<PAGE>


                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549

                                     FORM 10-K

                   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                       OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended December 31, 1997

                          COMMISSION FILE NUMBER:  0-13721

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

                               HICKORY TECH CORPORATION

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                 MINNESOTA                             41-1524393
     ------------------------------                -------------------
      (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)                 Identification No.)

                              221 EAST HICKORY STREET
                                   P.O. BOX 3248
                             MANKATO, MINNESOTA  56002

               (Address of principal executive offices and zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  800-326-5789

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE

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

                                COMMON STOCK, NO PAR
                                --------------------
                                   TITLE OF CLASS

     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, and (2) has been subject to such filing
requirements for the past 90 days.

                                                     Yes X      No
                                                        ---       ---

     Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.[X]

     As of March 6, 1998, the aggregate market value of the voting stock held
by non-affiliates of the Registrant was $160,915,381 (exclusive of voting
stock owned by Registrant's Directors and Officers).

     The total number of shares outstanding of the Registrant's common stock
as of March 6, 1998:  4,542,672.

     Documents Incorporated by Reference:   None.


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<PAGE>


                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>


     Item                                                            Page
     ----                                                            ----
<S>                                                                 <C>
                                       PART I


  1.   Business                                                       I-1
  2.   Properties                                                     I-11
  3.   Legal Proceedings                                              I-11
  4.   Submission of Matters to a Vote of Security Holders            I-11



                                      PART II


  5.   Market for Company's Common Equity and Related Stockholder
       Matters                                                        II-1
  6.   Selected Financial Data                                        II-2
  7.   Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                      II-3
  8.   Financial Statements and Supplementary Data                    II-14
  9.   Changes in and Disagreements with Accountants on
       Accounting and Financial Disclosure                            II-29



                                      PART III


  10.  Directors and Executive Officers of the Company                III-1
  11.  Executive Compensation                                         III-3
  12.  Security Ownership of Certain Beneficial Owners and
       Management                                                     III-10
  13.  Certain Relationships and Related Transactions                 III-11



                                      PART IV


  14.  Exhibits, Financial Statement Schedules and Reports on
       Form 8-K                                                       IV-1

</TABLE>
<PAGE>

                                     PART I
ITEM 1. BUSINESS.

IN GENERAL
  (a)  The Registrant is Hickory Tech Corporation, which is the parent company
  for eight operating subsidiaries, which are:
  Mankato Citizens Telephone Company (MCTC), a Minnesota corporation;
  Mid-Communications, Inc. (Mid-Comm), a Minnesota corporation;
  Heartland Telecommunications Company of Iowa (Heartland), a Minnesota
  corporation; Amana Colonies Telephone Company (ACTC), a Minnesota
  corporation; Cable Network, Inc. (CNI), a Minnesota corporation;
  National Independent Billing, Inc. (NIBI), a Minnesota corporation;
  Collins Communications Systems Co. (Collins), a Minnesota corporation and;
  Digital Techniques, Inc. (DTI), a Texas corporation.

  Hickory Tech Corporation (Company) was reorganized as the parent company in
June, 1985. Its predecessor, MCTC, has been in business since February, 1898.
The Company has evolved into four main segments, based upon the eight operating
companies listed above. The four business segments are described below.


TELEPHONE SEGMENT

  Telephone Operations represented approximately 56% of 1997 Consolidated
Operating Revenues.

  MCTC and Mid-Comm, both medium-sized independent telephone utilities in and
around Mankato, Minnesota, have experienced no major change in the scope or
direction of their operations during the past year.  The telephone operations
of MCTC and Mid-Comm are regulated by the Minnesota Public Utilities
Commission. MCTC also owned and operated a direct broadcast satellite license
under the trade name DirectVision (license acquired in 1993, operations began
in 1994). The DirectVision line of business was not regulated by State and
Federal regulators.  During 1997, MCTC sold its direct broadcast satellite
license. Heartland is a collection of eleven rural telephone exchanges in
Iowa purchased in 1997 by the Company.  Heartland is regulated by the Iowa
Utilities Board. ACTC is a small independent telephone company in east
central Iowa and is regulated by the Iowa Utilities Board. CNI owns and
operates fiber optic cable facilities in southern Minnesota which are used to
transport interexchange communications as a service to telephone exchange
carriers. CNI also holds a minority ownership interest in a rural cellular
limited liability company in south central Minnesota.  None of CNI's
operations are subject to regulation by the Minnesota Public Utilities
Commission.

  The five companies that provide telephone related services, MCTC, Mid-Comm,
Heartland, ACTC and CNI, are combined into the Company's Telephone Segment.
The total landline access lines served as of December 31, 1997 was 59,223.
There are twelve contiguous exchanges/central offices in and around Mankato,
Minnesota, eleven exchanges in northwest Iowa and one exchange serving seven
communities in and around Amana, Iowa. The net combined operating revenues
after intercompany eliminations for this Segment were $42,835,000 in 1997
compared with $34,334,000 in 1996, which is an increase of 24.8%.  After
removing the effect of the Heartland acquisition in 1997, the telephone
operating revenues increased $2,069,000 or 6.0%. Operating income for this
Segment was $19,169,000 in 1997 compared with $16,044,000 in 1996.  Operating
income without


                                    I - 1


<PAGE>

Heartland in 1997 would have been $16,943,000, which is a 5.6% increase. This
Segment is in a capital-intensive industry, and during the two year period ended
1997, $20,967,000 was invested in telecommunications plant facilities.

BILLING AND DATA SERVICES SEGMENT

  Billing and Data Services represented approximately 12% of 1997
Consolidated Operating Revenues.

  Revenues are earned primarily by billing and accounting services to local
exchange and municipal customers, and specialized contract services to
interexchange network carriers (IXCs). Computer data processing, the core
service of this Segment, is a dynamic business of standard programming
services, with a base of existing customers comprised mostly of local
telephone companies. However, there is turnover in this base. New customers
and services to existing customers are continually being sought to offset the
attrition of customers who establish in-house systems. National Independent
Billing, Inc. (NIBI) (the new company name after internal merger of two
wholly owned subsidiaries in 1997) enters into contracts for specialized
services to long distance communications providers (IXCs). NIBI's operating
revenues after intercompany eliminations were $9,474,000 in 1997 compared to
$9,573,000 in 1996, a decrease of 1.0%. Operating income for this subsidiary
was $1,795,000 in 1997 compared to $658,000 in 1996, a 172.8% increase. This
significant increase in operating income in 1997 was due to decreases in
management and overhead expenses.

EQUIPMENT SALES SEGMENT

  Equipment Sales represented approximately 21% of 1997 Consolidated
Operating Revenues.

  Collins' revenues are earned primarily by sales, installation and service
of business telephone systems in metropolitan Minneapolis/St. Paul,
Minnesota. Collins continues its commitment to service and support of its
core product, Nortel, while identifying new opportunities such as call
centers, Meridian Link, computer telephone integration voice mail and
interactive voice response. Collins' operations are reflected in the
Company's Equipment Sales Segment. This Segment's operating revenues were
$16,034,000 in 1997 compared with $16,153,000 in 1996, a 0.7% decrease. The
Segment's operating income was $1,485,000 in 1997 compared with $1,410,000 in
1996.  The 1997 results included $609,000 of revenue after the acquisition of
DataComm Products, a new division of Collins, in November 1997.

TELECOMMUNICATIONS PRODUCT DEVELOPMENT SEGMENT

  Telecommunications Product Development represented approximately 11% of
1997 Consolidated Operating Revenues.

  The Telecommunications Product Development Segment consists of the
operations of DTI. DTI designs, assembles and distributes telecommunications
components for business telephone systems such as Nortel.  The customers of
this market are national distributors of large telecommunications systems and
other equipment manufacturers.  DTI's products are distributed throughout
North America, in the United Kingdom and in the Pacific Rim. DTI has a base of


                                    I - 2


<PAGE>

operations in the Dallas, Texas area, but enjoys a national and
international presence through its RBOC, GTE and British Telecom, Inc.
distributor networks. This Segment's operating revenues were $8,119,000 in
1997 compared with $6,502,000 in 1996, a 24.9% increase. Net Operating Income
increased from  a loss of ($403,000) in 1996 to income of $640,000 in 1997.

FINANCIAL CONDITION

  The Company's financial position continues to be strong, with net working
capital of $8,265,000 at December 31, 1997. The Company operates in capital
intensive businesses. Additions to Property, Plant and Equipment are the
Company's largest investing activity, using $40,023,000 of cash in the three
years ended 1997 (including $12,499,000 of Heartland assets acquired). The
Company's primary source of working capital has been its operations,
primarily the Telephone Segment. The Company has achieved modernization of
its core business technology through internal reinvestment of capital,
diversification through acquisition of external companies and generation of
new business through start-up ventures, while still improving its
shareholders' capital position. The debt portion of the Company's total
capitalization is 42.9%.

  The construction and facilities program for 1998 is approximately
$8,100,000. Normal purchase commitments have or will be made for planned
expenditures.

  The Company purchased the assets of eleven rural telephone exchanges in the
State of Iowa from U S West Communications, Inc. ("US West") for $35,271,000.
The eleven exchanges contain approximately 12,500 access lines. The
acquisition was structured as a purchase of telephone assets from US West.
The purchase was approved by all required regulatory bodies. The acquisition
was funded by new long-term debt instruments, which the Company has secured
from institutional sources in a private placement. The financing transaction
for this US West acquisition closed in April, 1997.

  The Company has entered into a definitive agreement with Frontier
Corporation to acquire the stock of its subsidiary which presently owns and
operates the license of the Minnesota rural cellular property known as RSA
10.  RSA 10  spans seven counties in the southeast portion of Minnesota and
encompasses a population of 230,000.  Approval of this license transfer is
expected in March 1998.  No state regulatory approvals are needed for this
cellular transfer.

  Management believes the Company will generate sufficient working capital
internally from operations to meet its operating needs and sustain its
historical dividend, debt service, and equipment additions levels. The
Company has a $10,000,000 line-of-credit arrangement with a local bank at a
rate floating with LIBOR. The Company will utilize a new bank debt facility
to fund the majority of the $40 million acquisition price for the Frontier
Corporation cellular property in 1998.  The debt portion of the Company's
total capitalization is expected to be approximately 55% after the  1998 RSA
10 acquisition, which is a comparable in the Company's industry.

  The Company's reinvested growth in equity has come about while increasing
dividends to shareholders from $2,354,000 in 1987 to $5,529,000 in 1997, an
8.9% compound annual growth rate over 10 years. The Company announced a
dividend increase of 10% in 1998. This increase is not expected to affect the
liquidity of the Company.


                                    I - 3
<PAGE>
  BUSINESS SEGMENTS - FINANCIAL INFORMATION

  (b)  The Company's operations are conducted in four business segments. The
Telephone Segment provides telecommunications services to Mankato and adjacent
areas of Blue Earth and Nicollet Counties in southern Minnesota, to eleven
communities in northwest Iowa and to the Amana Colonies in east-central Iowa.
The Telephone Segment also operates fiber optic cable transport facilities in
southern Minnesota, and holds a minority ownership interest in a rural cellular
limited liability company in south central Minnesota. The Billing and Data
Services Segment provides data processing and related services primarily to
telecommunications companies. Its customers are local exchange telephone
companies and interexchange network carriers with operations across the country.
The Equipment Sales Segment sells, installs and services communications
equipment in the retail market. It has many ongoing business contracts with
large business customers in Minneapolis/St. Paul. The Telecommunications Product
Development Segment designs, assembles and distributes unique business telephone
system components through large distributors in North America, in the United
Kingdom and in the Pacific Rim.


                                    I - 4


<PAGE>


                               BUSINESS SEGMENT DATA
                              Years Ended December 31
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                   1997          1996          1995
<S>                                               <C>           <C>           <C>

IDENTIFIABLE ASSETS:
     Telephone                                   $ 92,617       $52,239       $50,339
     Billing and Data Services                      4,371         4,964         7,725
     Equipment Sales                                8,444         6,888         5,214
     Telecommunications Product Development         4,670         4,180         3,417
     Corporate                                      2,282         2,992         7,243
                                                 --------       -------       -------
     Total Assets                                $112,384       $71,263       $73,938
                                                 --------       -------       -------
                                                 --------       -------       -------


REVENUES BEFORE INTERSEGMENT ELIMINATION
     Telephone                                   $42,912        $34,479       $32,929
     Billing and Data Services                    11,821         11,769        12,437
     Equipment Sales                              16,034         16,153        12,111
     Telecommunications Product Development        8,119          6,502         7,731
     Intersegment Elimination                     (2,424)        (2,341)       (2,361)
                                                 --------       -------       -------
     Total Revenue                               $76,462        $66,562       $62,847
                                                 --------       -------       -------
                                                 --------       -------       -------


INTERSEGMENT REVENUES
     Telephone                                   $    77        $   145       $   329
     Billing and Data Services                     2,347          2,196         2,032
                                                 --------       -------       -------
     Total Intersegment Revenues                 $ 2,424        $ 2,341       $ 2,361
                                                 --------       -------       -------
                                                 --------       -------       -------


OPERATING INCOME
     Telephone                                   $19,169        $16,044       $15,118
     Billing and Data Services                     1,795            658           721
     Equipment Sales                               1,485          1,410           112
     Telecommunications Product Development          640           (403)        1,129
     Corporate                                    (2,433)          (936)       (1,301)
                                                 --------       -------       -------
     Total Operating Income                      $20,656        $16,773        $15,779
                                                 --------       -------       -------
                                                 --------       -------       -------


DEPRECIATION AND AMORTIZATION
     Telephone                                   $6,718         $4,571        $4,621
     Billing and Data Services                      863          1,939         1,784
     Equipment Sales                                182            104           523
     Telecommunications Product Development         143            131           138
     Corporate                                       84            113           122
                                                 --------       -------       -------
     Total Depreciation and Amortization          $7,990        $6,858        $7,188
                                                 --------       -------       -------
                                                 --------       -------       -------


CAPITAL EXPENDITURES
     Telephone                                   $11,431        $9,536        $5,438
     Assets acquired from US West                 12,499             -             -
     Billing and Data Services                       258            62           328
     Equipment Sales                                 260           204           120
     Telecommunications Product Development          103            97           123
     Corporate                                        83           201            12
                                                 --------       -------       -------
     Total Capital Expenditures                  $24,634       $10,100        $6,021
                                                 --------       -------       -------
                                                 --------       -------       -------

</TABLE>


                                    I - 5


<PAGE>

     BUSINESS SEGMENT DESCRIPTION

     (c)  1  (i)    The Company's operations are conducted in 4 business
segments:

Telephone Segment

     MCTC owns and operates an independent telephone system serving the
cities of Mankato and North Mankato, and adjacent rural areas in Blue Earth
and Nicollet Counties in south-central Minnesota approximately 75 miles south
of Minneapolis/St. Paul.  Mid-Comm provides telephone services to the
communities of Amboy, Cambria, Eagle Lake, Garden City, Good Thunder, Judson,
Lake Crystal, Madison Lake, Mapleton, Pemberton, St. Clair, Vernon Center and
surrounding rural areas located primarily in Nicollet and Blue Earth Counties
in south-central Minnesota.  Heartland provides service to the Iowa
communities of Akron, Bancroft, Boyden, Doon, Hawarden, Hull, Ireton, Lakota,
Rock Rapids, Rock Valley and Sibley. ACTC provides telephone services to the
Amana Colonies in east-central Iowa. The total number of lines served at the
end of 1997 was 59,223.

     MCTC derives its principal revenues and income from local services
charged to subscribers in its service area and from the operation of a toll
tandem switching center in Mankato, Minnesota.  Revenues and income for
Mid-Comm are also derived from local service charges in its area of
operation, and from providing access to long distance services for its
subscribers through the toll center in Mankato. Local and interexchange
telephone access for the two companies are provided on an integrated basis.
The local and interexchange telephone access for both telephone companies
utilize the same facilities and equipment and are managed and maintained by
the same work force. Heartland and ACTC derive their principal revenues and
income from local services charged to subscribers in their respective service
areas and from providing interexchange access for their subscribers.
Interexchange telephone access is provided by all four of the Company's
telephone companies by connecting the communications networks of
interexchange and cellular carriers with the equipment and facilities of end
users by use of its switched networks or private lines.

     CNI's activities are included in the Telephone Segment and are centered
on the operation of a fiber optic cable transmission facility in southern
Minnesota. CNI also holds a minority ownership interest in a rural cellular
limited liability company in south central Minnesota. The operations of CNI,
after elimination of intercompany activity, did not have a material impact on
the financial operations of the Company and are not separately disclosed.

Billing and Data Services Segment

     NIBI provides data processing and related services principally for the
Company, other local exchange telephone companies, interexchange carriers and
miscellaneous municipalities.  The computer operations are considered a
separate Segment of business in the Company's consolidated financial
statements.  NIBI's principal activity is the provision of monthly batch
processing of computerized data.  Services for telephone company customers
include the processing of long distance telephone calls from data sources and
telephone switches, the preparation of the subscriber telephone bills,
general accounting and payroll. NIBI also provides certain billing
clearinghouse functions for interexchange carriers.  NIBI obtains specialty
programming contracts with these carriers due to its expertise in the
telecommunications field. The unique programming and consulting aspects of
telecommunications data processing have become a primary source of revenue
for NIBI. Services for municipal customers consist of preparation of utility
bills, payroll and fund accounting, as well as a full array of turnkey
management systems.  NIBI generates


                                    I - 6


<PAGE>

revenues from the initial sale of software products as well as the associated
support and contract programming that complement the sale.

Equipment Sales Segment

     The Equipment Sales Segment activities are centered around the sale,
lease and service of telephone equipment and services in the metropolitan
Minneapolis/St. Paul area.  The products for this Segment consist of
telecommunication platforms such as Nortel and Rolm. Its expertise is very
high quality system installation and maintenance. Collins Communications
Systems Co. operates in the very competitive market of Minneapolis/St. Paul.

Telecommunications Product Development Segment

     The Telecommunications Product Development Segment has operations which
design, assemble and distribute value added telecommunications products.
This innovative development company is based in Dallas, Texas, but
distributes to national and international markets using large operating
telephone companies and suppliers. DTI develops new products, responds to
original equipment manufacturing assembly orders and distributes or licenses
products through large internationally recognized distributors.  DTI operates
in a competitive market, dominated by large manufacturers.  DTI has been able
to create a niche in this market with its unique engineering expertise and
its rapid turnaround capabilities.

               (ii) In February of 1997, the Company publicly announced the
creation of a new subsidiary, Crystal Communications, Inc.  The new company
will provide competitive telecommunications services to customers served by
other telephone companies.  Operations for Crystal Communications, Inc. began
in January 1998.

     The passage of the Federal Telecommunications Act of 1996 (Telecom Act),
the telephone companies no longer have the exclusive right to offer telephone
service to the customers in a franchised service area.  This legislation has
created the opportunity for the Company to offer communications service in
territories served by other telephone companies.  Crystal Communications,
Inc. will offer local dial tone, long distance, and local call Internet
access services to select markets.  Studies are currently in progress to
determine the specific markets in which services will be offered.  The
Company does not believe a material investment of assets will be required to
begin offering services by this new subsidiary.  Likewise, the Company and
its other subsidiaries are not planning the development or sale of a new
product line which would require the investment of a material amount of the
assets of the Company or its subsidiaries.

               (iii)     Materials and supplies which are necessary for the
operation of the businesses of the Company and its subsidiaries are available
from a variety of sources.  No supply problems are anticipated during the
coming year.

               (iv) The two telephone subsidiaries of the Company in
Minnesota are public utilities operating pursuant to Indeterminate Permits
issued by the Minnesota Public Utilities Commission, the governing regulatory
agency. Heartland and ACTC are also public utilities which operate pursuant
to Certificates of Public Convenience and Necessity issued by the Iowa
Utilities Board. Local service rates are filed as tariffs with the individual
state regulatory authority. At this time, Iowa's level of regulation of local
service rates is less restrictive than Minnesota's. Regardless


                                   I - 7


<PAGE>

of whether a particular rate is subject to regulatory review, the Company's
ability to raise rates will be determined by various factors, including
economic and competitive circumstances. Other patents, licenses, franchises
and concessions (such as cellular licenses, specific product knowledge and
distributor relationships) while important assets, are of less significance
in the businesses of the Company and its subsidiaries.

               (v) The businesses are not highly seasonal.

               (vi) The Company and its subsidiaries are engaged in service
businesses.  Working capital practices primarily involve allocation of funds
for the construction and maintenance of telephone and computer plant, the
payroll costs of highly skilled labor and the inventory to service its
telephone equipment customers.

               (vii)     As local exchange telephone companies, MCTC,
Mid-Comm, Heartland and ACTC provide end office switching and ancillary
services to long distance interexchange carriers, such as AT&T, US West, MCI
and Sprint.  This relationship allows the Company's telephone subscribers to
place long distance telephone calls.  By paying access charges in bulk
quantities for the long distance usage of all of the individual customers who
use their service, the long distance interexchange carriers are large
customers of the Company, but individually do not represent more than ten
percent of consolidated revenues. Access charges, payable by long distance
IXCs, are filed as tariffs with either the FCC or the individual state
regulatory authority, depending upon the jurisdiction of the traffic.

     The Company's level of activity with any of its long distance carrier
customers, including the largest customers, AT&T and US West, is not secured
by contract.  The FCC dictates that AT&T, or one of its long distance
competitors, must serve the Company's subscribers for certain types of toll
calls in certain jurisdictions, and the Minnesota Public Utilities Commission
dictates that US West must serve the Company's subscribers for certain types
of toll calls in certain jurisdictions as the "carrier of last resort."  The
prices for the services performed by the Company for interexchange carriers
are primarily established by the FCC and by State regulatory agencies.

     The Company offers equal access to other non-AT&T carriers in its service
territory.  The Company's level of activity with the non-AT&T carriers is not
secured by contract, and the prices for services performed by the Company for
these carriers are established by regulatory authorities in the same manner as
it is for AT&T and US West.

     The business of the Company's Equipment Sales and Telecommunications
Product Development Segments are not dependent upon any single customer or small
group of customers.  These service and equipment activities are more of a
commodity relationship and tend to provide more customers with smaller
individual transactions than the Company's telephone business. The Company's
Billing and Data Services Segment has a single customer which accounts for a
significant portion of its revenue. There is no customer which accounts for ten
percent or more of the Company's consolidated revenues in these Segments.

               (viii)    The Company and its subsidiaries are in service
businesses which provide an ongoing benefit to their customers for a fee.
These services are repetitive and recurring. Backlog orders are not a
significant factor in providing these services.

               (ix) There is no material portion of the businesses of the
Company or its subsidiaries which is subject to renegotiation or termination
by the Government.


                                    I - 8


<PAGE>

               (x)  The two telephone subsidiaries of the Company in
Minnesota operate pursuant to Indeterminate Permits issued by the Minnesota
Public Utilities Commission. The two telephone subsidiaries in Iowa operate
pursuant to Certificates of Public Convenience and Necessity issued by the
Iowa Utilities Board. These commissions regulate the services provided by
MCTC, Mid-Comm, Heartland and ACTC. Due to the size of the Company's
operations in Minnesota and in Iowa, these commissions do not regulate the
rate of return or profits of the Company's telephone operations. The Telecom
Act will open the doors to large telecommunications markets. Due to the
relatively rural nature of the Company's service territory, management does
not expect State or Federal regulation to materially impact the Company's
operations in the near future.  The Company's telephone subsidiaries are
exempt from certain obligations of the Telecom Act unless, in response to a
bona fide request, a state regulatory commission removes the exemption.
Competition is less likely to be a factor in rural areas because population
densities are much lower and rural LECs such as the Company's are very
advanced in terms of technology.  The Company has already begun to respond to
these changes with active programs to market products and to engineer its
infrastructure to pro-actively participate in these changes.

     Competitors now offer private line switched voice and data services in
or adjacent to the territories served by the Company, thus permitting bypass
of local telephone facilities. In addition, microwave transmission services,
wireless communications, fiber optic and coaxial cable deployment and other
services permit bypass of the local exchange network. These alternatives to
local exchange service represent a potential threat to the Company's
long-term ability to provide local exchange service at economical rates.

     In order to meet this competition, the Company has deployed new
technology for its local exchange network to increase operating efficiencies
and to provide new services to its customers. These new technologies include
the latest release of digital switching technology on all of the Company's
switches, remote switching technology to within 12,000 feet of every customer
in the local network, installation of over 450 miles of fiber optic cable and
installation of SS7 (an out-of-band system) to all of its access lines.  The
Company has also protected it's  interexchange network with fiber-ring
(redundant route designs which allow traffic to re-route if trouble appears
in the line).

     Competition does exist in some of the services provided for
interexchange carriers, such as customer billing services, operator services
and network switching.  The competition comes from the interexchange carriers
themselves. The provision of these services is of a contractual nature and is
primarily controlled by the interexchange carriers.  Other services such as
directory advertising and local private line transport and cellular
communications are open to competition.  Competition is based primarily on
service and experience.

     Since the mid-1980's, the Company's business strategy has been to
position itself as a "one-stop" telecommunications services provider.
Long-term business relationships with its customers have strengthened the
Company's business position. The Company believes that its customers value
the fact that it is the "local company" whose goal is to meet the customers'
total communications needs. The Company has several competitive advantages in
telecommunications; its prices and costs are extremely low; its service
reputation is extremely high; its technical investment is unsurpassed; and it
has a first hand billing relationship with almost 100% of the customers in
its service territories.


                                    I - 9


<PAGE>

     The long-range effect of competition on the provision of
telecommunications services and equipment will depend on technological
advances, regulatory actions at both the State and Federal levels, court
decisions, and possible additional future State and Federal legislation. The
trend emanating from legislation is to expand competition in the
telecommunications industry. It is imperative that the Company continue to do
whatever it can to ensure that competition is open on a equal basis to all
providers.

     There are a number of companies engaged in supplying data processing
services comparable to those furnished by NIBI.  Competition is based
primarily on price and service. There are some companies of much larger size
that dominate certain aspects of this field. As the level of competition is
opening for providers of local telephone service, those companies who are
trying to provide service will require facilities for rating, billing and
other related services. NIBI is in a position to provide those services for
these new telecommunications companies.

     There are several companies competing in the equipment sales market in
which Collins operates.  Competition is based primarily on price and service.
No company is dominant in this field. Collins offers state-of-the-art
customer premises telephone equipment through well-trained and experienced
market representatives with long term relationships with customers. It also
enjoys a very strong reputation for quality service. Collins has built a
strong base of customers and enjoys most of its recurring revenue by selling
to this base. With these attributes, Collins believes that it effectively
competes in this market segment.

     There are a limited number of companies competing in the product
development market for the specific types of products distributed by DTI.
This market is characterized by pressures to lower the manufacturing costs
and to raise the quality standards to meet customer expectations. DTI is a
small developer of telecommunications products attempting to distribute its
products through very large national distributors. DTI depends on finding
niches in development which are not met by the product line of large
manufacturers. This results in slow product recognition and testing cycles
which may cause cyclical patterns in DTI's financial results.

               (xi) The Company's subsidiary, DTI, engages in research and
development for the new telecommunications products it distributes.  These
research and development activities are not material to the Company's
consolidated operation.

               (xii)     The Company and its subsidiaries anticipate no
material effects on their capital expenditures, earnings, or competitive
position because of laws relating to the protection of the environment.

               (xiii)    As of December 31, 1997, the Company and its
subsidiaries had 452 full-time equivalent employees.

     (d)  The two telephone subsidiaries of the Company in Minnesota (MCTC
and Mid-Comm) provide telephone services to south central Minnesota.
Heartland provides telephone services in northwestern Iowa and ACTC provides
telephone services in east-central Iowa. CNI has operations in south central
Minnesota. The activities of NIBI are primarily concentrated in Midwest
United States, with local exchange telephone company customers nationwide.
NIBI also has major IXC customers which tend to be in metropolitan areas in
the Midwest, on the east coast and in the south.  The activities of Collins
are primarily concentrated in the metropolitan Minneapolis/St. Paul area of
Minnesota. DTI has its facilities in the Dallas, Texas area and distributes
its products throughout North America, the United Kingdom and the Pacific Rim.


                                    I - 10
<PAGE>

ITEM 2.   PROPERTIES.

          The Company's business is primarily in the service industry and its
properties are used for administrative support and to store and safeguard
equipment.  At December 31, 1997, the gross book value of $121,229,000,
consisted primarily of telephone plant and equipment. The two telephone
subsidiaries of the Company in Minnesota own dial central offices with
associated real estate in all of the communities mentioned in Item 1(c)1.(i)
above, except Judson, Minnesota.  The Company owns the telephone property,
plant and equipment which it utilizes to operate its telephone systems. It is
the opinion of the Company's management that the properties of the Company
are suitable and adequate to provide modern and effective telecommunications
services within its franchised areas, including both local and long distance
service. The capacity for furnishing these services, both currently and for
forecasted growth, are under constant surveillance by the engineering staff.
Facilities are put to full utilization after installation and appropriate
testing, according to two, three and five year construction plans.

     The Company's principal properties are the following:

     (1)  MCTC's general offices and principal central office exchange
building are located at 221 East Hickory Street, Mankato, Minnesota.  This is
a three-level brick and stone building containing approximately 60,000 square
feet of floor space.  Portions of this building are leased to the parent
company for its general offices and to NIBI for its data processing
equipment.

     (2)  MCTC's main warehouse is located on Summit Avenue, Mankato,
Minnesota. The warehouse, built in 1996, is a one story concrete building
containing approximately 48,000 square feet.  The warehouse is used to store
vehicles and supplies and is also used as office space for engineering and
outside telephone personnel.

     (3)  Heartland's main central office equipment is located in a one story
brick structure in Rock Rapids, Iowa.

     (4)  ACTC leases general office and telephone central office equipment
space in Homestead, Iowa.

     (5)  NIBI owns a three-story building in Mankato, Minnesota.  The
building contains 17,000 square feet.  NIBI also owns a main frame computer
and associated peripheral equipment which it uses to provide data processing
services for the Company and other customers.  NIBI also leases an operations
office in Minneapolis, Minnesota.

     (6)  The Company leases building and warehouse space for Collins in
Minneapolis, Minnesota and office/production space for DTI in Allen, Texas.

ITEM 3.   LEGAL PROCEEDINGS.

          Neither the Company nor its subsidiaries are engaged in any
material legal proceedings.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this 1997 Annual Report on Form
10-K.

                                   I-11

<PAGE>

                                       PART II

ITEM 5.   MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

          a)   Prior to March, 1995, the Company's common stock was traded by
local brokers in over-the-counter trading. In March 1995, the Company listed
its common stock on NASDAQ's National Market Trading System.

<TABLE>
<CAPTION>
          Quarterly market price information in 1997 was as follows:

          Quarter        High        Low        End of Qtr.
          -------        ----        ---        -----------
          <S>            <C>         <C>        <C>
          4th            $35.75      $32.875    $35.125
          3rd            $32.75      $27.125    $32.0625
          2nd            $30.00      $26.75     $27.6875
          1st            $30.50      $27.00     $28.375

</TABLE>

<TABLE>
<CAPTION>
          Quarterly market price information in 1996 was as follows:

          Quarter        High        Low        End of Qtr.
          -------        ----        ---        -----------

          <S>            <C>         <C>        <C>
          4th            $28.50      $25.25     $27.375
          3rd            $30.00      $24.50     $25.50
          2nd            $31.00      $26.00     $28.125
          1st            $31.50      $26.75     $27.50

</TABLE>

          b)   The total number of registered shareholders with a security
position in the Company as of March 6, 1998 was approximately 2,250.

          c)   The Company declared dividends for the two years ended
December 31, 1997 as follows:

<TABLE>
<CAPTION>

          <S>            <C>         <C>
          Quarter        1997        1996
          -------        ----        ----
          First          $ .30       $ .275
          Second         $ .30       $ .275
          Third          $ .30       $ .275
          Fourth         $ .30       $ .275

</TABLE>

     On January 28, 1998, the Board of Directors of the Company announced a
quarterly cash dividend of $ .33 per share of common stock, which is a 10%
increase over the previous quarter. The dividend was payable on March 5,
1998, to stockholders of record at the close of business on February 15, 1998.

                                  II-1

<PAGE>

<TABLE>
<CAPTION>

ITEM 6.   SELECTED FINANCIAL DATA.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                   1997        1996         1995        1994         1993
                                 -------     -------      -------     -------       ------

<S>                              <C>         <C>          <C>         <C>          <C>
FOR THE YEAR: (A)

  Operating Revenues
     Telephone                   $42,835     $34,334      $32,600     $29,127      $24,547
     Computer                      9,474       9,573       10,405       7,846        8,442
     Equipment                    16,034      16,153       12,111      13,172       14,471
     Telecommunications
      Product Development          8,119       6,502        7,731       8,063        5,081
                                 -------     -------      -------     -------       ------
     Total Operating Revenue     $76,462     $66,562      $62,847     $58,208      $52,541

  Net Income                     $15,479     $10,419       $9,900      $9,147       $8,341

PER SHARE:

  Earnings Per Share               $3.36       $2.09        $1.93       $1.78        $1.62
  Dividends Per Share              $1.20       $1.10        $1.00       $0.87        $0.84
  Book Value Per Share            $12.17      $10.99       $11.28      $10.31        $9.49

AT YEAR END:

  Total Assets                  $112,384     $71,263      $73,937     $67,780      $62,618
  Shareholders' Equity           $55,177     $52,627      $57,907     $52,842      $48,824
  Long-term Debt                 $41,525        $877       $1,087      $1,295       $1,524
  Equity Ratio                     57.1%       98.4%        98.2%       97.6%        97.0%

OTHER DATA:

  Employees                          452         425          447         425          405
  Return on Beginning Equity       29.4%       18.0%        18.7%       19.8%        19.8%
  Capital Expenditures (B)       $12,135     $10,100       $6,021      $6,204       $5,476
  Telephone Plant               $110,229     $78,132      $71,259     $66,314      $58,149
  Access Lines Served             59,223      44,583       42,954      41,326       38,519
  Shares Outstanding           4,534,119   4,790,229    5,134,021   5,124,291    5,143,829

</TABLE>


   (A) The acquisition of Amana Colonies Telephone Company in 1994 and
       Heartland Telecommunications Company of Iowa and DataComm Products
       in 1997 have contributed to the Company's revenue growth for years
       after 1993.

   (B) The 1997 capital expenditures exclude $12,499,000 of assets purchased
       in the Heartland Telecommunications Company of Iowa acquisition.

                                  II-2

<PAGE>

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

     The Company is a diversified communications holding company, with four
main business segments, encompassing eight operating companies. The Telephone
Segment provides service to its franchised territories in south central
Minnesota and north western and east central Iowa. The Billing and Data
Services Segment provides data processing service to independent telephone
companies and national long distance service providers. The Equipment Sales
Segment sells and services telecommunication equipment primarily in
Minneapolis/St. Paul, Minnesota. The Telecommunications Product Development
Segment designs, assembles and distributes unique telecommunications
components for business telephone systems throughout North America, the
United Kingdom and the Pacific Rim from its facility in Texas.

OVERVIEW OF OPERATIONS

     In 1997, the Company's consolidated net income increased to $15,479,000,
up from $10,419,000 in 1996 and $9,900,000 in 1995. This represents an
increase of 48.6% in 1997 compared to an increase of 5.2% in 1996. The
Company's consolidated net income in 1997 included a net of tax gain of
$3,712,000 from selling its DirecTV assets.  Net income excluding the DirecTV
gain in 1997 was $11,767,000, which is an 12.9% increase over 1996.  All four
segments experienced increased profitability versus 1996.  Earnings per share
(EPS) in 1997 increased to $3.36, up from $2.09 in 1996 and $1.93 in 1995,
reflecting an increase of 60.8% in 1997 compared to an increase of 8.3% in
1996.  EPS excluding the DirecTV gain in 1997 was $2.55, an increase of 22.0%
over 1996. The increase in EPS reflects the net income increase of 12.9% and
the 7.6% decrease in weighted average shares outstanding.

     Total operating revenues for 1997 increased to $76,462,000, up from
$66,562,000 in 1996 and $62,847,000 in 1995. This represents an increase of
14.9% in 1997 compared to an increase of 5.9% in 1996. The Company's core
Telephone Segment revenues increased 24.8% in 1997, while the three
non-telephone Segments combined for 4.3% revenue growth in 1997. Total costs
and expenses other than depreciation and amortization were $47,816,000 in
1997, up from $42,931,000 in 1996 and $39,880,000 in 1995. This represents an
increase of 11.4% in 1997 compared to an increase of 7.7% in 1996.

     A measure of the Company's pre-tax operating cash flow is EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization). EBITDA
increased to $30,408,000 in 1997, up from $24,286,000 in 1996 and $23,891,000
in 1995. This represents an increase of 25.2% in 1997 compared to an increase
of 1.7% in 1996. The Company's EBITDA increase would have been 8.1% in 1996
if it had not been for the Telecommunications Product Development Segment's
EBITDA decline of $1,539,000. Consolidated operating income after
depreciation and amortization increased to $20,656,000 in 1997, up from
$16,773,000 in 1996 and $15,779,000 in 1995. This is an increase of 23.2% in
1997 compared to an increase of 6.3% in 1996. Non-cash costs of depreciation
and amortization totaled $7,990,000 in 1997, $6,858,000 in 1996 and
$7,188,000 in 1995. Amortization expense is declining for the Company since
some intangible assets have become fully amortized.

                                  II-3

<PAGE>

CONSOLIDATED REVENUES

     The revenues of the Company, after intercompany eliminations, are
classified into major service categories in the following table. In 1997,
Consolidated Operating Revenues increased $9,900,000 or 14.9%.

<TABLE>
<CAPTION>

          (IN 000S)                         %                  %
                                1997      Change    1996     Change      1995
                                -------   ------   -------   ------   -------

     <S>                        <C>        <C>     <C>      <C>       <C>
     Telephone Operations       $42,835    24.8%   $34,334    5.3%    $32,600
     Billing and Data Services    9,474    (1.0%)    9,573   (8.0%)    10,405
     Equipment Sales             16,034    (0.7%)   16,153   33.4%     12,111
     Telecommunications
     Product Development          8,119    24.9%     6,502  (15.9%)     7,731
                                -------   ------   -------   ------   -------
     TOTAL REVENUES             $76,462    14.9%   $66,562    5.9%    $62,847

     TELEPHONE OPERATIONS

                                           (In Thousands)
                                      1997         1996        1995
                                    -------      -------     -------
  Revenues Before Eliminations      $42,912      $34,479     $32,929
  Net Operating Income               19,169       16,044      15,118
  Earnings Before Interest, Taxes
    Depreciation and Amortization
    (EBITDA)                         25,887       20,615      19,739
  Capital Expenditures               11,431        9,536       5,438

</TABLE>

     Telephone revenues represent 56% of 1997 consolidated operating revenues
after eliminations. Revenues are earned primarily by providing customers
access to the local network, and by providing interexchange access for
long-distance network carriers.

     The Telephone Segment also earns revenue through use of its fiber optic
transport network, operator services, network tandem switching, directory
advertising, cellular communications and direct broadcast satellite
television services. The Telephone Segment's consolidated revenues after
eliminations have grown 11.5% compounded annually over a five year period
from 1992 to 1997. Without the acquisition of Heartland in 1997, the five
year compound annual growth rate would have been 7.9%.

     Local service revenue increased in the Telephone Segment by 24.8% for
1997 over 1996.  After removing the effect of the Heartland acquisition in
1997, the local service revenue increase for 1997 was 6.7%.  This increase
and the 13% local service revenue increase for 1996 are significant
considering these increases exceeded the growth in access lines served, and
they were done without price increases. The revenue increases resulted from
the Telephone Segment's marketing efforts to sell its custom calling
services, CLASS services, Centrex, voice mail and cellular equipment and
agent fees. Services to an adjoining US West exchange were converted from
long distance to Extended Area Service (EAS) in 1996 which contributed to
local service revenue growth. Access line growth (without the 12,900 access
lines acquired in the Heartland

                                  II-4

<PAGE>

transaction) was 3.9% in 1997 and 3.8% in 1996. Over a five year period since
1992, total access line growth (outside of the Heartland acquisition) has
been approximately 4.4%, compounded annually.

     Network access revenues were positively affected by the continued growth in
access minutes, offset by overall lower rates charged for access service.
Customer selection of dedicated trunk lines over the switched access services
(i.e. bypass) also caused ongoing reductions in volume sensitive elements of
network access, while enhancing fixed fee recurring revenues. Access minutes in
1997 (without the effect of the 48,000,000 minutes of use from the Heartland
acquisition) increased by 6.5% over 1996 and 1996 increased 1.3% over 1995.  The
impact of the 1996 transition to EAS with an adjoining US West exchange was a
reduction of volume sensitive network access revenues in 1996.

     Ancillary services to interexchange network carriers include the billing
and collection function. Further reductions in 1997 occurred as more of these
services were taken back by interexchange carriers and no longer performed by
the Telephone Segment. Another ancillary service, directory revenues, increased
in 1997 due to new directory sales campaigns. The Telephone Segment experienced
significant expansion of its non-regulated lines of business (primarily customer
premises equipment sales and voice-mail).  Due to the sale of its DirecTV (DBS)
television service, there was a decline in revenue from this Telephone product
line. In 1997, DirecTV service revenues were $713,000, with $10,000 of EBITDA in
six months of operations before the sale.

     The Telephone net operating income for 1997 grew 19.5% and in 1996 it
increased 6.1%. This growth corresponds closely with revenue growth in both
years.


     BILLING AND DATA SERVICES

<TABLE>
<CAPTION>
                                                 (In Thousands)
                                      1997            1996          1995
                                      ----            ----          ----
<S>                                <C>           <C>             <C>
Revenues Before Eliminations         $11,821         $11,769       $12,437
Net Operating Income                   1,795             658           721
Earnings Before Interest, Taxes
  Depreciation and Amortization
  (EBITDA)                             2,658           2,597         2,505
Capital Expenditures                     258              62           328

</TABLE>

     Billing and Data Services revenues represent approximately 12% of 1997
consolidated operating revenues after eliminations. Revenues are earned
primarily by billing and accounting services to local exchange and municipal
customers, and specialized contract services to interexchange network carriers
(IXCs).

     Computer data processing, the core service of this Segment, is a dynamic
business of standard programming services, with a base of existing customers,
comprised mostly of local telephone companies. However, there is turnover in
this base. New customers and services to existing customers are continually
being sought to offset the attrition of customers who establish in-house
systems.

     Unique telephone industry data processing service to large, international
communications


                                    II - 5

<PAGE>

companies has become this Segment's largest business. The volume of monthly
processing with the IXCs relative to their long-distance business under
earlier contracts has declined over the three year reporting period. In 1995,
NIBI entered into new contracts with a large IXC which provided for the
development and sale of software as well as consulting and processing
services in the new competitive local service market. The fluctuations of
revenue in this Segment are more pronounced because of the large size and
small quantity of IXC contracts.

     Turnkey sales of small systems are no longer a major portion of this
Segment's business. In 1995, NIBI sold two significant software platforms to a
large IXC, which initiated a long-term service relationship. NIBI is actively
seeking more midsize installations of its turnkey data processing systems into
the newly developing, competitive aspects of the telecommunications business.
These proposals have very long customer acceptance cycles.

     The batch processing service to long-distance resellers has become a high
growth market, representing 16% of NIBI's Operating Revenue after eliminations
in 1997.

     Consolidated revenues after eliminations for the Billing and Data Services
Segment have grown 1.1% compounded annually over a five year period from 1992 to
1997. Revenues for this Segment were higher in 1995 than either 1996 or 1997 due
to the turnkey software sales to a large IXC, but otherwise have been
consistent. Net operating income in this Segment increased significantly in 1997
because of decreases in management and overhead expenses.  This Segment's
depreciation and amortization expense for 1997 declined $1,076,000 because of
fully amortized software balances.

     NIBI made a $750,000 payment to SePRO Telecom Int. Ltd. of Dublin, Ireland
in 1997 in formation of a joint software development agreement which was a
direct charge to earnings in 1997.


     EQUIPMENT SALES

<TABLE>
<CAPTION>

                                                (In Thousands)
                                      1997            1996             1995
                                      ----            ----             ----
<S>                               <C>           <C>                <C>
Revenues Before Eliminations         $16,034         $16,153          $12,111
Net Operating Income                   1,485           1,410              112
Earnings Before Interest, Taxes
  Depreciation and Amortization
  (EBITDA)                             1,667           1,514              635
Capital Expenditures                     260             204              120
</TABLE>


     Equipment Sales Segment revenues represent approximately 21% of 1997
consolidated operating revenues after eliminations. Revenues are earned
primarily by sales, installation and service of business telephone systems in
two geographic markets of metropolitan Minneapolis/St. Paul and southern
Minnesota. The Equipment Segment sold the assets of its California division in
1995. The volume of business in the Minneapolis/St. Paul area through Collins
Communications Systems Co., was very strong in 1996. Two $1 million contracts
were completed.  In 1997, Collins was able to match 1996's level of revenues,
with many smaller sized applications. The customers in this Segment's market are
the individual commercial/business end users of telecommunications service with
ongoing service needs. This Segment's products consist of  telecommunication
platforms such as Nortel, Centigram and Rolm.


                                    II - 6


<PAGE>

     Revenues for 1997 were substantially the same as 1996.  The 33% increase in
revenues in 1996 over 1995 was due to significant increases in volume of
business in everyday operations.  The 1997 results included $609,000 of revenue
after the acquisition of DataComm Products, a new division of Collins, in
November 1997. The Equipment Sales Segment's consolidated revenues after
eliminations have grown 0.6% compounded annually over a five year period from
1992 to 1997. The Equipment Sales Segment produced net operating income which
was $75,000 higher than 1996, which had a $1,300,000 improvement over 1995. This
comparison was affected by operations in California (sold in 1995) which had a
pre-tax loss of $440,000 in 1995.


     TELECOMMUNICATIONS PRODUCT DEVELOPMENT

<TABLE>
<CAPTION>

                                                      (In Thousands)
                                          1997             1996            1995
                                          ----             ----            ----
<S>                                   <C>             <C>               <C>
Revenues Before Eliminations             $8,119           $6,502          $7,731
Net Operating Income (Loss)                 640             (403)          1,129
Earnings Before Interest, Taxes
  Depreciation and Amortization
  (EBITDA)                                  783             (272)          1,267
Capital Expenditures                        103               97             123
</TABLE>


     Telecommunications Product Development Segment revenues represent
approximately 11% of 1997 consolidated operating revenues after eliminations.
Revenues are earned by sales of unique business system interface devices through
distributors. Digital Techniques, Inc. (DTI) of Allen, Texas, designs, assembles
and distributes components for business systems such as Nortel. The customers of
this market are national and international distributors of large
telecommunications systems and other equipment manufacturers. DTI's products are
distributed throughout North America, in the United Kingdom and in the Pacific
Rim.

     As a new product developer, DTI made deliberate steps to change its product
mix in 1995 and in 1996. In 1995, DTI experienced a 29% growth in sales of its
standard products while it experienced a 53% decrease in OEM sales. DTI's
standard products earn a higher gross margin than OEM sales. Thus, while
operating revenue went down 4% in 1995, gross margin increased 11%. This margin
increase and expense controls resulted in an increase in net operating income of
34% in 1995. In 1996, DTI made a commitment to growth in its standard product
line and to its national distributor network market strategy. Expenses and cost
of sales in this Segment increased as infrastructure was established for the
anticipated increase in business in 1996. Technical problems developed with
DTI's new key system call routing product and its release was delayed until late
in 1996. In addition, a primary customer of DTI's 911 call system suspended
orders for a portion of 1996 and then renewed late in 1996. The result was a
decline in operating revenues in 1996 when DTI was preparing for growth in
business. As a result, net operating income declined $1,532,000 in 1996.  In
1997, DTI returned to profitability with an 18.5% increase in standard product
sales, a 35% increase in OEM sales, increased profit margins and a reduction in
operating expenses. DTI's consolidated revenues after eliminations have grown
2.3% compounded annually over a five year period from 1992 to 1997. As DTI
enters 1998, it carries a strong backlog and a plan to balance its OEM business
with the new standard products it is launching.


                                    II - 7


<PAGE>

TOTAL COSTS AND EXPENSES

     Total consolidated costs and expenses of $55,806,000 increased 12.1% in
1997, less than the 14.9% increase in operating revenues. Consolidated costs and
expenses other than depreciation and amortization were $47,816,000 in 1997,
compared with $42,931,000 in 1996, an increase of 11.4%. The margin from
operations in 1997 has improved over 1996 and 1995 because of 1997 profitability
of the Telecommunications Product Development Segment, and improved margins in
the Equipment Sales Segment.

OTHER INCOME AND INTEREST EXPENSE

     Other income (primarily interest and equity in LLC income) was $1,107,000
higher in 1997 than 1996.  Included in other income is the Company's 6.3% equity
interest in Midwest Cellular LLC.  In 1997, this LLC income increased $500,000,
after having increased $74,000 in 1996 over 1995.  The remaining portion of the
1997 increase in other income was for gains on sales of certain assets during
1997, such as the CATV assets of two small rural communities, a former
operations facility for the Billing and Data Services Segment and a contract
settlement with an Iowa coalition of telephone companies.

     Interest expense increased by $2,149,000 in 1997 due to the new $40 million
in senior indebtedness initiated in April, 1997.  The new long-term debt
instruments accrue interest at 7.11%.  The proceeds of the debt were for the
Heartland acquisition and for working capital uses.

GAIN ON SALE OF ASSETS

     The 1997 gain on sale of assets of $6.3 million is recognition of the $7.2
million proceeds from selling the Company's DirecTV DBS assets in July, 1997,
when its amortized book value was $0.9 million.

INCOME TAXES

     The effective tax rate in 1997 was 41.5%, versus 39.7% in 1996 and 40.5% in
1995.  The effective rate in each year was affected by the proportionate amount
of operations in the various states the Company does business, and their varying
state income tax rates.  The effective tax rate in 1997 was also influenced by
the Company's increased level of acquisitions, and the need for a corresponding
level of tax accrual.

REVIEW OF CASH FLOW ACTIVITY

     The Company's net working capital of $8,265,000 at December 31, 1997, is an
increase of $1,986,000 from 1996. The Company and its subsidiaries operate in
capital intensive businesses. Additions to Property, Plant and Equipment are the
Company's largest investing activity, using $40,023,000 of working capital in
the three years ended 1997 (including $12,499,000 assets acquired in the
Heartland transaction).

     The Company used $7,716,000 and $10,786,000 to purchase outstanding shares
of its common stock in 1997 and 1996, respectively, as part of its publicly
announced share acquisition program. As a result of this program, the Company
has been able to more fully utilize its available cash while creating increased
value for its current shareholders.  Additionally, the Company completed the
purchase of assets of eleven rural telephone exchanges in the State of


                                    II - 8


<PAGE>

Iowa from US West Communications, Inc. for $35,271,000.  The acquisition has
been funded by new long-term debt instruments, which the Company secured from
institutional sources in a private placement. The Company's primary source of
working capital has been its operations, primarily the Telephone Segment. The
Company's financial strength continues to be supported by its 1997 current
ratio (1.83 to 1), its EBITDA ($30,408,000 in 1997) and its proven access to
debt markets.

DIVIDENDS

     The Company paid dividends of $5,529,000 in 1997.  This was a dividend of
$1.20 per share, a 9.1% increase over the $1.10 per share in 1996.  The
Company's reinvested growth in equity has come about while increasing dividends
to shareholders consistently.  The annual dividend per share has increased at a
compound annual rate of 10% in the ten year period since 1987.  The Company has
announced another 10% increase in dividends for 1998.  This increase is not
expected to affect the liquidity of the Company.

LIQUIDITY AND CAPITAL RESOURCES

     The Company continues to maintain state-of-the-art technology in its core
business.  Management believes the Company will generate sufficient working
capital internally from operations to meet its operating needs and sustain
historical dividend and fixed asset addition levels, and the new debt service
levels.

     The Telephone Segment capital expenditures of approximately $11.4 million
for 1997 and $9.5 million for 1996 were higher than usual because of unique
requirements associated with the new acquisition from US West in 1997 and unique
building construction requirements in 1996. The Company utilized approximately
$18.5 million in 1997 and 1996 to repurchase shares of its common stock under
its publicly announced share repurchase program.

     The Company has a $10 million bank line-of-credit arrangement to utilize
for short term needs of cash. As of December 31, 1997, there were no outstanding
borrowings under this arrangement.

     The Company's purchase of assets of eleven rural telephone exchanges in the
State of Iowa from US West Communications, Inc. was funded by new long-term debt
instruments, which the Company has secured from institutional sources in a
private placement.  The financing transaction for this US West acquisition
closed in April 1997.

     The Company is in a position to be able to borrow from institutional
sources on an unsecured basis or from banks on a secured or unsecured basis
because of its high level of cash flow.  Based on Company EBITDA levels and
existing loan covenants, there is sufficient ability to raise capital in order
to fulfill Company corporate development goals.

SHARE REPURCHASE PROGRAM

     The Company's Board of Directors authorized management to repurchase shares
of Company common stock in the open market or through private transactions.
During 1997, pursuant to this authorization, the Company repurchased 269,672
shares for $7.7 million, and in 1996 the Company repurchased 366,366 shares for
$10.8 million.  Management has the authority to repurchase approximately 370,000
additional shares, with no definite timetable.


                                    II - 9
<PAGE>

REGULATORY

     The Company's largest telephone subsidiary, Mankato Citizens Telephone
Company (MCTC), increased local rates, effective January 1, 1995, adding
approximately $600,000 of revenues. The Minnesota Department of Public
Service has the authority to investigate rates and profits of telephone
companies in Minnesota. The Minnesota state telephone industry mobilized
efforts to change the regulatory legislation in Minnesota in 1995. The
initiative changed the law so that companies with less than 50,000 customers
have their prices regulated instead of their profits. The Company's two
Minnesota telephone subsidiaries fall under this reduced level of regulation.
In 1998, the Company's telephone subsidiaries will implement increases in
their local service rates, which are substantially lower than most
neighboring telephone companies.  These rate changes have been filed with the
State and are approved.

      In 1994, all LECs in Minnesota agreed on a three-year intrastate access
charge limitation on their composite access rates. The Company's two
Minnesota telephone subsidiaries are incurring declines in access revenue
resulting from this limitation.  This Minnesota access charge agreement is
due for reconsideration in 1998.  At this time, management is not able to
predict the outcome, if any, of access charge reform in Minnesota. In the
state of Iowa, the Company's operations fall below the 15,000 access line
minimum level for regulation by the Iowa Utilities Board. No regulatory
matters in Iowa affect the Company's current operation.

     In 1996, the Company filed and received state regulatory approval for
its purchase of the assets of eleven rural telephone exchanges in the state
of Iowa from US West Communications, Inc. State approvals were obtained in
Iowa, Minnesota and South Dakota due to customer location. Approval of this
transfer was received from the Federal Communications Commission in February
1997.

     In January 1998, the Company made application with the Federal
Communications Commission to transfer the license of the Minnesota rural
cellular property known as RSA 10.  The Company has entered into a definitive
agreement with Frontier Corporation to acquire the stock of its subsidiaries
which presently owns and operates this cellular "A-side" license.  Approval
of this license transfer is expected in March 1998.  No state regulatory
approvals are needed for this cellular transfer.

     In February 1996, federal telecommunications reform legislation was
signed into law addressing competitive and regulatory issues in local and
long distance telephone, cable television and information services
industries. The 1996 Telecommunications Act overhauls years of
telecommunications law and the restrictions of the 1984 antitrust consent
decree. The law replaces government regulation with competition as the chief
way of assuring that telecommunications services are delivered to customers.
It removes many of the barriers to competition between segments of the
industry, enabling companies to go head-to-head in offering voice, video and
information services. The new law sets guidelines to open the local exchange
market, preserves universal service objectives, and allows for more
competition in the cable television and long distance telephone markets. The
FCC continues to refine and determine exactly how competition is introduced
to the local service market. It must determine such things as wholesale
prices for the reselling of local service, mechanisms for unbundling the
local network and interconnection rules. In addition to requiring the FCC to
preside over the provisions of the Telecommunications Act, Congress granted
state PUC's the authority to oversee LEC operations and play a role in this
deregulation. It is possible that FCC rulings will preempt state regulation
of LECs. The FCC has suggested that it will largely preempt state

                                  II-10

<PAGE>

regulators and establish national rules for opening up local telephone
service to competition.  There have been judicial cases filed to investigate
these federal versus state matters.  Although it is too early to witness
notable changes in both local and long distance industries, the 1996 Act is
certain to result in a much more competitive environment for all
telecommunications companies. Management of the Company expects to see
continued movement toward a fully competitive telecommunications marketplace.
The Telephone Segment's ability to compete is dependent on its commitment to
quality service in selected markets. Recent FCC decisions appear to have
opened the doors to larger telecommunications markets. Management expects to
experience more opportunities than threats from these sweeping changes.

COMPETITION

     Regulatory, legislative and judicial decisions, new technologies and the
convergence of other industries with the telecommunications industry are
causes of increasing competition in the telecommunications industry. The 1996
Telecommunications Act opened up the local network to competition, and
required all incumbent LECs to take steps in making it feasible for new
entrants to compete. It also removed restrictions prohibiting electric
utilities from providing telecommunications services. Competition is less
likely to be a factor in rural areas because population densities are much
lower and rural LECs such as the Company's telephone subsidiaries are very
advanced in terms of digital switching, fiber optic networks and advanced
services. The Telephone Segment has already begun to respond with active
programs to market products and engineer its infrastructure to be an active
participant in the new environment.  In the Telephone Segment's service
territories, although other competitive telephone service providers have
petitioned for the right to serve in the Segment's territories, none have
delivered service yet. The Company is evaluating future avenues of growth
including developing competitive local exchange company operations in areas
where the Company's telephone subsidiaries are not the incumbents. Industry
analysts agree that the FCC's order and interpretations create a more
favorable scenario for new entrants than for incumbent LECs. The Company has
unique advantages in its existing host switching network, its customer
service systems, its existing account relationships, its billing and data
management expertise, and its experience in telephone system engineering and
interconnection negotiation. The Company's endeavors in this newly
competitive market will complement its existing business.

     The Company operates businesses in several different markets. Each of
the businesses has fluctuations in revenues and operating earnings as the
result of the overall level, timing and terms of many contracts. The Company
monitors the technological changes and competitive and regulatory environment
of the telecommunications business and develops strategies to address these
changes. The Company evaluates the way it conducts business in order to
further improve customer responsiveness and quality. Also, the Company
evaluates productivity improvement programs that could involve retraining of
employees, re-engineering of systems, restructure of its resource levels and
operating costs.

ACCOUNTING PRONOUNCEMENTS

     In 1997, the Company adopted the provisions of Financial Accounting
Standard No. 128, "Earnings per Share."  The Company has retroactively
restated earnings per share for all periods reported.  In 1996, the Company
evaluated Financial Accounting Standard No. 121, "Accounting for the
impairment of Long-Lived Assets to be Disposed of" and No. 123, "Stock-Based
Compensation".

                                  II-11

<PAGE>

     In 1997, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (FAS
130). FAS 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements. FAS 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The adoption of this standard will have no
impact on the Company's results of operations, financial position or cash
flows.

     In 1997, the FASB issued Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (FAS
131). FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. FAS 131 is effective for
financial statements for fiscal years beginning after December 15, 1997.
Financial statement disclosures for prior periods are required to be
restated. The Company expects changes in its disclosure. The adoption of FAS
131 will have no impact on the Company's consolidated results of operations,
financial position or cash flows.

YEAR 2000 COMPLIANCE

     The Year 2000 Compliance issue concerns the inability of computerized
information systems to properly recognize and process date-sensitive
information as the year 2000 approaches.  The Company has taken actions to
understand the nature and extent of the work required to make its systems,
products and infrastructure, in those situations in which the Company is
required to do so, Year 2000 compliant.  The Company continues to evaluate
the estimated costs associated with these efforts based on actual experience.
The most vital facets of the Company's data processing are the telephone
network (central office switching), the backbone customer record system of
the telephone operation and the basic software platforms of the Billing and
Data Processing Segment.  The Company believes, based on available
information, that the costs of measuring and adjusting Year 2000 compliance
will not have a materially adverse effect on its results of operations.

BUSINESS OUTLOOK

     The Company operates businesses in several different markets. Management
reacts to the competitive market forces of its businesses which have
fluctuations in revenues and operating earnings as the result of volume. The
Company monitors the technological changes and competitive and regulatory
environment of the telecommunications business and develops strategies to
address these changes in ways unique to the telecommunications business.

     The Company has consistently maintained high EBITDA margins by running
its telephone operations efficiently while prudently diversifying into other
profitable niches in telecommunications. The diversification into
non-telephone Segments provides greater opportunities for dynamic internal
growth, and offers the Company unique service capabilities to utilize in
competitive expansions within the Telephone Segment. The diversification of
the Company reduces the dependence of the Company on any one market,
business, economy or regulatory environment. In order to achieve the
Company's continuous growth objectives, it will rely on the maturation of the
business plans for its existing four segments, the start-up of competitive
operations in the telephone local exchange business, and continued research
of the

                                  II-12

<PAGE>

many telephone industry acquisition candidates for those that are strategic
to the Company in profitability terms.

FORWARD-LOOKING STATEMENTS

     This Management's Discussion and Analysis of Financial Condition, and
other sections of this Annual Report, contain forward-looking statements that
are based on current expectations, estimates and projections about the
industry in which the Company operates, management's beliefs and assumptions
made by Company management. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates", variations of such
words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and probabilities which are difficult to
predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements, whether
as a result of new information, future events or otherwise.

                                  II-13

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.




                                FINANCIAL STATEMENTS
                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>

     Description                                                 Page
     -----------                                                 ----
     <S>                                                         <C>

     Independent Auditor's Report                                II-15

     Consolidated Balance Sheet                                  II-16

     Consolidated Statement of Income                            II-17

     Consolidated Statement of Shareholders' Equity              II-18

     Consolidated Statement of Cash Flows                        II-19

     Business Segment Data                                       II-20

     Notes to Consolidated Financial Statements                  II-21
</TABLE>


                                    II - 14


<PAGE>

                            INDEPENDENT AUDITOR'S REPORT



To the Shareholders and Board of Directors
Hickory Tech Corporation

We have audited the consolidated balance sheet of Hickory Tech Corporation and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hickory Tech
Corporation and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.


 /s/ Olsen Thielen & Co., Ltd.


St. Paul, Minnesota
January 30, 1998


                                    II - 15


<PAGE>

                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEET
                                 AS OF DECEMBER 31

(DOLLARS IN THOUSANDS)
                                       ASSETS

<TABLE>
<CAPTION>

                                                                                     1997           1996
                                                                                   -------         ------
<S>                                                                            <C>             <C>
CURRENT ASSETS:
  Cash and Cash Equivalents                                                       $  1,219       $  2,954
  Receivables, Net of Allowance for Doubtful Accounts of  $461 and $114             12,609         10,782
  Inventories                                                                        3,131          2,859
  Deferred Tax Benefit and Other                                                     1,314          1,372
                                                                                   -------         ------

  TOTAL CURRENT ASSETS                                                              18,273        17,967

INVESTMENTS                                                                          3,657          2,980

NET PROPERTY, PLANT AND EQUIPMENT                                                   57,769         40,873

OTHER ASSETS:
  Intangible Assets                                                                 32,135          8,735
  Notes Receivable                                                                       -           230
  Miscellaneous                                                                        550            478
                                                                                   -------         ------

    TOTAL OTHER ASSETS                                                              32,685          9,443

TOTAL ASSETS                                                                      $112,384        $71,263
                                                                                   -------         ------
                                                                                   -------         ------


                               LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts Payable                                                                $  6,765       $  8,671
  Accrued Taxes                                                                        191            722
  Accrued Interest                                                                     735              3
  Advanced Billings and Deposits                                                     1,878         2,080
  Current Maturities of Long-Term Debt                                                 439            212
                                                                                   -------         ------

    TOTAL CURRENT LIABILITIES                                                       10,008         11,688

LONG-TERM DEBT, Net of Current Maturities                                           41,525            877

DEFERRED CREDITS:
  Investment Tax Credits                                                                88            153
  Income Taxes                                                                       2,408          2,768
  Compensation, Benefits and Other                                                   3,178          3,150
                                                                                   -------         ------

    TOTAL DEFERRED CREDITS                                                           5,674          6,071

SHAREHOLDERS' EQUITY:
  Common Stock                                                                         454            479
  Additional Paid-In Capital                                                         1,990          1,778
  Retained Earnings                                                                 52,733         50,370
                                                                                   -------         ------

    TOTAL SHAREHOLDERS' EQUITY                                                      55,177         52,627


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                        $112,384        $71,263
                                                                                   -------         ------
                                                                                   -------         ------
</TABLE>


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


                                    II - 16

<PAGE>

                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED STATEMENT OF INCOME
                               YEARS ENDED DECEMBER 31


(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                     1997           1996          1995
                                                   ---------      ---------      ---------
<S>                                             <C>            <C>             <C>
OPERATING REVENUES:
  Telephone                                       $   42,835     $   34,334     $   32,600
  Billing and Data Services                            9,474          9,573         10,405
  Equipment Sales                                     16,034         16,153         12,111
  Telecommunications Product Development               8,119          6,502          7,731
                                                   ---------      ---------      ---------

    TOTAL OPERATING REVENUES                          76,462         66,562         62,847

COSTS AND EXPENSES:
  Cost of Sales                                       16,503         15,792         13,830
  Operating Expenses                                  31,313         27,139         26,050
  Depreciation                                         6,761          5,055          5,291
  Amortization of Intangibles                          1,229          1,803          1,897
                                                   ---------      ---------      ---------

    TOTAL COSTS AND EXPENSES                          55,806         49,789         47,068

OPERATING INCOME                                      20,656         16,773         15,779

OTHER INCOME                                           1,762            655            924
GAIN ON SALE OF DIRECTV ASSETS                         6,345              -              -
INTEREST EXPENSE                                      (2,292           (143)           (77)
                                                   ---------      ---------      ---------


INCOME BEFORE INCOME TAXES                            26,471         17,285         16,626

INCOME TAXES                                          10,992          6,866          6,726
                                                   ---------      ---------      ---------


NET INCOME                                        $   15,479    $    10,419    $     9,900
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------


EARNINGS PER SHARE                               $      3.36    $      2.09    $      1.93
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------

EARNINGS PER SHARE ASSUMING DILUTION             $      3.36    $      2.09    $      1.93
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------

DIVIDENDS PER SHARE                              $      1.20   $       1.10    $      1.00
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING         4,603,957      4,980,006      5,127,470
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------

</TABLE>


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

                                    II - 17


<PAGE>

                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                      Common Stock                Additional                               Total
                                            ------------------------------         Paid-In           Retained         Shareholders'
(DOLLARS IN THOUSANDS)                          Shares              Amount          Capital           Earnings            Equity
                                            --------------------------------------------------------------------------------------
<S>                                         <C>                  <C>         <C>                  <C>                <C>
BALANCE AT DECEMBER 31, 1994                  5,124,291          $    2,002   $          -          $   50,840         $    52,842

Employee Stock Purchase Plan                      8,205                 242                                                    242
Director Stock Purchase Plan                      1,525                  50                                                     50
Net Income                                                                                               9,900               9,900
Dividends Paid                                                                                          (5,127)             (5,127)
                                            --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1995                  5,134,021               2,294              -              55,613              57,907

Declaration of Common Stock Stated Value                             (1,429)         1,429                                       -
Stock Issued to Complete Prior Acquisition        6,757                   1            196                                     197
Long-Term Incentive Plan                          3,152                  93                                                     93
Employee Stock Purchase Plan                     11,094                   1            235                                     236
Director Stock Purchase Plan                      1,571                  13             29                                      42
Retirement of Stock                            (366,366)               (494)          (111)            (10,181)            (10,786)
Net Income                                                                                              10,419              10,419
Dividends Paid                                                                                          (5,481)             (5,481)
                                            --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1996                  4,790,229                 479          1,778              50,370              52,627

Long-Term Incentive Plan                          3,155                                 86                                      86
Employee Stock Purchase Plan                      9,426                   1            199                                     200
Director Stock Purchase Plan                        981                   1             29                                      30
Retirement of Stock                            (269,672)                (27)          (102)             (7,587)             (7,716)
Net Income                                                                                              15,479              15,479
Dividends Paid                                                                                          (5,529)             (5,529)
                                            --------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1997                  4,534,119         $       454    $     1,990          $   52,733         $    55,177
                                            --------------------------------------------------------------------------------------
                                            --------------------------------------------------------------------------------------


</TABLE>



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


                                    II - 18

<PAGE>

                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED STATEMENT OF CASH FLOWS
                               YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)                                               1997           1996           1995
                                                                  ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Income                                                    $  15,479      $  10,419      $   9,900
    Adjustments to Reconcile Net Income to Net Cash
      Provided by Operating Activities:
      Depreciation and Amortization                                   8,198          7,076          7,401
      (Gain) Loss Resulting from Disposition of Assets               (6,925)             -            415
      Provision for Losses on Notes Receivable and Investments          265            260            324
      Equity in Partnership Income                                   (1,046)          (503)          (597)
                                                                  ---------      ---------      ---------
    Cash Provided From Operations Before Changes
      in Assets and Liabilities                                      15,971         17,252         17,443
      Changes in Assets and Liabilities Net of
      Effects of Acquisitions and Dispositions:
    (Increase) Decrease in:
      Receivables                                                    (1,827)        (1,401)        (2,123)
      Inventories                                                      (102)           (13)             1
    Increase (Decrease) in:
      Accounts Payable and Accrued Taxes                              1,113            551          1,272
      Advanced Billings and Deposits                                   (202)           401            384
      Deferred Income Taxes and Investment Tax Credits                 (518)        (1,339)          (676)
    Other                                                               107            (53)         1,043
                                                                  ---------      ---------      ---------
    Net Cash Provided by Operating Activities                        14,542         15,398         17,344
                                                                  ---------      ---------      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to Property, Plant and Equipment                      (26,796)        (7,282)        (5,945)
    Increase in Notes Receivable and Investments                        (27)          (113)           (68)
    Redemption of Investments                                           361            200            275
    Change in Temporary Cash Investments                                  -          7,176         (5,289)
    Purchase of Intangible Assets                                   (23,568)        (1,081)        (1,114)
    Acquisitions, Net of Cash Acquired                               (2,513)             -              -
    Proceeds from Sale of Assets                                      8,320              -              -
    Other                                                                 -             42             67
                                                                  ---------      ---------      ---------
    Net Cash Used in Investing Activities                           (44,223)        (1,058)       (12,074)
                                                                  ---------      ---------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Issuance of Debt                                   42,512              -              -
    Repayments of Debt                                               (1,637)          (204)          (983)
    Proceeds from Issuance of Common Stock                              316            568            292
    Retirement of Common Stock                                       (7,716)       (10,786)             -
    Dividends Paid                                                   (5,529)        (5,481)        (5,127)
                                                                  ---------      ---------      ---------
      Net Cash Provided by (Used in) Financing Activities            27,946        (15,903)        (5,818)
                                                                  ---------      ---------      ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS                            (1,735)        (1,563)          (548)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                        2,954          4,517          5,065
                                                                  ---------      ---------      ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR                          $   1,219      $   2,954      $   4,517
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------
--------------------------------------------------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash Paid for Interest                                        $   1,372      $     143      $     134
    Cash Paid for Income Taxes                                    $  11,575      $   8,203      $   7,240
</TABLE>

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

                                        II-19
<PAGE>

                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                                BUSINESS SEGMENT DATA
                               YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)                                               1997           1996           1995
                                                                  ---------      ---------      ---------
<S>                                                               <C>            <C>            <C>
IDENTIFIABLE ASSETS:
    Telephone                                                     $  92,617      $  52,239      $  50,339
    Billing and Data Services                                         4,371          4,964          7,725
    Equipment Sales                                                   8,444          6,888          5,214
    Telecommunications Product Development                            4,670          4,180          3,417
    Corporate                                                         2,282          2,992          7,243
                                                                  ---------      ---------      ---------
    Total Assets                                                  $ 112,384      $  71,263      $  73,937
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

REVENUES BEFORE INTERSEGMENT ELIMINATION:
    Telephone                                                     $  42,912      $  34,479      $  32,929
    Billing and Data Services                                        11,821         11,769         12,437
    Equipment Sales                                                  16,034         16,153         12,111
    Telecommunications Product Development                            8,119          6,502          7,731
    Intersegment Elimination                                         (2,424)        (2,341)        (2,361)
                                                                  ---------      ---------      ---------
    Total Revenues                                                $  76,462      $  66,562      $  62,847
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

INTERSEGMENT REVENUES:
    Telephone                                                     $      77      $     145      $     329
    Billing and Data Services                                         2,347          2,196          2,032
                                                                  ---------      ---------      ---------
    Total Intersegment Revenues                                   $   2,424      $   2,341      $   2,361
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

OPERATING INCOME:
    Telephone                                                     $  19,169      $  16,044      $  15,118
    Billing and Data Services                                         1,795            658            721
    Equipment Sales                                                   1,485          1,410            112
    Telecommunications Product Development                              640           (403)         1,129
    Corporate                                                        (2,433)          (936)        (1,301)
                                                                  ---------      ---------      ---------
    Total Operating Income                                        $  20,656      $  16,773      $  15,779
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

DEPRECIATION AND AMORTIZATION:
    Telephone                                                     $   6,718      $   4,571      $   4,621
    Billing and Data Services                                           863          1,939          1,784
    Equipment Sales                                                     182            104            523
    Telecommunications Product Development                              143            131            138
    Corporate                                                            84            113            122
                                                                  ---------      ---------      ---------
    Total Depreciation and Amortization                           $   7,990      $   6,858      $   7,188
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------

CAPITAL EXPENDITURES:
    Telephone                                                     $  11,431      $   9,536      $   5,438
    Assets acquired from US West                                     12,499              -              -
    Billing and Data Services                                           258             62            328
    Equipment Sales                                                     260            204            120
    Telecommunications Product Development                              103             97            123
    Corporate                                                            83            201             12
                                                                  ---------      ---------      ---------
    Total Capital Expenditures                                    $  24,634      $  10,100      $   6,021
                                                                  ---------      ---------      ---------
                                                                  ---------      ---------      ---------
</TABLE>


                                        II-20
<PAGE>


                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES

The accounting policies of Hickory Tech Corporation are in conformity with
generally accepted accounting principles and, where applicable, conform to
the accounting principles as prescribed by federal and state telephone
utility regulatory authorities. The Company presently gives accounting
recognition to the actions of regulators where appropriate, as prescribed by
Financial Accounting Standards Board Statement No. 71 (SFAS 71), "Accounting
for the Effects of Certain Types of Regulation." A significant example
includes the amount charged as depreciation expense, which reflects estimated
lives and methods prescribed by regulators rather than those that might
otherwise apply to unregulated enterprises.

BASIS OF CONSOLIDATION

The consolidated financial statements of the Company include Hickory Tech
Corporation, its subsidiaries, and majority-owned partnerships. Investments
in 20% to 50% owned entities and all unconsolidated partnerships and LLCs are
accounted for using the equity method. All intercompany transactions have
been eliminated from the consolidated financial statements.

FINANCIAL STATEMENT PRESENTATION

Telephone revenues are derived from charges for network access to the
Company's local exchange network, from subscriber line charges and from
contractual arrangements for services such as billing and collection and
directory advertising. Certain of these revenues are realized under pooling
arrangements with other telephone companies and are divided among the
companies based on respective costs and investments to provide the services.
Management believes that recorded amounts represent reasonable estimates of
the final distribution from these pools. Revenue in the Equipment Sales
Segment earned on major installation and change contracts is recognized using
the percentage of completion method.

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and
liabilities. The estimates and assumptions used in the accompanying
consolidated financial statements are based upon management's evaluation of
the relevant facts and circumstances as of the date of the financial
statements. Actual results may differ from the estimates and assumptions used
in preparing the accompanying consolidated financial statements.

Certain amounts in the 1996 and 1995 financial statements and notes have been
reclassified to conform with the 1997 presentation.

PROPERTY AND DEPRECIATION

Property, plant and equipment are recorded at original cost of acquisition or
construction. When telephone assets are sold or retired, the assets and
related accumulated depreciation are removed from the accounts and no gains
or losses are recorded.

The components of Net Property, Plant and Equipment are summarized as follows:

<TABLE>
<CAPTION>
(Dollars in Thousands)                     1997                   1996
                                           ----                   ----
<S>                                       <C>                    <C>
Telephone Plant                           $110,229               $78,132
Other Property and Equipment                11,000                 9,464
                                          --------               -------
Total                                      121,229                87,596
Less Accumulated Depreciation               63,460                46,723
                                          --------               -------
Net Property, Plant and Equipment          $57,769               $40,873
                                          --------               -------
                                          --------               -------
</TABLE>

Depreciation for financial statement purposes is determined using the
straight-line method based on the lives of the various classes of depreciable
assets. The composite depreciation rates on depreciable telephone plant for
the three years ended December 31, 1997, were 6.4%, 6.1%, and 6.6%. Other
equipment is depreciated over estimated useful lives of three to fifteen
years, and the associated building is depreciated over its estimated useful
life of thirty-five years.

CASH INVESTMENTS

Cash and cash equivalents include general funds and short-term investments
with original maturities of three months or less.

                                      II-21

<PAGE>
                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVESTMENTS

Other investments are carried at lower of cost or net realizable value.

INVENTORIES

Inventories are stated at the lower of average cost or market and consist of
the following:

<TABLE>
<CAPTION>
(Dollars in Thousands)                     1997                   1996
                                           ----                   ----
<S>                                       <C>                    <C>
Finished Goods                            $  264                 $  211
Work in Process                              210                    156
Materials and Supplies                     2,657                  2,492
                                          ------                 ------
Total                                     $3,131                 $2,859
                                          ------                 ------
                                          ------                 ------
</TABLE>

INCOME TAXES

The provision for income taxes consists of an amount for taxes currently
payable and a provision for tax consequences deferred to future periods.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. For
financial statement purposes, deferred investment tax credits and excess
deferred income taxes relating to depreciation of regulated assets are being
amortized as a reduction of the provision for income taxes over the estimated
useful or remaining lives of the related property, plant and equipment.

INTANGIBLE ASSETS

Intangible assets are shown net of accumulated amortization of $1,288,000 and
$4,213,000. The excess of cost over fair value of net assets acquired
relating to acquisitions is being amortized over forty years. As of December
31, 1997 and 1996, unamortized excess costs over fair value of assets
acquired were $30,435,000 and $6,409,000 respectively. Contract rights and
covenants not to compete associated with acquisitions are being amortized
over three to twenty years.

CAPITALIZED SOFTWARE COSTS

Capitalized software costs consist of costs to develop software internally
for the Company's Billing and Data Services Segment. Capitalization of
internally developed software begins upon the establishment of technological
feasibility and continues until the product becomes available for general
release to customers. Unamortized software costs at December 31, 1997 and
1996 were $0 and $492,000, respectively, and are included in Intangible
Assets in the Consolidated Balance Sheets. Amortization expenses related to
capitalized software costs were $492,000 in 1997, $1,500,000 in 1996, and
$1,193,000 in 1995. Capitalized costs are amortized on a product-by-product
basis over the remaining estimated economic life of the product.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year.
Shares used in the earnings per share assuming dilution calculation are based
on the weighted average number of shares of common stock outstanding during
the year increased by dilutive potential common shares.  Dilutive potential
common shares include stock options and stock subscribed, under the employee
stock purchase plan (ESPP).

<TABLE>
<CAPTION>
                                            1997         1996        1995
                                            ----         ----        ----
<S>                                      <C>          <C>         <C>
Weighted average shares outstanding      4,603,957    4,980,006   5,127,470
Stock options                                1,322            -         544
Stock subscribed (ESPP)                        463          527         510
                                         ---------    ---------   ---------
Total dilutive shares outstanding        4,605,742    4,980,533   5,128,524
                                         ---------    ---------   ---------
                                         ---------    ---------   ---------
</TABLE>

Options to purchase 18,728 shares were not included in the 1997 computation
of earnings per share assuming dilution because including them would have
been antidilutive.

                                      II-22

<PAGE>

NOTE 2 - ACQUISITIONS AND DISPOSITIONS

On April 10, 1997, the Company acquired the assets of eleven rural telephone
exchanges in northwest Iowa from US West Communications, Inc. ("US West") for
$35,271,000.  The eleven exchanges contain approximately 12,500 telephone
access lines.  The new exchanges are reported as operations of Heartland
Telecommunications Company of Iowa, a wholly-owned subsidiary of the Company
and included in the Telephone Segment.  The acquisition was structured as a
purchase of telephone assets from US West and $22,772,000 of costs in excess
of net assets acquired was recorded.  The acquisition was financed by new
long-term debt instruments from seven institutional investors in a private
debt placement. A total of $40,000,000 in senior unsecured notes was funded.

On July 15, 1997, the Company sold its exclusive DirecTV distribution rights
in seven counties in southern Minnesota, along with related assets, to Golden
Sky Systems, Inc. in exchange for $7,200,000.  The Company recorded a pre-tax
gain on the sale of the assets of $6,345,000.  The DirecTV distribution
rights had been acquired by the Company from National Rural
Telecommunications Cooperative in 1993.  The amount of net operating revenue
and income before income tax associated with the Company's operation of its
DirecTV business have not been material to the Company.

On October 30, 1997, the Company acquired the assets of DataComm Products
(DataComm).  DataComm is a data networking business based in Brooklyn Park,
Minnesota with a customer base spanning the Midwest.  The operations of the
acquisition are included in the Equipment Sales Segment.  The purchase price
of $2,573,000 is scheduled to be paid over three years with $1,600,000 paid
in 1997.  A final contingent payment is possible on November 1, 2000.  The
Company attributed $1,877,000 of the purchase price as costs in excess of net
assets acquired.  In the acquisition, there were no liabilities assumed nor
cash acquired.  The amount of net operating income, income before income tax,
and earnings per share associated with this acquisition are not material to
the Company.

NOTE 3 - BUSINESS SEGMENTS AND CONCENTRATIONS

The Company's operations are conducted in four business segments. The
Telephone Segment provides telephone services to Mankato and adjacent areas
of south central Minnesota, to the Amana Colonies in east central Iowa and to
eleven communities in northwest Iowa. The Telephone Segment also operates
fiber optic cable transport facilities and holds a minority interest in a
rural cellular limited liability company, both in southern Minnesota. The
Billing and Data Services Segment provides data processing service to local
telephone companies, interexchange long distance companies and enhanced
service providers throughout the United States.  The Equipment Sales Segment
designs, sells, installs and services voice and data communications equipment
in the retail market in the Minneapolis/St. Paul area. The Telecommunications
Product Development Segment designs, assembles and distributes unique
telecommunications components for business telephone systems throughout North
America, the United Kingdom, and the Pacific Rim.  Refer to page II - 20 for
a schedule of business segment information.

NOTE 4 - FINANCIAL INSTRUMENTS AND INVESTMENT SECURITIES

The carrying value of cash and cash equivalents approximates their fair value
due to the short maturity of the instruments. Investments include investments
accounted for using the equity method of accounting and investments which do
not have a readily determinable fair market value. The fair value of the
Company's long-term debt, after deducting current maturities, is estimated to
be $41,065,000 at December 31, 1997 and $775,000 at December 31, 1996,
compared to carrying values of $41,525,000 and $877,000 respectively. The
fair value estimates are based on the overall weighted rates and maturity
compared to rates and terms currently available in the long-term financing
markets.

NOTE 5 - COMMON STOCK

The Company's common stock has no par value. There are 25,000,000 shares
authorized.

On April 1, 1996, a stated value of $0.10 per share was established for the
common stock which resulted in a reclassification of $1,429,000 from common
stock to additional paid-in capital.

Under the terms of an employee stock purchase plan, participating employees
may acquire shares of common stock through payroll deductions of not more
than 10% of compensation. The price at which the shares can be purchased is
85% of the fair market value for such shares on the lesser of two specified
dates in each plan year. There were 300,000 common shares reserved for this
plan. At December 31, 1997, employees had subscribed to purchase
approximately 9,700 shares in the current plan year ended August 31, 1998.

                                      II-23

<PAGE>

                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the terms of a corporate retainer stock plan for directors,
participating directors may acquire shares of common stock in exchange for
their quarterly retainers. The price at which the shares can be purchased is
100% of the fair market value for such shares on a specified date in each
quarter. There were 100,000 common shares reserved for this plan.

A long-term incentive award plan for officers provides for the granting of
incentive stock options, non-qualified stock options, restricted and
unrestricted stock awards. The Company has adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," but
applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans.

The plan includes stock performance awards based on Company growth in pre-tax
net income. Stock performance awards distributed under the plan amounted to
3,155 and 3,152 shares in 1997 and 1996.

If the Company had elected to recognize compensation cost for the stock
options granted based on the fair value at the grant dates using the
Black-Scholes option-pricing model, net income would have decreased by
$114,000 in 1997, $55,000 in 1996 and $37,000 in 1995.

Options may be exercised no later than ten years after the date of grant. All
shares available for grant in any year which are not granted under the plan
shall be available for grant in subsequent years. There were 250,000 common
shares reserved for this plan.

A summary of stock options activity of the plan is as follows:

<TABLE>
<CAPTION>

                                           Number of       Option
                                            Shares         Prices
                                            ------         ------
<S>                                         <C>         <C>
Options Outstanding at
December 31, 1994                           15,433      $30.75-$33.75
Granted in 1995                              6,645            $31.625
Expired in 1995                             (3,350)     $30.75-$33.75
Granted in 1996                             11,000            $28.125
Granted in 1997                             12,600            $28.375
                                            ------      -------------
Options Outstanding at
December 31, 1997                           42,328     $28.125-$33.75
                                            ------      -------------
                                            ------      -------------
Options Exercisable at
December 31, 1997                           20,183     $28.125-$33.75
                                            ------      -------------
                                            ------      -------------
</TABLE>

                                      II-24

<PAGE>
                     HICKORY TECH CORPORATION AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>

          (Dollars in Thousands)                          1997          1996
                                                          ----          ----
<S>                                                     <C>          <C>
Senior Notes to Institutional Investors, 7.11%
   Due April 2012                                       $40,000        $    -
Notes Payable for DataComm Acquisition,
   5.69% Imputed Interest Due November 2000                 912             -
Notes Payable to Rural Utilities Service, 2%
  Due November 2003                                         919           935
Notes Payable to Rural Telephone Bank, 4%
  Due April 2007                                            133           154
                                                        -------        ------
  Total                                                  41,964         1,089
Less Current Maturities                                     439           212
                                                        -------        -------
Long-Term Debt                                          $41,525        $  887
                                                        -------        -------
                                                        -------        -------
</TABLE>

In April 1997, the Company obtained $40,000,000 senior unsecured notes with
15 year maturities to fund the $35,271,000 acquisition of the US West
telephone exchanges in Iowa.  The notes accrue interest at 7.11%.  No
principal payments are due during the first four years.  Provisions of the
debt instruments contain covenants relating to liens, consolidated net worth
and cash flow coverage.  The Company is in compliance with all financial debt
covenants.

In October 1997, the Company acquired the assets of DataComm Products.  The
terms of the purchase agreement require the Company to make annual payments
in 1998 and 1999 on an unsecured note.  An additional contingent payment is
due in November 2000.

As of December 31, 1997, the Company has $1,052,000 of outstanding debt
remaining with the Rural Utilities Service and the Rural Telephone Bank for
the financing of telephone property, plant and equipment of
Mid-Communications, Inc.

Annual requirements for principal payments for the four years subsequent to
1998 are as follows: 1999 - $675,500; 2000 - $207,400;  2001 - $242,300 and
2002 -$3,853,600.

In July, 1997, the Company obtained a $10 million unsecured line of credit
arrangement with a local bank. This line of credit will be used for general
corporate purposes including interim financing for acquisitions. The line of
credit provides for borrowing at a variable annual rate of LIBOR plus 1.5%.
There are no material compensating balances or commitment fee requirements
under this arrangement.

NOTE 7 - EMPLOYEE RETIREMENT BENEFITS

Employees in participating companies who meet certain service requirements
are covered under a defined contribution retirement savings plan which
include IRS Section 401(k) provisions. The Company contributes up to 6% of
the employee's basic compensation, based on the employee's voluntary
contribution. The Company also offers an employee profit sharing provision
with the plan for all employees who are eligible to participate in the
employee retirement savings plan and are not covered by other types of
incentive pay plans. Under this provision, the Company contributes up to 2%
of the eligible employee group total base compensation into retirement
savings plan accounts if the participating companies achieve specific
earnings targets.  Company contributions and costs for the total retirement
savings plan were $937,000 in 1997, $751,000 in 1996 and $774,000 in 1995.

In addition to providing retirement savings benefits, the Company provides
postretirement health care and life insurance benefits for certain employees.
The Company is not currently funding these benefits.

                                      II-25
<PAGE>


                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net periodic postretirement benefit expense was $256,000 in 1997, $249,000 in
1996 and $334,000 in 1995. Accrued postretirement benefit cost was $1,033,000 as
of December 31, 1997 and $839,000 as of December 31, 1996. The unrecognized
transition obligation is being amortized over 20 years. The unrecognized
liability as of December 31, 1997 is $900,000 and was $960,000 as of December
31, 1996.

The health care cost trend rates used in determining the accumulated
postretirement benefit obligations were 9% decreasing to 6% in year 10 and later
for December 31, 1997 and 10% decreasing to 6% in year 10 and later for the
obligations on December 31, 1996.  An increase of one percentage point in the
assumed health care cost trend rates would increase the accumulated post-
retirement benefit obligations at December 31, 1997 by $338,000 and the net
periodic postretirement benefits cost for the year then ended by $48,000.

A weighted average discount rate of 8.00% was used to develop the net periodic
postretirement benefit cost and the actuarial present value of accumulated
benefit obligations.


                                        II-26
<PAGE>

                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - INCOME TAXES
The income tax provisions include the following components:

<TABLE>
<CAPTION>

                              (Dollars in Thousands)                 1997           1996           1995
                                                                   --------       --------       --------
<S>                                                                  <C>            <C>            <C>
Current Income Taxes:
  Federal                                                          $  9,133       $  6,394       $  5,769
  State                                                               2,377          1,811          1,633
Deferred Income Taxes:
  Federal                                                              (348)          (976)          (446)
  State                                                                (104)          (284)          (126)
Investment Tax Credit:
  Amortized                                                             (66)           (79)          (104)
                                                                   --------       --------       --------
Total Income Tax Expense                                           $ 10,992       $  6,866       $  6,726
                                                                   --------       --------       --------
                                                                   --------       --------       --------

Deferred tax liabilities and assets are comprised of the following:

                              (Dollars in Thousands)                 1997           1996
                                                                   --------       --------
Tax Liabilities Associated with:
  Depreciation and Fixed Assets                                    $  3,370       $  3,540
  Intangible Assets                                                     639            469
  Investments                                                           109            174
  Other                                                                   -             23
                                                                   --------       --------
    Gross Deferred Tax Liability                                      4,118          4,206
                                                                   --------       --------

Tax Assets Associated with:
  Deferred Benefit Plans                                              1,455          1,085
  Receivables and Inventory                                             515            360
  Accrued Liabilities                                                   491            577
  Investments                                                           255            290
  Other                                                                   -             40
                                                                   --------       --------
    Gross Deferred Tax Assets                                         2,716          2,352
                                                                   --------       --------
Net Deferred Tax Liability                                            1,402          1,854
Net Current Deferred Tax Asset                                        1,006            914
                                                                   --------       --------
  Net Non-Current Deferred
    Tax Liability                                                  $  2,408       $  2,768
                                                                   --------       --------
                                                                   --------       --------

The differences which cause the effective tax rate to vary from the statutory federal income rates are as follows:

                                                                     1997           1996           1995
                                                                   --------       --------       --------
Statutory Tax Rate                                                     35.0%          35.0%          35.0%
Effect of:
  State Income Taxes Net of
    Federal Tax Benefit                                                 5.6            5.8            5.9
  Amortization of Investment
    Tax Credit                                                         (0.3)          (0.5)          (0.6)
  Other, Net                                                            1.2           (0.6)           0.2
                                                                   --------       --------       --------
Effective Tax Rate                                                     41.5%          39.7%          40.5%
                                                                   --------       --------       --------
                                                                   --------       --------       --------
</TABLE>


                                        II-27
<PAGE>

                      HICKORY TECH CORPORATION AND SUBSIDIARIES
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - CONSTRUCTION COMMITMENTS
The construction and facilities program for 1998 is approximately $8,100,000.
Normal purchase commitments have or will be made for planned expenditures.

NOTE 10 - CORPORATE DEVELOPMENT
The Company has entered into an agreement to purchase the stock of Frontier
Corporation's Minnesota RSA 10 cellular property in a cash transaction.  The
property comprises the counties of Blue Earth, Faribault, Freeborn, Le Sueur,
Rice, Steele, and Waseca.  The population of the serving area is 230,000.  The
Company is awaiting approval from the Federal Communications Commission.  It is
anticipated that the purchase will be completed by the close of the second
quarter of 1998 and will be accounted for under the purchase method of
accounting.

The Company will utilize new long-term debt instruments to fund the majority of
the $40,000,000 acquisition price for the Frontier Corporation cellular
property. Negotiations are presently taking place to secure funding.  No
difficulty is anticipated in obtaining this financing.

NOTE 11 - QUARTERLY FINANCIAL INFORMATION (Not Audited)

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                1997
                                                              --------

                                   Total            4th            3rd            2nd            1st
                                --------       --------       --------       --------       --------
<S>                             <C>            <C>            <C>            <C>            <C>
Operating Revenues              $ 76,462       $ 20,168       $ 19,505       $ 19,299       $ 17,490
Operating Income                  20,656          5,422          5,226          5,663          4,345
Net Income                        15,479          2,939          6,662          3,156          2,722
Earnings Per Share                 $3.36           $.64          $1.46           $.68           $.58
Dividends Per Share                $1.20           $.30           $.30           $.30           $.30


                                                                  1996
                                                                  ----

                                   Total            4th            3rd            2nd            1st
                                --------       --------       --------       --------       --------
Operating Revenues              $ 66,562       $ 18,440       $ 16,639       $ 15,942       $ 15,541
Operating Income                  16,773          5,427          4,182          3,310          3,854
Net Income                        10,419          3,199          2,633          2,171          2,416
Earnings Per Share                 $2.09           $.65           $.54           $.43           $.47
Dividends Per Share                $1.10          $.275          $.275          $.275          $.275
</TABLE>




                                        II-28
<PAGE>

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

          There has been no change in accountants and no disagreement with the
accountants regarding accounting or financial disclosures within the twenty-four
month period ending December 31, 1997.

          On March 5, 1998, the Registrant notified Olsen, Thielen & Co., Ltd.
of their dismissal as the Registrant's certifying accountants effective April
13, 1998. On March 2, 1998, the Audit Committee of the Board of Directors of the
Registrant approved this action. During the Registrant's two most recent fiscal
years and through March 5, 1998, there were no disagreements with Olsen, Thielen
& Co., Ltd. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Olsen, Thielen & Co., Ltd., would have
caused that firm to make reference to the subject matter of the disagreement in
connection with its report. Olsen, Thielen & Co., Ltd.'s report on the
Registrant's financial statements for the past two years contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.  During the Registrant's two
most recent fiscal years and through March 5, 1998, there were no reportable
events (as described in Regulation S-K Item 304(a)(1)(v)).  The Registrant has
provided Olsen, Thielen & Co., Ltd. with a copy of the disclosures contained
herein and has requested that Olsen, Thielen & Co., Ltd. furnish it with a
letter addressed to the Securities and Exchange Commission stating whether it
agrees with the statements made by the Registrant herein and, if not, stating
the respects in which it does not agree.  A copy of Olsen, Thielen & Co., Ltd.
letter dated March 11, 1998 was filed as Exhibit 16 to the Form 8-K reported on
March 5, 1998.




                                        II-29
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

                        MEMBERS OF THE BOARD OF DIRECTORS

ROBERT D. ALTON, JR. has served as a director since 1993.  His present term
expires in 1999. Mr. Alton became President and Chief Executive Officer of the
Company in 1993.  Mr. Alton, age 49, is the former President of Telephone
Operations of Contel Corporation and was employed in various executive and
financial capacities at Contel Corporation for twenty-one years.

LYLE T. BOSACKER has served as a director since 1988.  His present term expires
in 2000.  Mr. Bosacker, age 55, is a management consultant and President of CEO
Advisors, Inc.  Mr. Bosacker served as the Director of Corporate Information
Services for International Multifoods from 1991 to 1993 and as its Director of
Corporate Information Systems Planning from 1987 to 1991.

ROBERT K. ELSE has served as a director since 1990.  His present term expires in
1999.  Mr. Else, age 62, has been the President of EI Microcircuits, Inc. in
Mankato, Minnesota, since 1984. EI Microcircuits manufactures and assembles
electronic circuit boards.

JAMES H. HOLDREGE has served as a director since 1992.  His present term expires
this year and he is a nominee.  Mr. Holdrege, age 59, has been the General
Manager of KATO Engineering Division, Reliance Electric Co. since 1984.  KATO
Engineering is a manufacturer of synchronous generators, power conditioning
equipment and associated controls.

LYLE G. JACOBSON has served as a director since 1989.  His present term expires
this year and he is a nominee.  Mr. Jacobson, age 56, has been the President and
Chief Executive Officer of Katolight Corporation in Mankato, Minnesota, since
1985.  Katolight Corporation is a manufacturer of diesel and gas powered
electrical generator sets and generator controls.

R. WYNN KEARNEY, JR.  has served as a director since 1993.  His present term
expires in 1999.  Dr. Kearney, age 54, has been in private practice with the
Orthopaedic & Fracture Clinic, P.A., in Mankato, Minnesota, since 1972 and is
President of the Minnesota Orthopaedic Society. Dr. Kearney, a minority owner of
the Minnesota Timberwolves, presently serves as President of the Mankato State
University Foundation.  Dr. Kearney is also a director of Exactech, Inc. of
Gainesville, Florida.

STARR J. KIRKLIN has served as a director since 1989.  His present term expires
this year and he is a nominee.  Mr. Kirklin, age 61, retired from First Bank
System, Inc. in February of 1996.  Mr. Kirklin is now employed as Director of
Development for Mankato State University.

BRETT M. TAYLOR, JR. has served as a director since 1970.  His present term
expires in 2000. Mr. Taylor, age 68, is the retired Chairman of Brett's
Department Stores, Co. and previously served as its President from 1971 to 1987.


                                      III-1
<PAGE>

                            OTHER EXECUTIVE OFFICERS

JON L. ANDERSON, age 45, has served as a Vice President since 1995.  Mr.
Anderson has served as President of Collins Communications Systems Co. since
1994 and was its Vice President and General Manager from 1991 to 1994.

DAVID A. CHRISTENSEN, age 45, has served as Secretary since 1993, Vice President
and Chief Financial Officer since 1989, and Treasurer since 1986.

MARY T. JACOBS, age 40, has served as a Vice President of the Company since
1996, Vice President of Human Resources since 1998, and Director of Human
Resources from 1993 to 1997.

BRUCE H. MALMGREN, age 53, has served as a Vice President of the Company and as
President of National Independent Billing, Inc. since 1995.  Mr. Malmgren was
Senior Vice President of Sales and Marketing and National Sales Manager for
Dataserv, Inc. from 1992 to 1995.  Dataserv, Inc. provides technical services
for commercial personal computer systems.

DAVID H. ROWLEY, age 57, has served as a Vice President since 1995 and President
of Digital Techniques, Inc. since 1993.

ASIM SABER, age 43, has served as Vice President of the Company and President of
the Company's Telephone Sector since August 1997.  From 1993 to 1997, Mr. Saber
was General Manager/CEO of Valley Telephone Co. in Texas.  From 1990 to 1993,
Mr. Saber was President of Virgin Islands Telecom, Inc. and Vice President of
Virgin Islands Telephone Co.


There are no present family relationships between the executive officers, nor
between the executive officers and the directors.


                                      III-2
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION.
The remuneration paid or accrued to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company whose
aggregate remuneration exceeded $100,000 in 1997 is as follows:  In addition,
partial year remuneration is included for Mr. Saber.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                LONG TERM COMPENSATION
                                    ANNUAL COMPENSATION                                AWARDS
                         -------------------------------------------------      ----------------------
                                                                                     Securities          All
Name and                                                                             Underlying          Other
Principal                                                                            Options/            Compensation
Position                 Year           Salary ($)             Bonus($)(2)           SARs (#)            ($)
--------                 ----           ----------             -----------           ----------          ------------
<S>                      <C>            <C>                    <C>                   <C>                 <C>

ROBERT D. ALTON, JR.     1997           $221,550 (1)           $131,149 (3)          5,500               $ 9,500 (4)
Director, Chairman,      1996           $213,050 (1)           $110,530 (3)          5,400               $ 7,923 (4)
President and Chief      1995           $205,800 (1)           $113,740              3,486               $ 8,625 (4)
Executive Officer

JON L. ANDERSON          1997           $110,800               $85,765               1,200               $14,508 (6)
Vice President           1996           $105,000               $24,697               1,000               $12,082 (5)
                         1995           $ 95,000               $43,910                 N/A               $ 5,456 (4)

DAVID A. CHRISTENSEN     1997           $127,500               $56,748                 700               $ 7,644 (4)
Vice President,          1996           $122,900               $72,510                 800               $ 7,211 (4)
Chief Financial          1995           $118,500               $51,139               1,405               $ 6,511 (4)
Officer, Secretary
and Treasurer

BRUCE H. MALMGREN        1997           $124,400               $53,889               1,000               $ 3,970 (6)
Vice President           1996           $119,600               $64,314                 800               $ 3,561 (5)
                         1995           $110,100               $ N/A                   N/A                   N/A

DAVID H. ROWLEY          1996           $114,500                  -0-                  500               $ 6,604 (4)
Vice President           1996           $110,000               $47,737               1,000               $15,488 (5)
                         1995           $104,500               $64,333                 N/A                   N/A

ASIM SABER               1997           $  50,673 (7)          $    N/A                N/A               $30,358 (8)

</TABLE>

(1) Includes deferred compensation of $9,800 in 1995, $10,145 in 1996 and
$10,550 in 1997 pursuant to a Supplemental Retirement Agreement with the
Company.  Each year Mr. Alton accrues benefits equal to five percent (5%) of his
base salary.  This accumulation of benefits will occur for a maximum of ten (10)
years of service commencing January 1, 1993.  Benefits are paid upon termination
of employment commencing on the earlier of Mr. Alton's 62nd birthday or his date
of death.

(2) The Company and its subsidiaries have an Executive Incentive Plan whereby
key executives may receive additional compensation based on annual performance
and set goals of the Company, its subsidiaries and the individual executive.  In
addition to cash compensation, each executive receives a performance award equal
to one-half of the cash compensation.  The cash award and performance award
credit are shown in this column.  The performance award is credited to the
executive's performance account.  This credit can be selected to be a cash
credit or a stock credit.  The stock credit is for the Company's stock and is
held in a trust.  If a cash credit, the account is annually credited with
interest equal to the rate for a ten year Treasury Bond.  If a stock credit, the
account is credited with additional shares equal to the dividends on the shares
held in the account.  One-fourth (1/4) of the performance account is vested
immediately and an additional one-fourth (1/4) vests each of the succeeding
three years.

(3) Includes awards actually granted under the Company's 1993 Stock Award
Program and distributed in 1996 to Mr. Alton of $38,038 and Mr. Christensen of
$15,375;  and under the Company's 1994 Stock Award Plan which were distributed
in 1997 to Mr. Alton of $39,567 and Mr. Christensen of $15,614.

(4) Employer contributions to 401(k) Plans.

(5) Includes $6,157 contribution to 401(k) Plan and $5,925 in discretionary
Stock Award in 1996 under the Company's Stock Award Plan for Mr. Anderson, and
$598 contribution to 401(k) Plan and $2,963 in discretionary Stock Award in 1996
under


                                      III-3
<PAGE>

the Company's Stock Award Plan for Mr. Malmgren and $6,600 contribution to
401(k) Plan and $8,888 in discretionary Stock Award in 1996 under the Company's
Stock Award Plan for Mr. Rowley.

(6) Includes $6,333 contribution to 401(k) Plan and $8,175 in discretionary
Stock Award in 1997 under the Company's Stock Award Plan for Mr. Anderson, and
$1,245 contribution to 401(k) Plan and $2,725 in discretionary Stock Award in
1997 under the Company's Stock Award Plan for Mr. Malmgren.

(7) Includes salary since date of hire, August 18, 1997.

(8) Includes a $30,000 one-time payment at time of hire and $358 contribution to
the 401(k) Plan.


                                      III-4
<PAGE>

                            LONG TERM INCENTIVE PLANS
                           AWARDS IN LAST FISCAL YEAR

Stock Award Programs (the "Programs") were implemented each year since 1993,
pursuant to the terms of the Company's 1993 Stock Award Plan.  This Plan was
approved by the shareholders in 1993 and since amended.  Each Program
established a number of shares that may be issued to the executives of the
Company contingent upon achievement of performance objectives over a three-year
period.  The objectives are based on compound annual increases in the earnings
of the Company and its subsidiaries.  The restricted shares established in the
1995 Stock Award Program were distributed to the participants in February of
1998.

<TABLE>
<CAPTION>

                                                                                 Estimated Future Payouts
                                                                             Under Non-Stock Price-Based Plans
                                                                        ------------------------------------------
                          Number of            Performance or
                          Shares, Units        Other Period
                          or Other             Until Maturation
Name                      Rights (#)(1)        or Payout                Threshold(2)     Target(3)      Maximum(4)
----                      -------------        ----------------         ------------     ---------      ----------
<S>                       <C>                  <C>                      <C>              <C>            <C>

Alton                         2,000            1 year                      1,400          2,000          3,000
                              2,000            2 years                     1,400          2,000          3,000

Anderson                        400            1 year                        200            400            600
                                400            2 years                       200            400            600

Christensen                     300            1 year                        100            300            450
                                300            2 years                       100            300            450

Malmgren                        400            1 year                        200            400            600
                                400            2 years                       200            400            600

Rowley                          400            1 year                        200            400            600
                                400            2 years                       200            400            600


</TABLE>
(1)  Under the terms of the Programs, shares will only be issued if the Company
and its subsidiaries achieve established goals of compound annual growth in pre-
tax net income for the three year periods ending December 31, 1998 and 1999,
respectively.  This table assumes all financial objectives being achieved and
the Committee approving a payout for each participant.

(2)  No restricted shares will be issued unless the Company and its subsidiaries
achieve the performance objectives.  The number of shares in the "Threshold"
column indicates the minimum number of shares to be awarded if the Company and
subsidiary performance objectives have been achieved.

(3)  There is a potential range of restricted shares established for each
participant under each Program.  The range has a separate threshold and target
number of shares that can be awarded once the pre-established performance
objectives of the Company and subsidiaries have been achieved.  The number of
shares in the "Target" column are the high end of this range, without
consideration of footnote (4) below.  No shares under the Program will be issued
if pre-established performance objectives are not achieved.

(4)  The Programs allow the Committee the authority to reward outstanding
individual performance by issuing restricted shares to an individual in an
amount not to exceed 150% of the number of shares the individual would have
received under the targeted level.  The shares in the "Maximum" column assumes
the Committee will issue 150% of the target number of shares to all
participants.


                                      III-5
<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                                                                                               Potential Realized Value At Assumed
                                                                                            Annual Rates of Stock Price Appreciation
                                         Individual Grants                                             For Option Term ($)
                 ----------------------------------------------------------------------     ----------------------------------------
                                   % of Total
                                   Options
                 Options           Granted To         Exercise
                 Granted           Employees In       Price                 Expiration
NAME              # (1)            Fiscal Year        ($/Share)             Date                  5%(2)                10%(2)
----             -------           ------------       ---------             -----------           -----                ------
<S>              <C>               <C>                <C>                   <C>                  <C>                 <C>

Alton             5,500              43.7%            $28.375               May 31, 2007         $98,313             $248,875
Anderson          1,200               9.5%            $28.375               May 31, 2007         $21,450              $54,300
Christensen         700               5.6%            $28.375               May 31, 2007         $12,513              $31,675
Malmgren          1,000               7.9%            $28.375               May 31, 2007         $17,875              $45,250
Rowley              500               4.0%            $28.375               May 31, 2007         $ 8,938              $22,625

</TABLE>

(1)  The options were granted at the fair market value of the shares on
May 31, 1997.  The options may be exercised for one-third (1/3) of the shares
after May 31, 1998, one-third (1/3) of the shares after May 31, 1999, and one-
third (1/3) of the shares after May 31, 2000.  All options expire on May 31,
2007 and in the event the optionee is no longer employed by the Company.  All
options vest upon the occurrence of an Event (as described in the 1993 Stock
Award Plan).  Shares acquired by the optionees are subject to rights of
repurchase by the Company in the event the optionee terminates employment with
the Company or wishes to transfer the shares.

(2)  The exercise price was compounded at 5% and 10% over the ten (10) year term
of the options.  The resulting stock price was reduced by the exercise price to
determine the potential realizable gain at the assumed rates of appreciation.



                          FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>

                 Number of Securities                Value of Unexercised
                Underlying Unexercised               In-The-Money Options
                   Options at FY-End                       At FY-End
                           #                                 $(1)
               ---------------------------        ---------------------------
               Exercisable   Unexercisable        Exercisable   Unexercisable
               -----------   -------------        -----------   -------------
<S>            <C>           <C>                  <C>           <C>

Alton            10,417         10,262              $38,990        $66,392
Anderson            334          1,866              $ 2,338        $12,762
Christensen       3,747          1,701              $12,542        $10,094
Malmgren            267          1,533              $ 1,869        $10,481
Rowley              334          1,166              $ 2,338        $ 8,037

</TABLE>

(1)  Value of unexercised options equals fair market value of shares underlying
in-the-money options at December 31, 1997 ($35.125 per share), less the exercise
price times the number of in-the-money options outstanding.


                                      III-6
<PAGE>

                            COMPENSATION OF DIRECTORS

Directors received $350 for each Board and committee meeting they attended
through May, 1997, and $500 for each Board and Committee meeting they attended
from June through December, 1997. In 1997, the Directors were paid an annual
retainer of $10,000. These fees are waived if the individual is a paid employee
of the Company.  Directors have the option of receiving the retainer fee in cash
or shares of Company stock.

                                CHANGE OF CONTROL

The Company has Change of Control Agreements with the following named executive
officers:  Robert D. Alton, Jr., Jon L. Anderson, David A. Christensen, Bruce H.
Malmgren, David H. Rowley and Asim Saber.  These Agreements provide that in the
event there is a change in control of the Company and termination of these
officers, the officers shall receive pay for the following number of years,
unless they are released for cause, are disabled or die:   2.99 years for Robert
D. Alton, Jr., and two (2) years for Jon L. Anderson, David A. Christensen,
Bruce H. Malmgren, David H. Rowley and Asim Saber.  If the officers are released
within three years after change in control, for a reason other than cause, death
or disability, they shall be paid a lump sum amount equal to their compensation
for the designated time periods.  In the event of a change in control of the
Company and the simultaneous release of the officers, the approximate maximum
amount of compensation that would be paid to Messrs. Alton, Anderson,
Christensen, Malmgren, Rowley and Saber under their current agreements would be
$1,325,750, $381,425, $393,925, $437,340, $323,120 and $550,700, respectively.

                                  SEVERANCE PAY

 The Company has an agreement with Robert D. Alton, Jr. that if he is discharged
by the Company, he will receive severance pay equal to 12 times his then current
monthly base salary.  The current maximum amount payable under this agreement
would be $221,550.  No payments will be made to Mr. Alton if he is discharged
for fraud, misappropriation of funds, embezzlement or the commission of a work
related felony.

                MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

During the fiscal year 1997, the Board of Directors held 11 meetings.  The
Company has an Audit Committee consisting of Messrs. Else, Holdrege and Kearney.
The Audit Committee reviews internal controls of the Company and its financial
reporting, and meets with certified public accountants on these matters; three
meetings were held in 1997.  The Company also has a Compensation Committee
consisting of Messrs. Bosacker, Jacobson and Taylor.  The Compensation Committee
makes recommendations to the Board regarding compensation for top management of
the Company; six meetings were held in 1997.  The Company also has a Corporate
Development Committee consisting of Messrs. Alton, Else, Kearney and Kirklin.
The Corporate Development Committee investigates potential expansion and new
markets for the Company; nine meetings were held in 1997.  The Company does not
have a nominating committee.


                                      III-7
<PAGE>

             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The compensation program for executives is the responsibility of the
Compensation Committee of the Board of Directors.  In 1997, this Committee was
composed of three outside directors, Messrs. Bosacker, Jacobson and Taylor.  Mr.
Bosacker is Chairperson of this Committee.

The Board of Directors has established the following ongoing principles and
objectives for the Company's executive compensation program:

1.   Provide compensation opportunities that will attract, motivate and retain
highly qualified managers and executives.
2.   Link executives' total compensation to the Company's financial performance
and individual job performance.
3.   Provide a balance between incentives focused on achievement of annual
objectives and longer term incentives linked to increases in earnings and
shareholders' value.

There are three elements to the compensation plan:  annual base salary, cash or
stock bonuses (the "Executive Incentive Plan") and longer term incentives (the
"Stock Award Plan").

Annual base salaries are somewhat influenced by the pay practices of comparable
companies so that the Company remains reasonably competitive with what others
are doing.

The Executive Incentive Plan has both an annual and a long-term component.  The
Executive Incentive Plan rewards an executive with a cash bonus for attainment
of annually established financial objectives based on a combination of revenue,
earnings and/or return on equity.  The individual executive's performance is
also factored into awards made under the Executive Incentive Plan.  In addition
to the payment of a cash bonus, an account is established for each executive
equal to 50% of the cash bonus.  This award can be credited to a cash account or
a stock account, at the participant's discretion.  If a cash credit is selected,
the account is increased annually based on interest equal to the rate on a ten
year Treasury Bond.  If a stock credit is selected, the account is credited with
additional shares equal to the dividends on the shares held in the account.
One-fourth of this account is vested immediately and an additional one-fourth
vests each of the succeeding three years.

The Stock Award Plan allows the Company to issue restricted shares, unrestricted
shares, incentive stock options and non-qualified stock options to officers of
the Company.  The 1997 Stock Award Program that was adopted pursuant to the
Stock Award Plan issued incentive stock options to seven officers of the
Company.  The incentive stock options vest over a three-year period and must be
exercised within ten years of their issuance.  Stock options are designed to
reward executives as the fair market value of the stock increases.  The 1997
Stock Award Program also establishes a range of restricted shares that may be
issued to each officer under the Program contingent upon the achievement of
performance objectives over a three-year period.  The objectives are based on
increases in the earnings of the Company and its subsidiaries.

The Committee applied the above-described principles and objectives in
determining the compensation for the Chief Executive of the Company, Mr. Alton.
In setting the 1997 salary, the Committee reviewed Mr. Alton's total
compensation program to make sure that it was closely related to the performance
of the Company in 1996.  In establishing Mr. Alton's salary for 1997, the
Committee specifically considered the satisfactory results of the Company in
1996 as compared to targeted goals in the areas of annual revenue, pre-tax
profitability, return on equity and rate of growth.  The Committee also reviewed
the compensation of the CEO to determine that the compensation was competitive
for similar positions in comparable companies and was equitable for the Company
and its shareholders.

                             COMPENSATION COMMITTEE
                                Lyle T. Bosacker
                                Lyle G. Jacobson
                              Brett M. Taylor, Jr.


                                      III-8
<PAGE>

              FIVE YEAR SHAREHOLDER RETURN PERFORMANCE PRESENTATION

The line graph presentation compares cumulative, five-year shareholder returns
on an indexed basis.  The graph shows the value at each year of $100 invested in
the Company's stock and the indexes at December 31, 1992 and assumes the
reinvestment of all dividends.  The Board of Directors has approved a peer group
of four (4) independent telecommunications companies which have been used for
purposes of this performance comparison.  These companies were selected because
they have a similar proportion of core business in regulated telephone
operations, a similar pattern of internal diversification and moderate external
acquisition activity.  The companies selected to be in the peer group are
identified below.  The following graph compares the cumulative five year
performance of the Company's common stock to the S&P Composite and to an index
of peer companies.

                          TOTAL RETURN TO SHAREHOLDERS
                         DECEMBER 1992 TO DECEMBER 1997


 (Following are the tables in the proxy which describe the points of the graph.)

<TABLE>
<CAPTION>

                                       ANNUAL RETURNS (BASED ON DIVIDENDS REINVESTED MONTHLY)
-----------------------------------------------------------------------------------------------------------------------------
                                                           RETURN         RETURN         RETURN         RETURN         RETURN
                                                            1993           1994           1995           1996           1997
                                                             ----          ----           ----           ----           ----
<S>                                                        <C>            <C>            <C>            <C>            <C>

Hickory Tech                                                 7.51          -1.17           1.45          -8.93          37.75
S&P 500 Composite Index                                     10.08           1.32          37.58          22.96          33.36
Peer Group Index Average                                    16.81          -3.74          51.43           6.81          17.55
                                                   Indexed Returns (12/31/92=100)

<CAPTION>

                                                        VALUE AT DECEMBER 31
-----------------------------------------------------------------------------------------------------------------------------
                                              1992          1993           1994           1995           1996           1997
                                              ----          ----           ----           ----           ----           ----
<S>                                           <C>          <C>            <C>            <C>            <C>            <C>

Hickory Tech                                   100         107.51         106.25         107.79          98.17         135.23
S&P 500 Composite Index                        100         110.08         111.53         153.45         188.68         251.63
Peer Group Index Average                       100         116.81         112.45         170.28         181.87         213.80

</TABLE>


     Companies in selected Peer Group are:


          Aliant Communications, Inc.
          Cincinnati Bell, Inc.
          Frontier Corporation
          Southern New England Telecommunications Corporation


                                      III-9
<PAGE>

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

a.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

          On February 28, 1998, no person is known to the Company to be the
          beneficial owner of more than five percent of any class of the
          Company's voting securities.

b.        SECURITY OWNERSHIP OF MANAGEMENT

Directors, nominees and named executive officers of the Company own the
following securities of the Company:

<TABLE>
<CAPTION>

NAME OF                        AMOUNT & NATURE OF                PERCENT OF
BENEFICIAL OWNER              BENEFICIAL OWNERSHIP              COMMON STOCK
----------------------------------------------------------------------------
<S>                           <C>                               <C>

Robert D. Alton, Jr.                21,725  (a)(b)                    *

Lyle T. Bosacker                   118,756  (c)                     2.6%

Robert K. Else                       3,185                            *

James H. Holdrege                    1,435                            *

Lyle G. Jacobson                     8,023  (d)                       *

R. Wynn Kearney, Jr.                23,936  (e)                       *

Starr J. Kirklin                     1,258                            *

Brett M. Taylor, Jr.                28,427  (f)                       *

Jon L. Anderson                      1,589  (a)(b)                    *

David H. Rowley                      4,737  (a)(g)                    *

David A. Christensen                 7,679  (a)(b)                    *

Bruce H. Malmgren                      631  (a)                       *

Asim Saber                             400                            *

All of the above and other
 executive officers as a group
 (14 persons)                      222,796                          4.9%

</TABLE>

 *   Less than 1%
(a)  Includes shares which may be acquired within 60 days after February 28,
     1998 through the exercise of stock options.  The persons who have such
     options and the number of shares which may be so acquired are as follows:
     Mr. Alton, 10,417; Mr. Anderson, 334; Mr. Christensen, 3,747; Mr. Rowley,
     334; and Mr. Malmgren, 267.

(b)  Includes shares held in a trust under the long-term portion of the
     Company's Executive Incentive Plan as follows:  Mr. Alton, 1,436; Mr.
     Anderson, 333; and Mr. Christensen, 632.

(c)  Includes 113,702 shares held by Mrs. Bosacker.


                                     III-10
<PAGE>

(d)  Includes 6,588 shares held by Mrs. Jacobson.

(e)  Includes 3,531 shares held in a profit sharing trust and 4,261 shares held
     in a family foundation.

(f)  Includes 16,611 shares held in a partnership, 11,816 shares in a trust for
     which Mr. Taylor is co-trustee.

(g)  Includes 4,103 shares held in a family trust.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          No reportable transactions occurred in 1997 involving directors,
          management or shareholders.


                                     III-11
<PAGE>

                                      PART IV

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

(a)  1.   FINANCIAL STATEMENT SCHEDULES

          All schedules are omitted because of the absence of conditions under
          which they are required or because the required information is given
          in the financial statements or notes thereto.

     2.   EXHIBITS

          Exhibit 10(m) Company's Directors' Stock Option Plan

          Exhibit (21) contains a listing of the Subsidiaries of the Company.

          Exhibit (23) contains the Consent of Independent Accountants regarding
          the Registration Statement of Hickory Tech Corporation on Form S-8.

(b)  1.   REPORTS ON FORM 8-K

          On March 11, 1998, the Company filed a Form 8-K.  Item 4 (Changes in
          Registrant's Certifying Accountant) was reported on the Form 8-K.  The
          Form 8-K reported that on March 5, 1998, the Company notified Olsen,
          Thielen & Co., Ltd. of their dismissal as the Company's certifying
          accountants effective April 13, 1998. There were no disagreements with
          the accountants nor reportable events (as described in Regulation S-K
          Item 304 (a)(1)(v)). The Company had provided a copy of the disclosure
          to the accountants and was furnished with a letter addressed to the
          Securities and Exchange Commission stating their agreement with the
          statements concerning their firm in the Form 8-K disclosure.

          On December 29, 1997, the Company filed a Form 8-K.  Item 5 (Other
          Events) was reported on the Form 8-K. The Form 8-K reported that on
          December 18, 1997, the Company issued a press release announcing the
          signing of a definitive agreement to purchase cellular property from
          Frontier Corporation.  Under the agreement, the Company will purchase
          all of the stock of Frontier's southern Minnesota RSA 10 property in a
          cash transaction. The cellular property (marketed under the Cellular
          One name) consist of seven counties with a serving area population of
          230,000.  The transaction is expected to close by the second quarter
          of 1998 once the Federal Communications Commission approval has been
          received.

          On November 11, 1997, the Company filed a Form 8-K.  Item 2
          (Acquisition or Disposition of Assets) was reported on the Form 8-K.
          The Form 8-K reported that on October 30, 1997, the Company acquired
          the assets of Datacomm Products (Datacomm).  Datacomm is an eleven
          year old data networking business based in Minneapolis, Minnesota.
          Datacomm will become a division of Collins Communications System Co.
          (a wholly owned subsidiary of the Registrant).

                                      IV-1

<PAGE>

                                     SIGNATURES

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


Dated:           March 25, 1998              HICKORY TECH CORPORATION
      -------------------------------




                                        By: /s/ Robert D. Alton, Jr.
                                            ------------------------------
                                            Robert D. Alton, Jr.
                                            Chairman, President and
                                            Chief Executive Officer


                                            /s/ Robert K. Else
                                            ------------------------------
                                            Robert K. Else, Director


                                            /s/ James H. Holdrege
                                            ------------------------------
                                            James H. Holdrege, Director


                                            /s/  R. Wynn Kearney, Jr.
                                            ------------------------------
                                            R. Wynn Kearney, Jr., Director


                                            /s/  Lyle G. Jacobson
                                            ------------------------------
                                            Lyle G. Jacobson, Director


                                            /s/ David A Christensen
                                            ------------------------------
                                            David A Christensen, Secretary,
                                            Vice President, Chief Financial
                                            Officer and Treasurer

                                      IV-2

<PAGE>

                     HICKORY TECH CORPORATION AND SUBSIDIARIES

                                  Exhibit Index to
                   Form 10-K for the Year Ended December 31, 1997


<TABLE>
<CAPTION>
                                                Filed in            Filed in
Regulation S-K                                 Securities           Exchange
  Reference         Title of Document           Act Form            Act Form
--------------  -------------------------     -------------      --------------
<S>             <C>                           <C>                <C>

   3(a)         Articles of Incorporation     S-8 dated
                                              June 22, 1993

   3(b)         By-Laws                       S-8 dated
                                              June 22, 1993

  10(a) & (b)   Supplemental Retirement       S-8 dated
                Agreements                    June 22, 1993

  10(c)         Company's Executive           S-8 dated
                Incentive Plan                June 22, 1993

  10(d)         Change of Control Agreements  S-8 dated
                                              June 22, 1993

  10(h)         Employment Agreement          S-8 dated
                                              June 22, 1993

  10(i)         Company's Retirement          S-8 dated
                Savings Plan and Trust        June 22, 1993

  10(j)         Employee Stock Purchase Plan  S-8 dated
                                              June 22, 1993

  10(k)         Company's 1993 Stock Award    Form 10-K dated
                Plan                          March 26, 1997

  10(l)         Company's Stock Plan for      S-8 dated
                Directors                     June 22, 1993

  10(m)         Company's Directors'                             Filed herewith
                Stock Option Plan                                at page IV- 4

  21            Subsidiaries of the Company                      Filed herewith
                                                                 at page IV-7

  23            Consent of Independent                           Filed herewith
                Accountants                                      at page IV-8

</TABLE>

                                      IV-3