346,000)   (2,266,000)   (2,046,000)

Interest expense                        (747,000)     (295,000)     (436,000)

Operating profit                     $ 4,523,000   $ 2,808,000    $  723,000 







                                              Depreciation

                              Identifiable         and            Capital

                                 Assets       Amortization     Expenditures

1997

                                                           



  Livestock                      $24,215,000      $  588,000        $4,109,000

  Farming                         10,176,000         737,000         1,287,000

  Resource management                363,000          21,000            25,000

  Real Estate                      5,933,000         328,000         1,571,000



  Corporate                       23,006,000          55,000            84,000

Total                            $63,693,000      $1,729,000        $7,076,000





1996

  Livestock                      $ 5,554,000      $  307,000         $  98,000



  Farming                         10,545,000         626,000         1,051,000

  Resource Management                259,000           1,000               ---

  Real Estate                      2,874,000         183,000           901,000

  Corporate                       28,137,000         104,000           293,000



Total                            $47,369,000      $1,221,000        $2,343,000





1995

  Livestock                      $ 5,533,000      $  303,000       $   270,000

  Farming                         10,370,000         477,000         2,287,000



  Resource Management                258,000           1,000               ---

  Real Estate                      2,713,000         133,000           557,000

  Corporate                       26,329,000         103,000           149,000



                                 $45,203,000      $1,017,000        $3,263,000







Intersegment sales are not significant.  Segment profits are total revenues

less operating expenses, excluding interest and corporate expenses. 

Identifiable assets by segment include both assets directly identified with

those operations and an allocable share of jointly used assets.  Corporate

assets consist primarily of cash and cash equivalents, refundable and deferred

income taxes, land and buildings.  Land is valued at cost for acquisitions

since 1936.  Land acquired in 1936, upon organization of the Company, is

stated on the basis (presumed to be at cost) carried by the Company's

predecessor.



13.   Unaudited Quarterly Operating Results



The following is a tabulation of unaudited quarterly operating results for the

years indicated (in thousands of dollars, except per share amounts):



                                         Segment        Net        Earnings

                            Total        Profit       Income        (Loss)

                         Revenue(1)      (Loss)       (Loss)     Per Share(2)

1997

                                                        



  First quarter             $  3,037       $   (93)      $ (288)       $(0.02)

  Second quarter               6,265           251           (6)         0.00 

  Third quarter               16,163         2,830        1,432          0.11 



  Fourth quarter (3)          15,521         3,469        1,894          0.15 

                             $40,986        $6,457       $3,032       $  0.24 

1996



  First quarter              $ 1,518        $ (408)      $ (364)       $(0.03)

  Second quarter               4,312           416           57          0.01 

  Third quarter                5,824         1,982          918          0.07 



  Fourth quarter               7,306         2,071        1,074          0.08 

                             $18,960        $4,061       $1,685       $  0.13 





(1)   Includes interest income.



(2)   Earnings per share on a diluted basis.



(3)   Includes receipt of one time payment of $2,050,000 ($1,353,000 net of

      tax or $.11 per share) from a pipeline company for acquisition of

      easement rights.



14.  Acquisition of Assets



On March 10, 1997, the Company completed the purchase of certain assets from

Champion Feeders, Inc., a cattle feedlot company in western Texas.  The assets

purchased include land, a feed mill, cattle pins, office and shop buildings,

and all rolling stock.  No debt or material liabilities of Champion Feeders,

Inc. were assumed in the purchase of these assets.  The purchase price for

these assets was $3.5 million plus inventory and other assets of $374,000, as

of February 28, 1997 and has been accounted for as a purchase.  The purchase

price of assets was based upon a dollar value per head of capacity at the

feedyard and the fair market value of assets purchased.  The excess of  the

purchase price over the fair market value of tangible assets acquired was

immaterial.



The purchase of these assets allows the Company to begin to  meet its long-

term objective of becoming more vertically integrated within the beef

industry.   The assets purchased allow the Company to own and operate a cattle

feedyard operation in western Texas.



The following unaudited pro forma information presents a summary of

consolidated results of operations of the Company as if the acquisition had

occurred as of January 1, 1997, and does not purport to be indicative of what

would have occurred had the acquisition actually been made as of such date or

of results that may occur in the future.  The pro forma information provided

is for the year ended December 31:



                                                 1997              1996



 Pro forma Statement of Income

                                                            



 Revenues                                       $43,646,000       $34,059,000

 Net Operating Income                             4,854,000         3,228,000



 Net Income                                       3,286,000         1,937,000



 Earnings Per Share, diluted                          $0.26             $0.15