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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                                   (MARK ONE)
|X|    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934
For the fiscal year ended June 30, 1999
                                       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 33-70732

                                   TELMARK LLC
     (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CERTIFICATE OF FORMATION)

          DELAWARE                                               16-1551523
  (STATE OR OTHER JURISDICTION                                (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

                   333 BUTTERNUT DRIVE, DEWITT, NEW YORK 13214
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

         REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 315-449-7935

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of each class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
      None                                               None

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.
                                                         X
            ---                                         ---
             No                                         Yes

     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT  FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST  OF  REGISTRANT'S   KNOWLEDGE,  IN  ANY  DEFINITIVE  PROXY  OR  INFORMATION
STATEMENTS  INCORPORATED  BY  REFERENCE  OF PART  III OF THIS  FORM  10-K OR ANY
AMENDMENT TO THIS FORM 10-K.    X
                               ---

         STATE THE AGGREGATE  MARKET VALUE OF THE VOTING AND  NON-VOTING  COMMON
EQUITY HELD BY NON-AFFILIATES OF THE REGISTRANT SEPTEMBER 10, 1999.
                                      ZERO

         INDICATE THE NUMBER OF SHARES  OUTSTANDING OF EACH OF THE  REGISTRANT'S
EQUITY SECURITIES, AS OF THE LATEST PRACTICABLE DATE.

      CLASS                                    OUTSTANDING AT SEPTEMBER 10, 1999
----------------------                         ---------------------------------
MEMBERSHIP CERTIFICATE                                        ONE

TELMARK  IS A  DIRECT  WHOLLY  OWNED  SUBSIDIARY  OF  AGWAY  HOLDINGS,  INC.,  A
SUBSIDIARY OF AGWAY,  INC.,  WHICH IS A REPORTING  COMPANY UNDER THE  SECURITIES
EXCHANGE ACT OF 1934, AND MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
I(1)(A) AND (B) OF FORM 10-K AND IS THEREFORE  FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.


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--------------------------------------------------------------------------------



<PAGE>
                         FORM 10-K ANNUAL REPORT - 1999
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES

                              CROSS-REFERENCE SHEET


                                     PART I
<TABLE>
<CAPTION>
                                                                                                               Page
<S>               <C>                                                                                          <C>
Item 1. & 2.      Business and Properties.........................................................................3
Item 3.           Legal Proceedings...............................................................................5
Item 4.           Submission of Matters to Vote of Security Holders...............................................5


                                     PART II

Item 5.           Market for the Registrant's Common Equity and Related Membership Matters........................6
Item 6.           Selected Financial Data.........................................................................6
Item 7.           Management's Discussion and Analysis of Financial Condition and Results of Operations...........6
Item 7A.          Quantitative and Qualitative Disclosures About Market Risk.....................................11
Item 8.           Financial Statements...........................................................................12
Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........25


                                    PART III

Item 10.          Directors and Executive Officers of the Registrant.............................................26
Item 11.          Executive Compensation.........................................................................27
Item 12.          Security Ownership of Certain Beneficial Owners and Management.................................29
Item 13.          Certain Relationships and Related Transactions.................................................30


                                     PART IV

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K................................31

                  Signatures.....................................................................................33
</TABLE>

                                        2
<PAGE>
                                     PART I

ITEM 1. & 2.  BUSINESS AND PROPERTIES

Telmark LLC ("Telmark," "we," "our," "us" or "Company") was organized in 1964 as
Telmark  Inc.  under  the  Business  Corporation  Law of the  State of New York.
Effective  July 1, 1998,  Telmark  Inc.  was merged into Telmark LLC, a Delaware
limited  liability  company  that was formed  solely to carry on the business of
Telmark in limited liability company, rather than corporate,  form. We are owned
and controlled by Agway Inc. ("Agway"),  one of the largest  agricultural supply
and services cooperatives in the United States, in terms of revenues, based on a
1998 Co-op 100 Index produced by the National  Cooperative Bank. We are a direct
wholly-owned  subsidiary  of Agway  Holdings,  Inc.,  an indirect  subsidiary of
Agway.

Agway  is  subject  to  certain  informational  reporting  requirements  of  the
Securities  Exchange  Act of 1934 and in  accordance  with  those  rules,  files
reports  and other  information  with the  Commission.  Reports  filed  with the
Commission can be inspected at the Public Reference Section of the Commission at
450 Fifth Street N.W.,  Washington D.C. 20549 and at the regional offices of the
Commission at Suite 1400,  Northwestern  Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New
York 10048.  Copies of the  materials  can be obtained  from the  Commission  at
prescribed rates.

Our operations  are comprised  almost  exclusively of direct finance  leasing of
agricultural related equipment, vehicles and buildings to farmers or other rural
businesses that serve the agricultural  marketplace.  Our leases offer customers
an  alternative  to directly  purchasing  or borrowing to purchase as a means of
acquiring the use of equipment, vehicles or buildings.

         o        We branded our leasing service as Agrilease(R) and TFS(SM).
         o        We highlight our service-oriented  approach in  advertisements
                  and product brochures.

We have over 17,000 customers, most of whom are in the dairy, forestry crops and
transportation  industries. Our customers are farmers and other rural businesses
as well as  manufacturers  and  independent  dealers who serve the  agricultural
marketplace.

We operate  throughout the continental  United States and Canada.  Our own field
representatives serve customers in 29 states. We serve customers in other states
through unaffiliated dealers of equipment distributed by selected farm equipment
manufacturers.

We compete with finance  affiliates  of  equipment  manufacturers,  agricultural
financial  institutions,  other independent  finance and leasing companies,  and
commercial banks.  Many of these  organizations  have substantial  financial and
other  resources and as a consequence  are able to compete on a long-term  basis
within  the  market  segment  which  we  serve.   See  "Business  of  Telmark  -
Competition," in our Annual Report to Investors provided with this prospectus.

We use  direct  mail,  advertisements  in trade  magazines  and  referrals  from
equipment  retailers and building  contractors  to solicit  customers.  Our main
competitors are  agricultural  lenders and other leasing  companies.  We believe
that we compete effectively because of:

         o        our special expertise in agricultural equipment financing;
         o        our close relationship with the farming community;
         o        our focus on service;
         o        our financial strength; and
         o        our credit management.

Telmark's   business  is   concentrated  in  agriculture  in  the  New  England,
Mid-Atlantic,  and Midwest states with  approximately 70% of its leases directly
related to production agriculture. However, the portfolio of agricultural leases
is diversified  into many different kinds of  agriculture.  As of June 30, 1999,
the largest  concentration was in crops enterprises which represented 19% of the
portfolio,  dairy enterprises  which represented 17% of the portfolio,  and wood
products  enterprises which represented 12% of the portfolio.  At June 30, 1999,
approximately 44% of our net lease investment was in the states of Michigan, New
York,   Ohio,  and   Pennsylvania.   Developments  in  any  of  these  areas  of
concentration could affect operating results adversely.


                                       3

<PAGE>



ITEM 1. & 2.  BUSINESS AND PROPERTIES (CONTINUED)

We offer a variety of lease financing  packages,  with varying payment schedules
on a monthly,  quarterly,  semiannual or annual basis, depending on the expected
timing of customer  cash flows and customer  credit  quality and the  customer's
individual preferences.

With a direct finance lease our customers have use of the leased property over a
specified term for a periodic rental charge: i.e., the lease payment.  Customers
make lease payments in advance.  In most cases, at least two months of the lease
payments  are  collected  in advance  before the lease  starts.  We require  the
advance payment to provide protection in the event of default on the lease.

We offer most of the direct  finance  leases for a period  which does not exceed
our  estimate  of the useful life of the  equipment,  vehicle,  or the  building
leased.

         o        We  offer  equipment and vehicle leases typically for a period
                  of 3 to 6 years, and generally do not
                  exceed eight years.
         o        We offer  building  leases typically for longer terms (e.g., 5
                  to 10 years) than for equipment leases, up to maximum terms of
                  15 years.

As of June 30, 1999,  our  outstanding  leases had an average  original  term of
approximately 5.5 years and average remaining term of approximately 4 years.

Generally,  the customer selects the supplier of the equipment or other property
to be leased and we are not responsible for its suitability,  performance, life,
or any other characteristics.  Our primary responsibility is to buy the property
from the supplier,  lease it to the  customers,  and collect the lease  payments
although in certain  circumstances  we have  agreed to  indemnify  customers  if
certain  adverse tax  consequences  arise in connection  with a lease. We cannot
predict our liability  under these  indemnification  provisions,  but we believe
that  our  liability  is  remote  and the net  effect  of any  liability  is not
material.  Telmark also offers financing through specific equipment manufacturer
programs.

We retain title to the leased  property,  but our customers are  responsible for
insurance, repairs, maintenance,  service, and property taxes. At the expiration
of the direct finance lease term, the lessee has an option to:

         o        purchase the leased property,
         o        renew the lease, or
         o        return the leased property to us.

Historically,  in most of our lease  transactions,  the lessee has purchased the
leased property or equipment upon termination of the lease.

Telmark has internal credit  approval  policies that are required to be followed
prior to entering into any lease  transaction.  The required  procedures vary by
kind and size of  transaction.  We set credit approval limits based on the total
amount of leases  outstanding to the customer.  We assign  lending  authority to
members of management depending on position, training, and experience. Telmark's
Board of Directors must approve all lease amounts exceeding $1 million.  After a
Telmark field  representative  completes a financial  application,  we conduct a
thorough credit approval process.

Telmark  retains  title to the  equipment or building  leased.  If  appropriate,
Telmark  obtains a lien on the real  estate  owned by the farmer or  customer as
collateral for payments under a building lease. We maintain monthly  delinquency
reports which monitor leases that have been delinquent for over 30 days, as well
as non-earning leases.  Generally,  accounts past due at least 120 days, as well
as accounts in foreclosure or bankruptcy, are transferred to non-earning status.
The potential losses from non-earning leases are partly offset by our ability to
repossess  leased  property and to foreclose on other  property in which we have
been  granted a security  interest.  Accounts are  generally  written off at the
earlier of the time they are determined to be  uncollectible or when they become
one year past due.


                                        4

<PAGE>
ITEM 1. & 2.  BUSINESS AND PROPERTIES (CONTINUED)

We may not be able to collect lease payments under the following circumstances:

         o        Bankruptcy of the customer;
         o        Defaults by customer; or
         o        Contract disputes between customers and suppliers.

The  ultimate  collectibility  of  amounts  due  under our  leases  is  directly
dependent  upon the credit  practices  we use, and the  creditworthiness  of our
customers.  Even though we follow our credit policies and we establish  reserves
for bad  debts,  there are  other  factors  that  could  significantly  impact a
customer's ability to pay and consequently,  our lease collection experience and
our earnings.  Additional factors that might impact our ability to collect lease
payments are:

         o        Changes in general economic conditions;
         o        Changes  in the  level  of  government  expenditures  on  farm
                  programs and other changes in government agricultural programs
                  that adversely effect the level of income of our customers;
         o        Adverse  weather-related conditions that negatively impact the
                  agricultural productivity and income of customers; and
         o        Oversupply of, or reduced demand for, agricultural commodities
                  produced by our customers.

We realize net  earnings,  if revenues  from our  leases,  exceed our  operating
expenses and income taxes. Our "revenue" from a lease is the sum of all payments
due under the lease plus the  residual  value of the leased  property,  less the
cost of purchasing the leased property.

         o        "Operating  expenses" include interest expense,  provision for
                  credit losses (the dollar  amount  Telmark sets aside to cover
                  its  estimated  losses should a customer fail to make required
                  payments   under  a   lease),   and   selling,   general   and
                  administrative  expenses,  including our payroll costs,  rent,
                  advertising  costs and fees paid for credit checking and legal
                  and accounting services.
         o        "Interest  expense" is the single  largest  operating  cost of
                  Telmark  and is  primarily  the  interest  it must  pay on the
                  amounts  borrowed  from banks and other  investors  to finance
                  leases.

We lease  all of our  office  space  from  Agway.  We do not own any of the real
property we use for office facilities.

We have three wholly owned subsidiaries:

         o        Telease Financial Services, Ltd.
         o        Telmark Lease Funding I, LLC; and
         o        Telmark Lease Funding II, LLC.

Telease Financial  Services,  Ltd. is a Canadian  Corporation  formed to conduct
certain lease transactions with Canadian customers. Telmark Lease Funding I, LLC
was established solely to enable a lease  securitization  financing entered into
during 1997.  Telmark Lease Funding II, LLC was  established  solely to enable a
lease securitization financing entered into in 1999.

ITEM 3.  LEGAL PROCEEDINGS

We are not a party to any  litigation or legal  proceedings  pending,  or to the
best  of  our  knowledge  threatened,  which,  in  the  opinion  of  management,
individually  or in the aggregate,  would have a material  adverse affect on our
results of operations, financial condition, or liquidity.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not required.

                                        5

<PAGE>
                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MEMBERSHIP
         MATTERS
Effective  July 1, 1998 Telmark  Inc's.  common stock was cancelled by virtue of
the merger of Telmark Inc. with and into Telmark LLC, with Telmark LLC being the
surviving entity in the merger. We have one limited liability company membership
interest   outstanding,   which  is  indirectly   owned  by  Agway  through  its
wholly-owned  subsidiary Holdings.  There is no public market for the membership
interest  and we do not expect one to  develop.  During the years ended June 30,
1999, 1998, and 1997, Telmark or its predessor paid no dividends with respect to
its common stock and there was no distribution of member's equity.  Under a loan
covenant,  dividends are  prohibited to the extent they exceed 75% of net income
for the period beginning on October 1, 1997,  through the date of determination,
inclusive.  As of June 30, 1999,  $13.0  million of member's  equity was free of
this restriction.

ITEM 6.  SELECTED FINANCIAL DATA
Not required.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (000 OMITTED)
1999 COMPARED TO 1998.

NET INCOME
Our Net Income Increased by 1,600 (18%) from $8,800 in 1998 to $10,400 in 1999.
<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Net income                         $10,400           $8,800            $1,600           18%
</TABLE>

The increase was principally due to increased revenue from a larger  outstanding
portfolio of leases and notes receivable during 1999 as compared to 1998.

TOTAL REVENUES
Total Revenues of $70,000 in 1999  Increased  $4,500 (7%) as Compared to $65,500
in 1998.
<TABLE>
<CAPTION>

                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Total revenues                     $70,000           $65,500           $4,500           7%
</TABLE>

The increase is  attributable  in part to a $55,400 (11%) increase in net leases
and notes in 1999 as compared to 1998.  Total revenue as a percentage of average
net leases and notes decreased from 13.5% in 1998 to 13.1% in 1999. This decline
was consistent with a decline in prevailing market interest rates.

INCREASE IN LEASE PORTFOLIO
Increases  in the lease  portfolio  resulting  from new booked  lease  volume of
$252,100 in 1999 and  $227,300 in 1998  exceeded  lease  reductions  from leases
repaid and  provision  for credit  losses of $196,700  and  $177,400 in 1999 and
1998, respectively.

                                            FY 1999           FY 1998
                                            -------           -------
         New booked lease volume            $252,100          $227,300

         Leases repaid                      (188,700)         (169,800)
         Provision for credit losses        (  8,000)       (    7,600)

         Portfolio increase                 $ 55,400          $  49,900
                                            =========         =========

The increase in new booked lease volume in excess of leases repaid and provision
for credit losses had the effect of increasing the size of the lease  portfolio,
thereby  increasing total revenues.  The increased volume of new leases resulted
from  development  of  Telmark's  existing  markets  and  the  addition  of  new
employees.


                                        6

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (000 OMITTED) (CONTINUED)

INTEREST EXPENSE
Interest  expense  increased from $26,900 in 1998 to $27,600 in 1999.  While the
weighted  average  interest rate paid on debt decreased from 7.2% to 6.9%, total
interest rate expense increased due to increased  borrowings required to finance
the growth of the lease portfolio noted above.
<TABLE>
<CAPTION>
                                                                                PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Interest expense                   $27,600           $26,900           $700             3%
</TABLE>

Total debt  outstanding  at June 30,  1999  increased  by $28,100 to $433,700 as
compared to total debt outstanding at June 30, 1998.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling,  general,  and administrative  expenses of $16,200 in 1999 increased by
$600 (3%) compared to $15,600 in 1998.
<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Selling, general,                                                                       PERCENTAGE
         and administrative
         expenses                           $16,200           $15,600           $600             3%
</TABLE>

The  increase  in  total  selling,  general,  and  administrative  expenses  was
primarily the result of  additional  personnel  and  incentives  paid to certain
employees relating to additional new business.  Expenses which are determined to
be related to  origination  of new lease business are deferred and recorded over
the term of the leases.

PROVISION FOR CREDIT LOSSES
The provision for credit losses of $8,000 in 1999 represents an increase of $400
(5%) compared to $7,600 in 1998.
<TABLE>
<CAPTION>

                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>

         Provision for Credit Losses        $8,000            $7,600            $400             5%
</TABLE>

This  increase  is based on our  analysis  of  reserves  required to provide for
uncollectible  receivables.  Telmark's allowance for credit losses is based on a
periodic  review  of the  collection  history  of past  leases,  current  credit
practices,  an analysis of delinquent accounts, and current economic conditions.
At June 30,  1999,  the  allowance  for credit  losses was  $30,000  compared to
$27,100 at June 30, 1998.  During 1998 and 1999,  the general  economy  remained
strong,  however,  the total value of non-earning accounts increased from $3,000
in 1998 to $4,900 in 1999.  Reserves are  established  at a level  sufficient to
cover estimated losses in the portfolio.

1998 COMPARED TO 1997.

NET INCOME
Our net income increased by $900 (11%) from $7,900 in 1997 to $8,800 in 1998.
<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Net income                         $8,800            $7,900            $900             11%
</TABLE>

The increase was principally due to increased revenue from a larger  outstanding
portfolio of leases during 1998 as compared to 1997.

TOTAL REVENUES
Total revenues of $65,500 in 1998 increased  $8,600 (15%) as compared to $56,900
in 1997.
<TABLE>
<CAPTION>

                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Total revenues                     $65,500           $56,900           $8,600           15%
</TABLE>

The increase is  attributable  in part to a $49,900 (11%) increase in net leases
and notes in 1998 as compared to 1997. Total revenue, as a percentage of average
net leases and notes, decreased slightly from 13.7% in 1997 to 13.5% in 1998.

                                        7

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (000 OMITTED) (CONTINUED)

INCREASE IN LEASE PORTFOLIO
Increases in the least portfolio resulting from new booked volume of $227,300 in
1998 and $231,000  million in 1997 exceeded lease  reductions from leases repaid
and  net  bad  debt   expense  of  $177,400  and  $159,800  in  1998  and  1997,
respectively.

Increase In Lease Portfolio                 FY 1998           FY 1997
                                            --------          --------
         New booked volume                  $227,300          $231,000

         Leases repaid                      (169,800)         (151,900)

         Provision for credit losses        (  7,600)         (  7,900)
                                            ---------         ---------

         Portfolio increase                 $  49,900         $  71,200
                                            =========         =========


The  increase  in new  booked  volume in excess  of leases  repaid  and bad debt
provisions had the effect of increasing total revenues.

INTEREST EXPENSE
While the weighted  average  interest rate paid on debt  decreased  from 7.5% to
7.2%, total interest expense increased due to increased  borrowings  required to
finance the growth of the lease portfolio noted above.
<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>

         Interest expense                   $26,900           $23,500           $3,400           14%
</TABLE>

Total debt  outstanding  at June 30,  1998  increased  by $34,500 to $405,700 as
coupled to total debt at June 30, 1997.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling,  general,  and administrative  expenses of $15,600 in 1998 increased by
$3,100 (25%) compared to $12,500 in 1997.
<TABLE>
<CAPTION>
                                                                                                 PERCENTAGE
                                            FY 1999           FY 1998           INCREASE         CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Selling, general,                                                                       PERCENTAGE
         and administrative
         expenses                           $15,600           $12,500           $3,100           25%
</TABLE>

The increase was  primarily  the result of  additional  personnel  and incentive
costs relating to the additional new business booked as we expand our territory.

PROVISION FOR CREDIT LOSSES
The provision for credit losses of $7,600 in 1998  represents a decrease of $300
(4%) compared to $7,900 in 1997.
<TABLE>
<CAPTION>
                                                                                INCREASE         PERCENTAGE
                                            FY 1999           FY 1998           (DECREASE)       CHANGE
                                            -------           -------           --------         ------
         <S>                                <C>               <C>               <C>              <C>
         Provision for Credit Losses        $7,600            $7,900            (300)            4%
</TABLE>

This  decrease  is based on our  analysis  of  reserves  required to provide for
uncollectible  receivables.  Telmark's allowance for credit losses is based on a
periodic  review  of the  collection  history  of past  leases,  current  credit
practices,  an analysis of delinquent accounts, and current economic conditions.
During 1997 and 1998, the general economy remained strong and the total value of
non-earning  accounts  increased  only slightly from $2,700 in 1997 to $3,000 in
1998.  Reserves are established at a level  sufficient to cover estimated losses
in the portfolio.

                                        8

<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (000 OMITTED) (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES
The ongoing  availability  of  adequate  financing  to maintain  the size of our
portfolio  and to  permit  lease  portfolio  growth  is  key  to our  continuing
profitability  and  stability.  We have  principally  financed  our  operations,
including the growth of our lease portfolio,  through borrowings under our lines
of credit,  private  placements of debt with  institutional  investors and other
term debt, lease backed notes, principal collections on leases and cash provided
from  operations.  Total assets have grown at an average annual rate of 16% over
the past fifteen years. The debt to equity ratio decreased from 4.3 in both 1997
and 1998 to 4.1 in 1999.

         CASH IN FLOWS                FY 1999           FY 1998          FY 1997
                                      --------          -------          -------
         Cash flows from operations   $22,800           $21,200          $15,200
         Cash flows from financing     41,000            36,800           64,500
                                      --------          --------         -------
         Total cash in flows           63,800            58,000          79,700

         CASH OUT FLOWS
         Cash flows from investing    (63,800)          (58,000)        (79,700)

Virtually all of the cash flows from both  operations  and financing  activities
was invested in growth of our lease  portfolio.  Telmark has been  successful in
arranging  its past  financing  needs and  believes  that its current  financing
arrangements are adequate to meet its foreseeable operating requirements.  There
can be no  assurance,  however,  that  Telmark  will be able  to  obtain  future
financing in amounts or on terms that are  acceptable.  Our  inability to obtain
adequate  financing  would have a  material  adverse  effect on our  operations.
Management  conducts  ongoing  discussions  and  negotiations  with existing and
potential lenders for future financing needs. See footnote 5 to the Consolidated
Financial Statements "Borrowing under Lines of Credit and Term Debt."

OTHER MATTERS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES  LITIGATION  REFORM  ACT OF  1995
We are including the  following  cautionary  statement in this Form 10-K to make
applicable  and take  advantage of the "safe  harbor"  provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking  statement made
by, or on behalf of, Telmark. Where any such forward-looking  statement includes
a  statement  of  the  assumptions  or  basis  underlying  such  forward-looking
statement, Telmark cautions that, while it believes such assumptions or basis to
be reasonable and makes them in good faith, assumed facts or basis almost always
vary from actual results, and the differences between assumed facts or basis and
actual  results  can be  material,  depending  upon the  circumstances.  Certain
factors  that  could  cause  actual  results  to differ  materially  from  those
projected  have been  discussed  herein and include the factors set forth below.
Other  factors  that could cause  actual  results to differ  materially  include
uncertainties of economic,  competitive and market decisions and future business
decisions,  all of which are difficult or impossible to predict  accurately  and
many of which are beyond the control of Telmark.  Where, in any  forward-looking
statement, Telmark, or its management,  expresses an expectation or belief as to
future  results,  such  expectation  or belief is  expressed  in good  faith and
believed to have a  reasonable  basis,  but there can be no  assurance  that the
statement of expectation  or belief will result or be achieved or  accomplished.
The words "believe," "expect" and "anticipate" and similar expressions  identify
forward-looking statements.

YEAR 2000
The approach of the year 2000 presents potential issues to all organizations who
use  computers in the conduct of their  business or depend on business  partners
who use computers.  To the extent  computer use is  date-sensitive,  hardware or
software  that  recognizes  the  year by the  last two  digits  may  erroneously
recognize "00" as 1900 rather than 2000,  which could result in errors or system
failures.

Telmark  utilizes a number of computers  and computer  software  programs in the
conduct  of  its  business  that  are  principally   involved  in  the  flow  of
information.  This includes the software for tracking the lease  portfolio,  the
financial and  administration  software,  and the related hardware and operating
system  software.  It also includes the personal  computers and software used by
the field sales force.  All critical  hardware and  operating  software has been
inventoried and made year 2000 ready through  replacement or  remediation.  This
hardware and software has been tested and determined to be year 2000  compliant.
All critical application software has been inventoried and upgraded

                                        9

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (000 OMITTED) (CONTINUED)

YEAR 2000 (CONTINUED)
through  remediation or replacements.  The lease portfolio tracking software has
been  updated  to a new  vendor  certified  year  2000  compliant  version.  The
financial and  administration  applications  have been replaced by  applications
that are vendor-certified as year 2000 compliant. Successful internal testing of
the year  2000  compliance  of the lease  portfolio  tracking  software  and the
financial and administrative software has been completed. The interaction of the
new vendor  software  with other  corporate  systems  has also been tested in an
enterprise  wide test  environment  which was completed  during August 1999. New
year 2000 compliant  personal computers and operating systems have been acquired
for the field sales force and the related application software has been replaced
or remediated,  successfully tested as year 2000 compliant, and installed. These
new fully  tested  year  2000  compliant  personal  computer  systems  have been
distributed to the field sales force.

In addition to the  information  technology  applications  review  noted  above,
Telmark also reviewed and modified,  where appropriate,  other areas impacted by
year 2000. External interfaces to internal information  technology  applications
have been  tested and are  compliant.  There are no  embedded  chips used in the
business operations. Business continuity plans are complete.

Telmark's principal sources of capital are banks,  insurance companies,  and its
customers'  repayment of leases.  While banks and insurance companies are highly
computer-dependent  and are exposed as creditors to a broad array of businesses,
both nationally and internationally, Telmark management considers failure of its
banks and insurance  company  investors as remote.  Telmark has a number of such
creditors  which  diversifies  the  risk.  Telmark's  customer  base  is  widely
diversified  in number,  geography  and  industry  and in  Telmark  management's
opinion  is not  highly  exposed to year 2000  related  failures.  The year 2000
compliance  issue  is,  however,  an  uncertainty  that  is  continuously  being
monitored by Telmark.  Based on the work performed to date, we presently believe
that the likelihood of the year 2000 having a material  effect on the results of
operations, liquidity, or financial condition is remote.

Notwithstanding  the foregoing,  it is not presently clear that all parts of the
country's infrastructure, including such things as the national banking systems,
electrical  power,  transportation  of goods,  communications,  and governmental
activities,  will be fully functioning as the year 2000 approaches. Our research
to date gives us increased confidence in many of these infrastructure components
but also persuades us that absolute  certainty  regarding their performance will
not  likely be  possible  prior to  passing  into the year  2000.  To the extent
failure occurs in such activities,  which are outside the our control,  it could
affect  our  ability  to  service  our   customers   with  the  same  degree  of
effectiveness with which they are served presently.  We have identified elements
of the  infrastructure  that are of greater  significance to our operations,  is
obtaining  information  on an  ongoing  basis as to  their  expected  year  2000
readiness, and have considered alternative solutions if required.

We have incurred  internal  staff costs as well as consulting and other expenses
related  to its year  2000  efforts.  Due to the  level of  effort  required  to
complete  remediation  for  the  year  2000,   non-business   critical  software
application  enhancements  have been  deferred  until the year 2000 efforts have
been  completed.  The  conversion  and  testing  of  existing  applications  and
replacements of hardware has cost Telmark  approximately  $803, all of which has
been incurred as of June 30, 1999. However,  additional costs may be incurred if
Telmark is required to invoke continuity plans. Telmark treats non-capital costs
associated  with  year 2000 as period  costs  and they have been  expensed  when
incurred.

In planning for  business  continuance,  the highest  priority is our ability to
maintain high quality customer  service.  All business events were evaluated for
impact of a potential Y2K failure.  From this analysis,  we developed continuity
plans for all critical events to assure business processes could be performed in
an alternate  manner.  These plans were approved by Telmark's senior  management
and include the details of the scope, any preparation steps needed, plan date of
activation, appropriate communications, and procedures. Two tests are planned to
validate  these  plans in the  event of a  failure  whether  facility  or system
related.
                                       10

<PAGE>
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following table provides information about the Telmark's debt securities and
loans that are  sensitive  to  changes in  interest  rates.  The table  presents
principal cash flows (in 000's) and related  weighted  average interest rates by
contractual maturity dates.
<TABLE>
<CAPTION>

FIXED INTEREST RATE                                                                           Fair Value
Liabilities                       2000    2001     2002     2003     2004  Thereafter Total     6/30/99

                                 ----------------------------------------------------------------------------
<S>                              <C>      <C>      <C>      <C>      <C>   <C>        <C>     <C>
Short Term Bank
     Lines of Credit             43,300     -        -        -        -        -     43,300  43,300
Weighted Average
      Interest Rate               5.79%     -        -        -        -        -

Long-Term Debt,
 including current portion       91,461  84,431   68,581   48,608   57,529    2,191  352,801  361,086
Weighted Average
      Interest Rate               7.05%   6.75%    6.67%    6.70%    6.65%    6.62%     -        -

Subordinated Debentures,
 including current portion       18,200   3,766    4,650   11,017      -        -    37,633    37,887
Weighted Average
       Interest Rate              8.23%   7.49%    7.29%    8.00%      -        -       -        -
</TABLE>

Telmark  does  not use  derivatives  or  other  financial  instruments  to hedge
interest rate risk in its portfolio.  Telmark  endeavors to limit the effects of
changes in  interest  rates by matching  as closely as  possible,  on an ongoing
basis, the maturity and repricing  characteristics  of funds borrowed to finance
its leasing  activities with the maturity and repricing  characteristics  of its
lease  portfolio.  However,  a rise in interest rates would increase the cost of
that portion of the debt which is not precisely  matched to the  characteristics
of the portfolio.  Telmark has a formal risk management  policy which limits the
short-term  exposure  to an  amount  which  is  immaterial  to  the  results  of
operations or cash flows. The subordinated  debentures'  interest rate is at the
greater of the  quoted  rate or a rate  based  upon the  discount  rate for U.S.
Government  Treasury Bills (T-Bill),  with maturities of 26 weeks.  Based on the
T-Bill rate of 4.9% as of June 30, 1999,  as compared to the stated rates of the
debentures, which  range  from  6.0% to 8.5% at June  30,  1999,  we  believe  a
reasonably  possible  near-term  change in interest  rates and the conversion of
debt to a variable  rate  would not cause  material  near-term  losses in future
earnings or cash flows.  Finally, for the portion of debt which is not precisely
matched  as of  June  30,  1999,  we do not  believe  that  reasonably  possible
near-term  changes in interest rates will result in a material  effect on future
earnings, fair values, or cash flows of Telmark.


                                       11

<PAGE>
ITEM 8.  FINANCIAL STATEMENTS

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                              PAGES

<S>                                                                                                           <C>
TELMARK LLC AND CONSOLIDATED SUBSIDIARIES:
         Report of Independent Accountants.......................................................................13

         Consolidated Balance Sheets, June 30, 1999 and 1998.....................................................14

         Consolidated Statements of Income and Member's Equity,
                  for the years ended June 30, 1999, 1998 and 1997...............................................15

         Consolidated Statements of Cash Flows for the years ended June 30, 1999, 1998 and 1997..................16

         Notes to Consolidated Financial Statements..............................................................17
</TABLE>




                                       12

<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of Telmark LLC:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of income and member's  equity and cash flows  present
fairly,  in all  material  respects,  the  financial  position of TELMARK LLC (a
wholly-owned  subsidiary of Agway Holdings,  Inc.) and its  subsidiaries at June
30, 1999 and 1998, and the results of their  operations and their cash flows for
each of the three years in the period ended June 30, 1999,  in  conformity  with
generally accepted  accounting  principles.  These financial  statements are the
responsibility of the Telmark's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements  in  accordance  with  generally  accepted  auditing
standards, which 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,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.






PricewaterhouseCoopers LLP

Syracuse, New York
July 30, 1999


                                       13

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES

                                 BALANCE SHEETS
                             JUNE 30, 1999 AND 1998
                             (THOUSANDS OF DOLLARS)


                                     ASSETS
<TABLE>
<CAPTION>

                                                          1999             1998
                                                       ------------     ------------
<S>                                                    <C>              <C>
Restricted cash........................................$  4,480         $  1,704
Leases and notes receivable, net....................... 551,071          495,626
Investments............................................  12,780           11,850
Equipment, net.........................................     868            1,000
Deferred income taxes..................................   5,443            7,030
Other assets...........................................   1,345            1,106
                                                       ------------     ------------

Total Assets...........................................$575,987         $518,316
                                                       ============     ============


                         LIABILITIES AND MEMBER'S EQUITY

                                                          1999             1998
                                                       ------------     ------------
Borrowings under lines of credit and term debt.........$396,101         $371,677
Subordinated debentures................................  37,633           34,006
Accounts payable.......................................   6,692            5,108
Payable to Agway Inc...................................  22,337            4,443
Accrued expenses, including interest of
      $3,258 - 1999 and $4,262 - 1998 .................   7,658            7,918
                                                       ------------     ------------


Total Liabilities...................................... 470,421          423,152

Commitments & Contingencies

Member's Equity........................................ 105,566           95,164
                                                       ------------     ------------

     Total Liabilities and Member's Equity.............$575,987         $518,316
                                                       ============     ============
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

                                       14

<PAGE>



                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    STATEMENTS OF INCOME AND MEMBER'S EQUITY
                FISCAL YEARS ENDED JUNE 30, 1999, 1998, AND 1997
                             (THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>

                                           1999         1998         1997
                                         --------     --------     --------
<S>                                      <C>          <C>          <C>
Revenues:
     Interest and finance charges........$ 68,337     $ 63,872     $ 55,451
     Service fees and other income.......   1,669        1,604        1,492
                                         --------     --------     --------

         Total revenues..................  70,006       65,476       56,943
                                         --------     --------     --------

Expenses:
     Interest expense....................  27,626       26,871       23,486
     Provision for credit losses.........   8,024        7,587        7,947
     Selling, general and administrative.  16,198       15,606       12,507
                                         --------     --------     --------

         Total expenses..................  51,848       50,064       43,940
                                         --------     --------     --------

         Income before income taxes......  18,158       15,412       13,003

Provision for income taxes...............   7,756        6,654        5,112
                                         --------     --------     --------

         Net income......................  10,402        8,758        7,891

Member's equity, beginning of year.......  95,164       86,406       78,515
                                         --------     --------     --------
Member's equity, end of year.............$105,566       95,164     $ 86,406
                                         ========     ========     ========
</TABLE>


The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       15

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES

                            STATEMENTS OF CASH FLOWS
                FISCAL YEARS ENDED JUNE 30, 1999, 1998, AND 1997
                             (THOUSANDS OF DOLLARS)

                           Increase (Decrease) in Cash
<TABLE>
<CAPTION>
                                                     1999         1998          1997
                                                  ----------   ----------   ----------
<S>                                               <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income ...............................   $  10,402    $   8,758    $   7,891
     Adjustments to reconcile net income to
       net cash from operating activities:
         Depreciation and amortization ........         510          607          529
         Deferred taxes .......................       1,587        3,614        1,259
         Provision for credit losses ..........       8,024        7,587        7,947
         Patronage refund received in stock ...        (930)      (1,043)        (769)
         Changes in assets and liabilities:
              Other assets ....................        (239)        (169)      (1,283)
              Payables ........................       1,584          709         (246)
              Income taxes payable ............       2,153        1,330       (2,136)
              Accrued expenses ................        (260)        (231)       2,028
                                                  ----------   ----------   ----------
         Net cash flow provided by
              operating activities ............      22,831       21,162       15,220
                                                  ----------   ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Leases originated ........................    (252,107)    (227,270)    (231,006)
     Leases repaid ............................     188,637      169,827      151,851
     Purchases of equipment, net ..............        (378)        (552)        (523)
                                                  ----------   ----------   ----------
         Net cash flow used
              in investing activities .........     (63,848)     (57,995)     (79,678)
                                                  ----------   ----------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net change in borrowings under
         short term line of credit ............      15,000       16,000        4,000
     Net change under revolving line of credit       (8,700)     (25,900)      44,900
     Proceeds from notes payable ..............           0      100,000       38,000
     Repayment of notes payable ...............     (23,000)     (50,723)     (45,122)
     Proceeds from lease backed notes .........      48,384            0       25,944
     Repayment of lease backed notes ..........      (7,243)      (7,785)        (499)
     Repayment of capital lease ...............         (17)         (73)         (66)
     Net change payable to Agway Inc. .........      15,742        2,663       (8,092)
     Repayment of debentures ..................           0      (11,208)           0
     Proceeds from sale of debentures .........       3,627       14,170        6,786
     Net change in restricted cash ............      (2,776)        (311)      (1,393)
                                                  ----------   ----------   ----------
         Net cash flow provided by
                financing activities ..........      41,017       36,833       64,458
                                                  ----------   ----------   ----------

     Net change in cash .......................           0            0            0
     Cash at beginning of year ................           0            0            0
                                                  ----------   ----------   ----------
     Cash at end of year ......................   $       0    $       0    $       0
                                                  ==========   ==========   ==========

     Cash paid during period for:
         Interest .............................   $  28,629    $  27,395    $  22,761
         Income Taxes .........................   $   3,556    $   2,972    $   6,968
</TABLE>

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.

                                       16

<PAGE>
                   TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                             (THOUSANDS OF DOLLARS)

1. SIGNIFICANT ACCOUNTING POLICIES

Operations
      Telmark LLC  ("Telmark" or the "Company") was organized in 1964 as Telmark
Inc. under the Business Corporation Law of the State of New York. Effective July
1, 1998,  Telmark Inc. was merged into Telmark LLC, a Delaware limited liability
company.  Telmark is in the business of leasing  agricultural related equipment,
vehicles,  and  buildings.  Telmark's  customers  are  farmers  and other  rural
businesses  as well as  manufacturers  and  independent  dealers  that serve the
agricultural  marketplace.  We are indirectly owned and controlled by Agway Inc.
("Agway"),  one of the largest agricultural supply and services  cooperatives in
the United States. Telmark is a wholly-owned  subsidiary of Agway Holdings, Inc.
("Holdings"), a subsidiary of Agway. Telmark operates throughout the continental
United  States and the Telmark's  field  representatives  serve  customers in 29
states including Alabama,  Connecticut,  Delaware,  Florida, Georgia,  Illinois,
Indiana, Iowa, Kentucky, Maine, Maryland,  Massachusetts,  Michigan,  Minnesota,
Mississippi,  Missouri,  New Hampshire,  New Jersey,  New York,  North Carolina,
Ohio, Pennsylvania,  Rhode Island, South Carolina, Tennessee, Vermont, Virginia,
West Virginia and Wisconsin.

Basis of Consolidation
      The consolidated  financial  statements include the accounts of all wholly
owned subsidiaries.  All significant intercompany transactions and balances have
been eliminated in consolidation.

Cash and Equivalents
      Telmark  considers all investments with a maturity of three months or less
when purchased to be cash equivalents. Certain cash accounts amounting to $4,480
and $1,704 at June 30, 1999, and 1998 respectively related to securitized leases
are held in segregated cash accounts  pending  distribution to the  lease-backed
note holders and are restricted in their use.

Lease Accounting
      Completed  lease  contracts,  which  qualify as direct  finance  leases as
defined  by  Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  13
"Accounting for Leases," are accounted for by recording on the balance sheet the
total future minimum lease payments receivable,  plus the estimated unguaranteed
residual  value of leased  equipment,  less the  unearned  interest  and finance
charges. Unearned interest and finance charges represent the excess of the total
future  minimum lease  payments plus the estimated  unguaranteed  residual value
expected  to be  realized  at the end of the  lease  term  over  the cost of the
related equipment.  Interest and finance charge income is recognized as revenue,
by  using  the  interest  method  over  the term of the  lease,  which  for most
commercial  and  agricultural  leases is 60 months or less with a maximum of 180
months for  buildings.  Income  recognition is suspended on all leases and notes
which become past due greater than 120 days. As of June 30, 1999,  and 1998, the
recognition  of  interest  income was  suspended  on leases  and notes  totaling
approximately $4,890 and $3,046, respectively.

      Initial  direct costs  incurred in  consummating  a lease are not recorded
when the lease is booked. The expense is capitalized and amortized over the life
of the lease.  This  deferral of expenses has the effect of reducing the expense
recorded  in the  period  the  lease  is  booked,  and  increasing  the  expense
recognized over the remaining life of the lease.
<TABLE>
<CAPTION>
                                                   FY1999     FY1998     FY1997
                                                   ------     ------     ------
<S>                                                <C>        <C>        <C>
           Expenses not recognized this year
           are deferred to later years             6,745      5,256      5,354

           Expenses from prior years amortized
           this year                               4,969      4,553      4,168
</TABLE>

      Provisions  for credit losses are charged to income in amounts  sufficient
to maintain the allowance at a level considered  adequate to cover losses in the
existing  portfolio.  The net  investment  in a lease  is  charged  against  the
allowance  for credit  losses when  determined  to be  uncollectible,  generally
within one year of becoming past due.
                                       17

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

1. SIGNIFICANT ACCOUNTING POLICIES (CONT )

Investments
      Investments comprise capital stock of a cooperative bank acquired from the
bank at par or  stated  value.  This  stock is not  traded  and is  historically
redeemed on a periodic  basis by the bank at cost. By its nature,  this stock is
held for  redemption  and is  reported  at cost.  Dividends  on this  stock  are
recorded as a reduction of interest  expense and totalled  $1,329,  $1,489,  and
$1,099 for the years ended June 30, 1999, 1998, and 1997, respectively.

Equipment
      Depreciation  is  calculated  using  the  straight-line  method  over  the
estimated useful lives of the equipment.

Advertising Costs
      We expense  advertising  costs as  incurred.  Advertising  expense for the
years ended June 30, 1999, 1998, and 1997, was approximately  $1,008,  $877, and
$829.

Income Taxes
      Telmark  provides for income taxes in  accordance  with the  provisions of
Statement of Financial  Accounting  Standards  (SFAS) No. 109,  "Accounting  for
Income Taxes." Under the liability  method  specified by SFAS No. 109,  deferred
tax assets and  liabilities  are based on the  difference  between the financial
statement and tax basis of assets and  liabilities  as measured by the tax rates
which are  anticipated  to be in effect  when  these  differences  reverse.  The
deferred tax provision  represents the net change in the assets and  liabilities
for deferred tax.
      We are included in a  consolidated  federal tax return filed by Agway Inc.
Under the  Telmark's tax sharing  agreement,  the provision for income taxes and
related  credits and carry forwards are  calculated on a separate  company basis
and billed to us as  appropriate  on an interim  basis.  Through  June 30, 1998,
Telmark filed separate state tax returns. Effective July 1, 1998, for income tax
filing purposes, Telmark is included as a business division of Holdings.

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

Reclassifications
      Certain  reclassifications  have been made to conform prior year financial
statements with the current year presentation.

                                       18

<PAGE>
                   TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

2. LEASES, NOTES AND ALLOWANCE FOR CREDIT LOSSES

      Leases and notes as of June 30 were as follows:
<TABLE>
<CAPTION>
                                                   1999         1998
                                                 --------     --------
      <S>                                        <C>          <C>
      Leases:
         Commercial and agricultural             $740,011     $667,222
         Leasing to Agway Inc. and subsidiaries       220          302
                                                 --------     --------
                                                  740,231      667,524
      Retail installment loans                     28,349       21,464
                                                 --------     --------
            Total leases and notes               $768,580     $688,988
                                                 ========     ========

      Net investment in leases and notes at June 30 are summarized as follows:

                                                   1999        1998
                                                ---------    ---------

      Leases and notes                          $768,580     $688,988
      Unearned interest and finance charges     (199,122)    (175,887)
      Net deferred origination costs              11,591        9,596
                                                ---------    ---------

         Net investment                          581,049      522,697
      Allowance for credit losses                (29,978)     (27,071)
                                                ---------    ---------
          Leases and notes, net                 $551,071     $495,626
                                                =========    =========
</TABLE>
Included  within the above leases and notes is unguaranteed  estimated  residual
values of leased  property  approximating  $82,100 and $72,400 at June 30, 1999,
and 1998, respectively.

      Contractual  maturities  of leases  and notes  were as follows at June 30,
1998:
<TABLE>
<CAPTION>
                                 Leases
                        --------------------------
                         Commercial     To Agway        Retail
                              and        Inc. and     Installment
                        Agricultural  Subsidiaries      Loans         Total
                        ------------  ------------    -----------   ---------

      <S>               <C>                <C>        <C>           <C>
      2000              $211,902           $    69    $ 8,217       $220,188
      2001               164,513                58      6,839        171,410
      2002               122,969                51      3,481        126,501
      2003                81,389                26      2,110         83,525
      2004                50,550                16      1,347         51,913
      Thereafter         108,688                 0      6,355        115,043
                         --------          --------   --------      ---------
         Totals          $740,011          $   220    $ 28,349      $768,580
                         ========          ========   ========      =========
</TABLE>
      Changes in  the  allowance  for credit losses for the years ended June 30
were as follows:
<TABLE>
<CAPTION>
                                                            1999        1998         1997
                                                          ---------   ---------   ---------
      <S>                                                 <C>         <C>         <C>
      Balance, beginning of year                          $ 27,071    $ 24,014    $ 19,776
      Provision for credit losses charged to operations      8,024       7,587       7,947
      Charge-offs                                           (6,820)     (6,513)     (5,481)
      Recoveries                                             1,703       1,983       1,771
                                                          ---------   ---------   ---------
         Balance, end of year                             $ 29,978    $ 27,071    $ 24,014
                                                          =========   =========   =========
</TABLE>
                                       19

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

3. EQUIPMENT

      Equipment,  at cost, including capital leases,  consisted of the following
at June 30:
<TABLE>
<CAPTION>

      1999                                                Owned                 Leased              Combined
      ----                                           -------------         -------------         -------------
      <S>                                            <C>                   <C>                   <C>

      Office and other equipment.................    $      2,571          $          0          $      2,571
      Less accumulated depreciation
              and amortization...................          (1,703)                    0                (1,703)
                                                     -------------         -------------         -------------
                                                     $        868          $          0          $        868
                                                     =============         =============         =============


      1998
      Office and other equipment.................    $      2,413         $         203          $      2,616
      Less accumulated depreciation
              and amortization...................          (1,430)                 (186)               (1,616)
                                                     -------------         -------------         -------------
                                                     $        983          $         17          $      1,000
                                                     =============         =============         =============


4. INCOME TAXES

      The provision for income taxes consists of the following:

                                                                   1999             1998            1997
                                                              -------------     -------------    -------------
           Currently payable:
                Federal..................                     $       4,451     $       2,321    $      3,215
                State....................                             1,718               719             638
           Deferred......................                             1,587             3,614           1,259
                                                              -------------     -------------    -------------
                                                              $       7,756     $       6,654    $      5,112
                                                              =============     =============    =============
</TABLE>

Telmark's  effective  income tax rate on pre-tax income differs from the federal
statutory tax rate as follows:
<TABLE>
<CAPTION>
                                                                   1999             1998            1997
                                                              -------------     -------------    -------------
           <S>                                                <C>               <C>              <C>
           Currently payable:

                Statutory federal income tax rate ........            34.0%          34.0%           34.0%

                Tax effects of:
                    State taxes, net of federal benefit                8.0            8.7             5.4
                    Other items...........................              .7             .5             (.1)
                                                              -------------     -------------    -------------

                Effective income tax rate                             42.7%          43.2%           39.3%
                                                              =============     =============    =============
</TABLE>

                                       20

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)
4. INCOME TAXES (CONT.)
The components of the net deferred tax asset as of June 30 were as follows:
<TABLE>
<CAPTION>
                                                         1999                    1998
                                                     --------------        --------------
              <S>                                    <C>                   <C>
              Deferred tax assets:
                  Lease receivable reserves......    $      11,849         $      10,726
                  Other reserves.................              305                   761
                  Alternative minimum tax
                     credit carry forward........            3,574                 3,462
                  Other..........................              655                   456
                                                     -------------         -------------
                  Total deferred tax assets                 16,383                15,405
                                                     -------------         -------------

              Deferred tax liabilities:
                  Difference between book and
                      tax treatment of leases....           10,745                 8,192
                  Other..........................              195                   183
                                                     -------------         -------------
                     Total deferred tax liabilities         10,940                 8,375
                                                     -------------         -------------
                     Net deferred tax asset          $       5,443         $       7,030
                                                     =============         =============
</TABLE>
Based on our history of taxable  earnings and its  expectations  for the future,
management  has determined  that  operating  income will more likely than not be
sufficient  to recognize  its deferred tax assets.  At June 30, 1999,  Telmark's
federal AMT credit can be carried forward indefinitely.

5. BORROWINGS UNDER LINES OF CREDIT AND TERM DEBT

As of June 30, 1999, we have credit facilities  available from banks which allow
us to borrow up to an  aggregate  of $315,000.  Uncommitted  short-term  line of
credit  agreements  permit us to borrow up to $65,000 on an unsecured basis with
interest paid upon  maturity.  The lines bear interest at money market  variable
rates.  A  committed  $250,000  partially  collateralized  revolving  term  loan
facility  permits us to draw short-term  funds bearing  interest at money market
rates  or draw  long-term  debt at  rates  appropriate  for the term of the note
drawn.  The total amount  outstanding as of June 30, 1999,  under the short-term
lines of credit and the  revolving  term loan facility was $35,000 and $156,300,
respectively.

Telmark has issued lease-backed notes,  through two wholly owned special purpose
funding  subsidiaries.  In 1997,  Telmark Lease Funding I, LLC issued $24,000 of
Class A  lease-backed  notes and $2,000 of Class B  lease-backed  notes to three
insurance companies.  Telmark Lease Funding I, LLC pays interest at 6.58% on the
Class A notes and 7.01% on the Class B notes. In 1999, Telmark Lease Funding II,
LLC  issued  $44,800  of  Class A  lease-backed  notes  and  $3,600  of  Class B
lease-backed notes to an insurance  company.  Telmark Lease Funding II, LLC pays
interest at 6.54% on the Class A notes and 7.61% on the Class B notes. The notes
are  collateralized  by leases having an aggregate  present value of contractual
lease  payments equal to the principal  balance of the notes,  and the notes are
further collateralized by the residual values of these leases.

Telmark borrows under its short-term line of credit agreements and its revolving
term agreement from time to time to fund its operations.  Short-term debt serves
as interim financing between the issuances of long-term debt. Telmark renews its
lines of credit  annually.  The $65,000 lines of credit all have terms  expiring
during  the next 12  months.  The  $250,000  revolving  term  loan  facility  is
available  through  August 1, 2000.  The  scheduled  maturity  of these notes is
December 2007.

At June 30, 1999, we had balances  outstanding on unsecured  senior note private
placements  totaling $146,000.  Interest is payable  semiannually on each senior
note. Principal payments are both semiannual and annual. The note agreements are
similar to each other and each contain financial covenants, the most restrictive
of which  prohibit  (I)  tangible net worth,  defined as  consolidated  tangible
assets less total liabilities (excluding notes payable to Agway Holdings, Inc.),
from  being  less  than  $75,000,  (ii)  the  ratio of  total  liabilities  less
subordinated  notes  payable to Agway  Holdings,  Inc. to  member's  equity plus
subordinated notes payable to Agway Holdings, Inc. from exceeding 5:1, (iii) the
ratio of earnings  available for fixed charges from being less than 1.25:1,  and
(iv) dividend  distributions and restricted  investments (as defined) made after
September  30,  1997 that exceed 75% of  consolidated  net income for the period
beginning on October 1, 1997 through the date of determination, inclusive. As of
June 30, 1999, $13,000 of member's equity was free of this restriction.  Telmark
has complied with all covenants contained in its borrowing agreements.
                                       21

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

5. BORROWINGS UNDER LINES OF CREDIT AND TERM DEBT (CONT.)

At June 30, term debt consisted of the following:
<TABLE>
<CAPTION>
                                                                       1999             1998
                                                                    ----------       ----------
<S>                                                                 <C>              <C>
Notes payable to banks due in varying amount and dates through
   April 12, 2004 with interest ranging from 5.56% to 7.67%.......  $ 191,300        $ 185,000
Unsecured notes payable to insurance companies due in varying
   amount and dates through May 29, 2004, with interest
   ranging from 6.47% to 7.64%....................................    146,000          169,000
Lease-backed notes payable to insurance companies in varying
   amounts and dates through December 15, 2007 with interest
   rates ranging from 6.54% to 7.61%..............................     58,801           17,660
Capital lease payable in 1999.....................................          0               17
                                                                    ----------       ----------

     Total Term Debt..............................................    396,101          371,677
Subordinated debentures due in varying amount and dates through
   March 31, 2003, with interest ranging from 6.00% to 8.50%......     37,633           34,006
                                                                    ----------       ----------

     Total Debt...................................................  $  433,734       $ 405,683
                                                                    ==========       ==========
</TABLE>
The notes payable to banks represents the portion  outstanding at June 30, 1999,
and 1998, of the amount available under credit facilities  totaling $315,000 and
$294,000  respectively.  Of the amount outstanding at June 30, 1999, $156,300 is
partially  collateralized  by our investment in a cooperative bank having a book
value of $12,780 at June 30, 1999.  The  subordinated  debentures  represent the
outstanding balance of registered  debentures offered to and held by the general
public.  The debentures are unsecured and are  subordinate to all senior debt of
Telmark.

The carrying  amounts and  estimated  fair values of our  significant  financial
instruments held for purposes other than trading at June 30, were as follows:
<TABLE>
<CAPTION>
                                                         1999                      1998
                                            --------------------------    -------------------------
                                                Carrying       Fair        Carrying         Fair
                                                 Amount       Value         Amount          Value
                                            ------------     ---------    -------------------------
<S>                                         <C>              <C>          <C>              <C>
Liabilities:
Lines of Credit and
   Term Debt (excluding capital leases)     $    396,101     $404,386     $    371,660     $377,628
Subordinated Debentures                           37,633       37,887           34,006       34,605

</TABLE>
The aggregate  amounts of notes payable,  and subordinated  debentures  maturing
after June 30, 1999, are as follows:
<TABLE>
<CAPTION>
                                                  Notes Payable
                                        ---------------------------------           Subordinated
     Year Ending June 30,                     Bank        Ins. Companies            Debentures            Total
                                        ---------------  ----------------           -------------      -------------
     <S>                                <C>              <C>                        <C>                <C>
     2000                               $     102,300    $         32,461           $      18,200      $     152,961
     2001                                      33,000              51,431                   3,766             88,197
     2002                                      10,000              58,581                   4,650             73,231
     2003                                      16,000              32,608                  11,017             59,625
     2004                                      30,000              27,529                       0             57,529
     Thereafter                                     0               2,191                       0              2,191
                                        ---------------  ----------------           -------------      -------------
                                        $     191,300    $       $204,801           $      37,633      $     433,734
                                        ===============  ================           =============      =============
</TABLE>
                                       22

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

6.  EMPLOYEE BENEFIT PLANS

Employees  of Telmark  participate  in Agway's  employee  benefit  plans,  which
include a defined benefit retirement plan, a defined contribution 401(K) plan, a
medical and dental benefit plan, a  postretirement  medical plan, and a life and
health  insurance  plan.  Total benefit costs under these plans are allocated by
Agway to Telmark primarily based on payroll costs. Benefit costs for those plans
included  in selling,  general and  administrative  expense  were  approximately
$1,400,  $1,100, and $1,200 for the periods ended June 30, 1999, 1998, and 1997,
respectively.

7.  RELATED PARTY TRANSACTIONS

Cash Management
In lieu of having our own cash  account we utilizes the  depository  accounts of
its  parent,  Agway Inc.,  drawing  checks  against  these  accounts  and making
deposits  to them.  The  balance  represented  by the  Payable to Agway Inc.  is
dependant on the timing of deposits and the drawing of checks.

Inter-Company Transactions
Selected  amounts related to transactions  with Agway Inc. and  Subsidiaries are
separately disclosed in the financial statements. Certain other transactions for
the years ended June 30 with Agway Inc. and Subsidiaries were approximately:

   (Revenue) Expense                               1999      1998       1997
   -----------------                             -------    ------    -------

   Interest and finance charges..................$  (27)    $ (49)    $  (38)
   Administrative and general expense............ 1,691      1,638     1,780

Interest and finance  charges are earned on  equipment  leases to Agway Inc. and
subsidiaries.  The  administrative  and general expense caption  described above
includes  certain shared  expenses  incurred by Agway Inc. on behalf of Telmark,
including  the  corporate  insurance  program,  information  services,  payroll,
benefits, and accounts payable  administration and facilities management.  These
expenses were allocated to us and management  believes the  methodology  used is
reasonable.

During the years ended June 30, 1999, 1998, and 1997,  Telmark paid no dividends
with  respect  to its common  stock and there was no  distribution  of  member's
equity.

8.  COMMITMENTS & CONTINGENCIES

COMMITMENTS

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination  clauses.  Since some
of the  commitments  are expected to expire  without being drawn upon, the total
commitment  amounts  do not  necessarily  represent  future  cash  requirements.
Outstanding  commitments to extend lease financing at June 30, 1999 approximated
$12,581.

LEGAL PROCEEDINGS

Telmark is not a party to any litigation or legal proceedings pending, or to the
best of its  knowledge  threatened,  which,  in the  opinion of its  management,
individually  or in the aggregate,  would have a material  adverse affect on its
results of operations, financial position or liquidity.


                                       23

<PAGE>
                    TELMARK LLC AND CONSOLIDATED SUBSIDIARIES
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                             (THOUSANDS OF DOLLARS)

9.  FINANCIAL INSTRUMENTS

Off Balance-Sheet Risk

Telmark is a party to financial  instruments with off-balance  sheet risk in the
normal  course of its  business to meet the  financing  needs of its  customers.
These  financial  instruments  consist  of  commitments  to  extend  credit  not
recognized in the balance sheet.  In the event of  non-performance  by the other
party to the  financial  instrument,  Telmark's  credit  risk is  limited to the
amount of Telmark's  commitment to extend credit. Our exposure to credit loss in
the event of nonperformance  by the other party to the financial  instrument for
commitments  to extend credit is represented  by the  contractual  amount of the
instrument. We use the same credit and collateral policies in making commitments
as it does for on-balance sheet instruments.

Market Risk

Telmark's   business  is   concentrated  in  agriculture  in  the  New  England,
Mid-Atlantic,  and Midwest states with  approximately 70% of its leases directly
related to production agriculture. However, the portfolio of agricultural leases
is diversified  into many different kinds of  agriculture.  As of June 30, 1999,
the largest  concentration was in crops enterprises which represented 19% of the
portfolio,  dairy enterprises  which represented 17% of the portfolio,  and wood
products  enterprises which represented 12% of the portfolio.  At June 30, 1999,
approximately 44% of our net lease investment was in the states of Michigan, New
York,   Ohio,  and   Pennsylvania.   Developments  in  any  of  these  areas  of
concentration could affect operating results adversely.

Telmark  endeavors to limit the effects of changes in interest rates by matching
as  closely as  possible,  on an  ongoing  basis,  the  maturity  and  repricing
characteristics  of funds  borrowed to finance its leasing  activities  with the
maturity and repricing  characteristics of its lease portfolio.  However, a rise
in interest  rates would  increase the cost of that portion of the debt which is
not precisely  matched to the  characteristics  of the portfolio and could lower
the value of our outstanding leases in the secondary market.



                                       24

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

There were no changes in or  disagreements  with  accountants  on accounting and
financial disclosure.


                                       25

<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                            DIRECTORS AND MANAGEMENT

DIRECTORS,  EXECUTIVE  OFFICERS AND  SIGNIFICANT  MEMBERS OF  MANAGEMENT  OF THE
REGISTRANT

The  Directors of Telmark  determine our policy and are elected by the member at
each  annual  meeting to serve  until the next  annual  meeting  or until  their
successors  are elected and  qualified.  The following  table sets forth certain
information   regarding  the  Telmark's   Directors,   executive   officers  and
significant members of management:
<TABLE>
<CAPTION>

                                                                 Years served        Year Became          Term
         Name                  Age  Position                      as Officer         a Director          Expires
         --------------------------------------------------------------------        -----------       ----------

<S>                            <C>  <C>                               <C>               <C>            <C>
Peter J. O'Neill               52   Senior Vice President,
                                    Finance and Control,
                                    Chairman of the
                                    Board and Director                 5                1995           July, 2000
Andrew J. Gilbert              40   Director                                            1997           July, 2000
Samuel F. Minor                61   Director                                            1989           July, 2000
Gary K. Van Slyke              56   Director                                            1996           July, 2000
William W. Young               46   Director                                            1992           July, 2000
Daniel J. Edinger              48   President and Director            11                1988           July, 2000
Raymond G. Fuller              48   Director of Customer               5
                                    Operations
Herbert E. Gerhart             54   Secretary and                     22
                                    Director of Finance
Karen A. Johnson               37   Treasurer
Richard A. Kalin               50   Controller                         5
Kipp R. Weaver                 49   Director of Credit                 5
</TABLE>

The Board of  Directors,  except for Messrs.  O'Neill and  Edinger,  are paid an
annual  retainer  fee of $1,000 for their  services  on the Telmark  Board.  The
executive  officers and  significant  members of management  of Telmark  provide
operating  control  to  carry  out the  policies  established  by the  Board  of
Directors  and  serve  at the  discretion  of the  Board  with no  guarantee  of
employment.  Telmark is organized with nine  functional  managers and six region
managers  reporting to the  President,  Daniel J.  Edinger.  The  officers  with
company wide  responsibilities  who report to the  President are the Director of
Credit,   Director  of  Customer  Operations,   Director  of  Finance,  and  the
Controller.  More detailed  biographies of each person listed above,  except for
those who have been a director or officer  for more than 5 years,  are set forth
below.

ANDREW J. GILBERT - Mr. Gilbert is a member of the Agway Board of Directors.  He
has been engaged in full-time farming for more than five years.

GARY K. VAN SLYKE - Mr. Van Slyke is a member  of  the Agway Board of Directors.
He has been engaged in full-time farming for more than five years.

RAYMOND G. FULLER - Mr. Fuller was Collection Manager from 1985 to 1996, and was
named Director of Customer Operations in September 1996.

KAREN A. JOHNSON -  Ms. Johnson  is  Treasurer  of  Agway  Inc.  She  served  as
Assistant Treasurer of Agway from September 1992 to August 1998.   She was named
Treasurer of Agway and Telmark in August 1998.

RICHARD A. KALIN  -  Mr.  Kalin was named Controller in July 1995.  He served as
Accounting Manager for the prior three years.

KIPP R. WEAVER - Mr. Weaver was named Director of Credit in May 1995. During the
prior three years he was employed as an officer  of  the  Farm  Credit  Bank  of
Baltimore.

                                       26

<PAGE>
ITEM 11.  EXECUTIVE COMPENSATION

Employees of Telmark are eligible to  participate  in Agway Inc.'s  benefits and
compensation plans. The following table sets forth information  regarding annual
and  long-term  compensation  for services in all  capacities to Telmark for the
fiscal years ended June 1999, 1998, and 1997, of the chief executive officer and
any of the other four most highly compensated  executive officers of the Telmark
(other than the CEO) who were serving in such capacity at June 30, 1999 and were
compensated over $100,000.
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------

                                                        ANNUAL
                                                   COMPENSATION(4)
                                             ----------------------------
                                                                                 ALL OTHER
NAME AND                                                                       COMPENSATION
PRINCIPAL POSITION                 YEAR         SALARY(1)      BONUS(2)             (3)
------------------------------ ------------  --------------- ------------   -------------------
<S>                                <C>              <C>          <C>                     <C>
Daniel J. Edinger.............     1999             $199,710     $155,040                $3,764
 President                         1998              178,853      105,240                 3,033
                                   1997              130,619       52,801                 2,807


Raymond G. Fuller.............     1999              $69,139       $61,616               $1,556
 Director of                       1998               60,580        38,688                  814
 Customer Operations               1997               59,414        27,261                  774


Herbert E. Gerhart............     1999              $69,208      $61,616                $1,480
 Secretary and                     1998               61,152       39,059                 1,253
 Director of Finance               1997               61,152       21,403                 1,170

Richard A. Kalin..............     1999              $69,238      $61,616                $2,001
 Controller                        1998               61,412       39,220                 1,258
                                   1997               61,412       21,494                 1,183

Kipp R. Weaver................     1999              $84,890      $74,703                $2,126
 Director of Credit                1998               82,394       52,632                   968
                                   1997               82,394       28,838                   704
------------------
</TABLE>


     (1) Total compensation (defined as base salary or wages, overtime and bonus
or  incentive   compensation)   is  used  in  determining   the  average  annual
compensation  pursuant to the Agway Inc.  Retirement  Plan. This amount includes
all deferred amounts under the Agway Inc.  Employees' Thrift Investment Plan and
the Agway Inc. Employee's Benefits Equalization Plan.

     (2) Members of the Agway Inc.  chief  executive  officer's  staff and other
executives designated by the Agway Inc. chief executive officer are eligible for
participation in the Agway Inc. management  incentive plan. Within Telmark,  the
President  qualified  for this  program.  A bonus  may be paid to each  eligible
executive  contingent  upon each  individual's  performance as determined by the
President  and CEO of Agway Inc.,  Telmark's net margin,  and other  performance
factors.  Bonuses  for  other  Telmark  executive  officers  may be paid to each
eligible executive  contingent upon each individual's  performance as determined
by the President of Telmark, Telmark's net margin and other performance factors.
Bonuses are reflected in the fiscal year earned regardless of payment date.

     (3) Amounts shown include  contributions made to the Agway Inc.  Employees'
Thrift Investment Plan and the Agway Inc. Employees' Benefits  Equalization Plan
and any other payment not appropriately characterized as salary or bonus.

     (4) There are no perquisites  paid by us in excess of the lesser of $50,000
or 10% of an executives total salary and bonus for the years disclosed.

                                       27

<PAGE>



ITEM 11.  EXECUTIVE COMPENSATION - CONTINUED

EMPLOYEES' RETIREMENT PLAN

The  Employees'  Retirement  Plan of  Agway  Inc.  (the  Retirement  Plan)  is a
non-contributory  defined  benefit  plan  covering  nearly  all  employees.  The
Retirement Plan was amended  effective July 1, 1998, to include a pension equity
formula,  as  well  as  to  recognize  incentive   compensation  as  pensionable
compensation for all employees.  It provides for retirement benefits,  up to the
limits provided by law, based upon average annual  compensation  received during
the  highest 36  consecutive  months in the last 10 years of service and credits
earned for years of service with Telmark. Full credits are earned for service on
and after July 1,  1998,  and  credits  equal to  approximately  3/4 of the full
credits are earned for service prior to July 1, 1998.  The benefit is defined as
an account balance and can be paid out as a lump sum or an annuity.  An employee
is 100% vested in his benefit  after  completing 5 years of service or attaining
age 55 after completing one year of service.

The following  table shows  estimated  annual  benefits  payable upon retirement
using the credit  formula in effect for service  after June 30,  1998,  based on
certain 3-year average remuneration levels and years-of-service classifications.
Under  the  formula,  base  credits  are  applied  to the total  average  annual
compensation  and excess credits are applied to the average annual  compensation
in excess of one-half the Social  Security Wage Base. In developing  this table,
both base and  excess  credits  have been  applied to the total  average  annual
compensation.  Further,  the table was developed assuming a normal retirement at
age 65 and an annuity conversion factor based on a 6% interest rate.

                               PENSION PLAN TABLE
                                  (NEW FORMULA)
                            YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>

   3-YEAR AVERAGE
    REMUNERATION           5              10             15             20             25              30             35
--------------------  ------------  -------------- -------------- --------------  -------------  -------------- --------------
    <S>                   <C>             <C>            <C>            <C>            <C>              <C>            <C>
    $ 125,000             $  8,800        $ 16,800       $ 24,800       $ 32,100       $ 39,500         $46,300        $53,000
      150,000               10,600          20,200         29,700         38,500         47,400          55,500         63,600
      175,000               12,400          23,500         34,700         45,000         55,300          64,800         74,300
      200,000               14,100          26,900         39,600         51,400         63,200          74,000         84,900
      225,000               15,900          30,200         44,600         57,800         71,100          83,300         95,500
      250,000               17,700          33,600         49,500         64,200         79,000          92,500        106,100
      275,000               19,400          37,000         54,500         70,700         86,900         101,800        116,700
      300,000               21,200          40,300         59,400         77,100         94,800         111,000        127,300
      325,000               23,000          43,700         64,400         83,500        102,700         120,300        137,900
      350,000               24,800          47,000         69,300         89,900        110,600         129,500        148,500
      375,000               26,500          50,400         74,300         96,400        118,500         138,800        159,100
</TABLE>

ACTIVE  PARTICIPANTS  ARE  ENTITLED  TO  RECEIVE NO LESS THAN THE VALUE OF THEIR
BENEFITS ACCRUED UNDER THE OLD FORMULA THROUGH JUNE 30, 1998. IN ADDITION,  MOST
ACTIVE  PARTICIPANTS  WHOSE AGE PLUS SERVICE TOTALED 55 YEARS OR MORE AS OF JULY
1, 1998,  WILL  RECEIVE  THE  GREATER OF THE  BENEFIT  DETERMINED  UNDER THE NEW
FORMULA DESCRIBED ABOVE, OR THE BENEFIT  DETERMINED HAD THE OLD FORMULA REMAINED
IN EFFECT.

THE OLD FORMULA IS BASED UPON AVERAGE ANNUAL  COMPENSATION  RECEIVED  DURING THE
HIGHEST 60 CONSECUTIVE MONTHS IN THE LAST 10 YEARS OF SERVICE AND CREDITED YEARS
OF SERVICE.  OPTIONAL  EARLIER  RETIREMENT AND OTHER BENEFITS ARE ALSO PROVIDED.
THE OLD FORMULA PAYS A MONTHLY  RETIREMENT  BENEFIT BASED ON THE GREATER  AMOUNT
CALCULATED  UNDER TWO FORMULAS.  THE BENEFIT AMOUNT UNDER ONE FORMULA IS SUBJECT
TO AN OFFSET FOR SOCIAL SECURITY BENEFITS.



                                       28

<PAGE>



ITEM 11.  EXECUTIVE COMPENSATION - CONTINUED

EMPLOYEES' RETIREMENT PLAN (CONTINUED)

The following table shows  estimated  annual benefits under the old formula upon
retirement   based  on   certain   5-year   average   remuneration   levels  and
years-of-service  classifications.  The table was  developed  assuming  a normal
retirement  at age 65 and does not reflect an offset for up to 50% of the Social
Security benefit, subject to certain minimum benefits.

                               PENSION PLAN TABLE
                                  (OLD FORMULA)
                            YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>
   5-YEAR AVERAGE
    REMUNERATION           5             10             15              20             25             30             35
--------------------  ------------  -------------  -------------  -------------- -------------- -------------- --------------
      <S>                  <C>            <C>            <C>             <C>            <C>            <C>            <C>
      $100,000             $ 8,000        $16,000        $24,000         $32,000        $40,000        $48,000        $56,000
       125,000              10,000         20,000         30,000          40,000         50,000         60,000         70,000
       150,000              12,000         24,000         36,000          48,000         60,000         72,000         84,000
       175,000              14,000         28,000         42,000          56,000         70,000         84,000         98,000
       200,000              16,000         32,000         48,000          64,000         80,000         96,000        112,000
       225,000              18,000         36,000         54,000          72,000         90,000        108,000        126,000
       250,000              20,000         40,000         60,000          80,000        100,000        120,000        140,000
       275,000              22,000         44,000         66,000          88,000        110,000        132,000        154,000
       300,000              24,000         48,000         72,000          96,000        120,000        144,000        168,000
       325,000              26,000         52,000         78,000         104,000        130,000        156,000        182,000
       350,000              28,000         56,000         84,000         112,000        140,000        168,000        196,000
      375,000               30,000         60,000         90,000         120,000        150,000        180,000        210,000
</TABLE>

AMOUNTS  UNDER THE  RETIREMENT  PLAN MAY BE SUBJECT TO REDUCTION  BECAUSE OF THE
LIMITATIONS IMPOSED UNDER THE INTERNAL REVENUE CODE; HOWEVER,  THE EXTENT OF ANY
REDUCTION WILL VARY IN INDIVIDUAL CASES ACCORDING TO  CIRCUMSTANCES  EXISTING AT
THE  TIME  PENSION  PAYMENTS  COMMENCE.   THE  AGWAY  INC.   EMPLOYEES'  BENEFIT
EQUALIZATION  PLAN HAS BEEN  ESTABLISHED  TO PROVIDE  FOR THE AMOUNT OF ANY SUCH
REDUCTION IN ANNUAL PENSION BENEFITS UNDER THE RETIREMENT PLAN.

THE BENEFITS  SHOWN ARE COMPUTED ON A STRAIGHT  LIFE BASIS AND DO NOT REFLECT AN
OFFSET FOR UP TO 50% OF THE SOCIAL SECURITY BENEFIT,  SUBJECT TO CERTAIN MINIMUM
BENEFITS. ALSO, THE BENEFITS ARE BASED ON CONTINUING THE PLAN'S BENEFIT FORMULAS
AS IN EFFECT ON JUNE 30,  1999.  AS OF JUNE 30,  1999,  THE  OFFICERS  AND THEIR
RESPECTIVE NUMBER OF CREDITED YEARS OF SERVICE UNDER THE RETIREMENT PLAN WERE AS
FOLLOWS: MESSRS. EDINGER, 20; FULLER, 14; GERHART, 26; KALIN, 26; AND WEAVER, 4.
"COMPENSATION"  IS DEFINED AS THE  REGULAR  SALARY OR WAGES,  AS REPORTED IN THE
SALARY AND BONUS COLUMNS OF THE SUMMARY  COMPENSATION TABLE, WHICH IS PAID TO AN
EMPLOYEE FOR SERVICES RENDERED TO TELMARK, INCLUDING OVERTIME,  VACATION PAY AND
BONUSES OR SPECIAL PAY.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Telmark  has no  compensation  committee.  The  salary  of  Daniel  J.  Edinger,
President of Telmark is determined by Donald P. Cardarelli, President and CEO of
Agway Inc.,  the parent  Company of Telmark.  The salary of the other  Executive
Officers of Telmark is  determined  by Mr.  Edinger.  Salaries of all  Executive
Officers are included in the annual operating  budget,  which budget is approved
by the entire Board of Directors of Telmark.

None of the Executive  Officers or Directors who  participated  in  establishing
compensation  policies  had  interlocks  reportable  under  Section  402  (j) of
Regulation S-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

All of the outstanding  member's equity of Telmark is indirectly  owned by Agway
Inc.  None of the  executive  officers  who are  directors  of Telmark  owns any
membership interest of Telmark or equity securities of its parent company or the
parent company's subsidiaries.  All of the other directors are also directors of
Agway  Inc.  Agway  is an  agricultural  cooperative  and  each  of its  members
including  each director  owns one share of $25 par value common stock.  None of
the executive  officers and directors  either  individually or in the aggregate,
own greater than 1% of any class of equity security of Telmark or of Agway Inc.

                                       29

<PAGE>
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Telmark  is an  indirect  wholly-owned  subsidiary  of Agway  and as  such,  had
intercompany   transactions.   See  "Management's  Discussion  and  Analysis  of
Financial  Condition  and  Results of  Operations"  and Note 7 to the  Financial
Statement for further information.

                                PRINCIPAL MEMBER

Telmark is a wholly-owned  subsidiary of Agway  Holdings,  Inc. Agway  Holdings,
Inc. is a wholly-owned  subsidiary of Agway Financial  Corporation which in turn
is a  wholly-owned  subsidiary of Agway.  Agway is one of the largest supply and
services cooperatives in the United States.




                                       30

<PAGE>
                                    PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
                                                                                                                    PAGE
              (A)     INDEX TO DOCUMENT LIST                                                                       LOCATION
                                                                                                                   --------
                      <S>      <C>                                                                                       <C>

                      (1)      FINANCIAL STATEMENTS
                               Among the responses to this Item 14(a)(1) are the following financial statements
                               which are included in Item 8.
                               (i)   Report of Independent Accountants...................................................11
                               (ii)  Consolidated Balance Sheets, June 30, 1999 and 1998.................................12
                               (iii) Consolidated Statements of  Income and Member's Equity, for the years ended
                                     June 30, 1999, 1998, and 1997.......................................................13
                               (iv)  Consolidated Statements of Cash Flow, for the years ended June 30, 1999,
                                      1998, and 1997.....................................................................14
                               (v)   Notes to the Consolidated Financial Statements......................................15

                      (2)      FINANCIAL STATEMENT SCHEDULES
                               Schedules  are  omitted  for the reason  that they are not  required  or are not
                               applicable,  or the required information is shown in the financial statements or
                               notes thereto.

                      (3)      THE FOLLOWING  REQUIRED  EXHIBITS ARE EITHER  ATTACHED  HERETO OR ARE HEREBY
                               INCORPORATED  BY REFERENCE TO PREVIOUSLY  FILED  REGISTRATION  STATEMENTS OR THE
                               APPLICABLE FORM 10-K FILED AS SPECIFIED.

                               3 -    ARTICLES OF INCORPORATION

                                      3(a) -Certificate of Incorporation of Telmark Inc.  (predecessor to Telmark LLC)
                                            dated June 4, 1964, as amended September 8, 1964; January 15, 1975; and June 16,
                                            1987, filed by reference to Exhibit 3 of the Registration  Statement (Form S-1),
                                            File No. 33-70732, dated October 22, 1993.

                                      BY-LAWS

                                      3(b) -By-laws of Telmark Inc. (predecessor to Telmark LLC) as amended September
                                            19, 1995, filed by reference to Exhibit 3 of the Annual Report (Form 10-K) dated
                                            August 23, 1996.

                                      CERTIFICATE OF FORMATION

                                      3(c) -Certificate  of formation  of Telmark LLC dated June 25,  1998,  filed by
                                            reference to Item 14 of the Annual Report (Form 10-K) dated August 21, 1998.

                                      LIMITED LIABILITY COMPANY AGREEMENT

                                      3(d) -Operating  agreement of Telmark LLC dated July 1, 1998, filed by reference
                                            to Item 14 of the Annual Report (Form 10-K) dated August 21, 1998.

                                      CERTIFICATE OF MERGER

                                      3(e) -Certificate of Merger of Telmark Inc. into Telmark LLC effective July 1, 1998,
                                            filed by reference to Item 14 of the Annual Report (Form 10-K) dated August 21,
                                            1998.

                                       31

<PAGE>
ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (CONTINUED)

                               4 -    INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES

                                      4(a) -The Indenture dated as of September 30, 1993, between Telmark Inc. and OnBank
                                            & Trust Co. of Syracuse, New York, Trustee, filed by reference to Exhibit 4 of
                                            the Registration Statement (Form S-1), File No. 33-70732, dated October 22,
                                            1993.

                                      4(b) -Telmark Inc. Board of Directors resolutions dated as of June 21, 1995,
                                            authorizing the issuance of Debentures under the Indenture filed by reference to
                                            Exhibit 4 of the post effective Amendment No. 1 to the Registration Statement
                                            (Form S-1), File No. 33-84442, dated August 28, 1995.

                                      4(c) -Supplemental Indenture dated as of June 30, 1998 between Telmark Inc. and
                                            Manufacturers and Trust Company, filed by reference to Exhibit 4 of the Current
                                            Report (Form 8-K), File No. 33-70732, dated July 6, 1998.

                                      4(d)  -Supplemental  Indenture dated as of July 1, 1998 between Telmark Inc. and
                                            Telmark LLC and Manufacturers  and Traders Trust Company,  filed by reference to
                                            Exhibit 4 of the Current Report (Form 8-K), dated July 6, 1998.

              (B)     REPORTS ON FORM 8-K
                      No reports on Form 8-K for the three months ended June 30,
                      1999, have been filed.
</TABLE>


                                       32

<PAGE>




                                   SIGNATURES

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

                                    TELMARK LLC
                                    (Registrant)


                                              By   DANIEL J. EDINGER
                                                   -----------------------------
                                                   President
                                                   (Principal Executive Officer)

                                            Date   9/10/99

      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.

      SIGNATURE                  TITLE                                    DATE
      ---------                  -----                                   -------


      DANIEL J. EDINGER      President                                   9/10/99
                             (Principal Executive Officer)



      PETER J. O'NEILL       Senior Vice President, Finance and Control  9/10/99
                             Chairman of the Board and Director
                             (Principal Financial Officer
                             & Principal Accounting Officer)



      ANDREW J. GILBERT      Director                                    9/10/99



      SAMUEL F. MINOR        Director                                    9/10/99



      GARY K. VANSLYKE       Director                                    9/10/99



      WILLIAM W. YOUNG       Director                                    9/10/99






                                       33