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 1998           FY 1997           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 1998           FY 1997           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 1998           FY 1997           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 1998           FY 1997           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 1998           FY 1997           (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