SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

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

                   For the Fiscal Year Ended December 31, 1999
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        Commission File Number: 000-23309
                               LINC CAPITAL, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                     06-0850149
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

303 East Wacker Drive, Suite 1000, Chicago, Illinois     60601
 (Address of principal executive offices)                (Zip Code)

                                 (312) 946-1000
              (Registrant's telephone number, including area code)
           Securities registered pursuant to Section 12(b) of the Act:
                                      None
           Securities registered pursuant to Section 12(g)of the Act:
                                 Title of class
                          Common Stock, $.001 par value



Indicate by check mark whether the registrant (1) has filed all reports required
to be  filed by  Section  13 or 15(d) of  the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

The  aggregate  market  value  of  voting  stock  held  by   nonaffiliates   was
approximately  $10.0  million based upon the sale price of  registrant's  Common
Stock as of March 30, 2000. For purposes of the foregoing calculation only, each
of the issuer's officers and directors is deemed an affiliate.

At March 30,  2000,  5,265,050  shares of the  Registrant's  Common  Stock  were
outstanding.





<PAGE>
<TABLE>
<CAPTION>

                                                 LINC CAPITAL, INC.

                                                 TABLE OF CONTENTS

                                                                                                         Page

PART I.

        <S>          <C>                                                                                  <C>
        Item 1.       Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1
        Item 2.       Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   24
        Item 3.       Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   25
        Item 4.       Submission of Matters to Vote of Security Holders. . . . . . . . . . . . . . . . .  25

PART II.

         Item 5.      Market for the Registrant's Common Equity and
                          Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . .  25
         Item 6.      Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
         Item 7.      Management's Discussion and Analysis of Financial
                      Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . .  29
         Item 7A.     Quantitative and Qualitative Disclosures
                      About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  38
         Item 8.      Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . .  40
         Item 9.      Changes in and Disagreements with Accountants on
                      Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . .  40

PART III.

         Item 10.     Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . .   40
         Item 11.     Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
         Item 12.     Security Ownership of Certain Beneficial Owners
                      and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   47
         Item 13.     Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . .   48

PART IV.

         Item 14.     Exhibits, Financial Statement Schedules, and
                      Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    50

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   52

</TABLE>

<PAGE>




                                     Part I

Item 1.  Business

     General

     LINC Capital,  Inc. (the  "Company")  is a specialty  finance  company that
provides  leased  equipment,  asset-based  financing,  and equipment  rental and
distribution   services  to  growing   businesses.   The  Company  provides  its
specialized financing services through the following four business units:

o    Select Growth Finance (or  Select Growth )  directly  originates  equipment
     leases  and other  asset-based  financing  to  emerging  growth  companies,
     primarily    in   the    telecommunications,    high-tech    manufacturing,
     Internet-related  and  information  technology   industries.   Lessees  are
     typically  early-stage  businesses backed by venture capital funds or other
     professional  investors.  The Company frequently receives warrants or other
     equity  participation  rights in its lessees, in addition to its rights, as
     lessor, in the residual values of the leased equipment.

o    Portfolio  Finance  purchases  or  finances  leases  originated  by smaller
     companies within the highly  fragmented  leasing industry through warehouse
     and  portfolio  purchase  programs.  Since its re-entry  into the Portfolio
     Finance  business in October 1997,  the Company has formed lease  financing
     and portfolio purchase  relationships with over 20 lessors and has financed
     over $300 million in leases.  By financing the business  generated by these
     smaller lessors, the Company provides access to the capital markets on more
     favorable terms than would be available to them directly.

o    Rental  and  Distribution   facilitates  the  short-term  trial,  use,  and
     acquisition of analytical instruments and related equipment by companies in
     the  pharmaceutical,  environmental  and biotechnology  industries  through
     rentals,  leasing and sales of such equipment. The Company is a distributor
     for some of the most significant manufacturers of these types of equipment,
     including  Agilent  Technologies,  The Perkin-Elmer  Corporation and Varian
     Associates  Inc. In addition,  through its recent  acquisition  of Internet
     Finance + Equipment ( LINC IF+E ),  the Company  distributes and leases new
     and used  telecommunication  and networking equipment  manufactured by such
     manufacturers as Lucent Technologies, 3-Com and Cisco Systems.

o    Vendor Finance assists the sales efforts of manufacturers  and distributors
     by  developing  leasing  programs for the users of equipment  sold by these
     manufacturers  and  distributors.  Since the beginning of 1998, the Company
     has  made  four   acquisitions  of  smaller  leasing  companies  that  have
     significant  levels of vendor  relationships,  either  directly  or through
     third-party brokers that in turn maintain vendor relationships.

     The Company primarily  conducts its business  throughout the United States.
California  and  Texas  each  account  for  approximately  20% of the  Company's
revenues.  Otherwise,  no  state  accounts  for more  than 10% of the  Company's
revenues.  The Company  believes,  based on its own  research  and  management's
knowledge of and  experience in the  equipment  leasing  industry,  that it is a
leading  provider  of  equipment  leasing,  rental  and  other  services  in its
specialized markets and maintains a competitive  position in those markets.  For
information  regarding  segment  reporting,  see  note  15 to  the  Consolidated
Financial Statements.

     In August  1999  following  efforts  by the  Company  to obtain  additional
capital to continue  growth in its each of its  operations,  the Company engaged
U.S. Bancorp Piper Jaffray to investigate  opportunities to optimize shareholder
value.  It  became  apparent  in March  2000 that the sale of the  Company  as a
complete unit could not be accomplished on acceptable terms.  During March 2000,
the Company made a strategic  decision to de-emphasize  its traditional  leasing
activities and substantially  reduce overhead and debt. The Company intends that
its focus on a going-forward  basis will be on its profitable  distribution  and
rental activities. The Company continues to engage U.S. Bancorp Piper Jaffray to
explore the sale of individual  leasing business units and elements of its lease
portfolio.

     In March 2000 the Company  indefinitely  suspended  the  Portfolio  Finance
business,  which it had scaled back  dramatically in the later part of 1999, and
ceased  origination  of new leases in LINC  Connor,  one of its  Vendor  Finance
origination units. Currently, the Company is in discussions to sell or refinance
components of its Select Growth business and its Vendor Finance  business and to
use the proceeds to reduce  borrowings under its senior secured revolving credit
facility (the  Loan  Agreement ) and to reduce  outstandings  under a commercial
paper conduit  facility ( CP Conduit  Facility )  available to a special purpose
subsidiary  of the Company as well as to provide  additional  liquidity.  In the
event that the Company is unable to sell individual  leasing  business units and
elements of its lease  portfolio,  the Company may  liquidate  its Select Growth
activities and further downsize its Vendor Finance business.

     Furthermore,  as of December  31, 1999,  the Company was not in  compliance
with certain  covenants  under the Loan Agreement,  the CP Conduit  Facility and
certain covenants under the terms of agreements  relating to a securitization of
lease  receivables  completed by a special purpose  subsidiary of the Company in
July 1999 (the July Term  Securitization  ). The Company is in discussions  with
the lenders  under the Loan  Agreement,  the  liquidity  providers  under the CP
Conduit Facility and appropriate parties related to the July Term Securitization
regarding  forbearance from enforcement of remedies available to such parties as
a result of the  Company's  failure  to comply  with the  applicable  covenants.
During these  forbearance  discussions,  the Company is not  permitted to borrow
additional funds under its Loan Agreement. New lease originations have therefore
been  substantially  curtailed.  In the  event  that the  Company  is  unable to
successfully obtain such a forbearance from these secured creditors for a period
that enables it to sell individual  leasing businesses and elements of its lease
portfolio,  the Company may not be able to continue  some or all of its business
and may be required to seek protection  under the Bankruptcy Code. No assurances
can  be  made  as  to  the  Company  obtaining  such  forbearances,  that  lease
originations  will commence at a level to support the operations of the Company,
or that the  secured  creditors  will  allow  management  to  implement  various
strategic  plans. In addition,  even if the Company was to  successfully  obtain
such  forbearance and  successfully  sell individual  leasing business units and
elements of its lease portfolio,  there can be no assurance that the proceeds of
such sales will  provide the Company with  sufficient  liquidity to continue its
remaining  operations.  See  Dependence  on Capital and  Dependence  on External
Financing in  Forward-Looking  Statements and Associated Risks and Liquidity and
Capital Resources in Management's Discussion and Analysis of Financial Condition
and Results of Operations.

Equipment Leasing Industry

     The  Equipment  Leasing   Association  of  America  (the  ELA)  notes  that
approximately  80% of all U.S.  businesses  use leasing to acquire some of their
assets.  Leasing  is  advantageous  since it  enables  a company  to obtain  the
equipment  it  needs  while  preserving  cash  flow,  and  may  offer  favorable
accounting  and tax treatment.  These  factors,  in  management's  opinion,  are
contributing to greater acceptance of leasing as a major financing  component of
equipment  investment.  In  particular,  the  emergence  of  small,  growth  and
technology-oriented  businesses  in the U.S.  economy  continues  to broaden the
market for leasing companies.  The ELA notes that leasing financed approximately
$126 billion in new business  volume for fiscal year 1998.  Independent  lessors
represent  about 60% of this new  business  volume as compared  to other  lessor
types.

     Management believes consolidation in the leasing industry will be driven by
(1) basic economies of scale, (2)  specialization  factors,  and (3) the capital
constraints of small companies.

     Economies  of  scale  exist  in  operational  and  back  office  functions,
especially those that relate to technological platforms. The increasing level of
automation often allows companies to increasingly  rely on technology to perform
tasks  previously  performed  by  individuals.   Thus,  more  efficient  leasing
companies can acquire less efficient  leasing  companies and spread the costs of
technology over larger lease portfolios.

     Specialization  will also drive  consolidation,  as smaller players will be
disadvantaged  relative to their larger  peers who often have better  resources,
including the skill set and customer service  capabilities  necessary to attract
meaningful  partnerships with  manufacturers.  Consequently,  management expects
competitive  pressures from the larger  independent  leasing  companies to drive
smaller companies to seek strategic merger partners.

     Capital  availability  is primary to the  success of any  leasing  company.
Larger  leasing  companies  have  the  advantages  of lower  cost of  funds  and
diversification  of funding  sources  relative  to smaller  players who can face
capital  constraints,  especially  during  periods of tight  credit.  Therefore,
larger lessors can acquire  smaller  companies that benefit from a lower cost of
capital.

     History

     The Company's predecessor was organized in 1975 and, from its organization
through  September  1994,  focused its  activities  primarily  in the leasing of
equipment to businesses engaged in the healthcare industry. The Company believes
that through  internal growth and its acquisition of Scientific  Leasing Inc. in
1988, it became the largest  independent  lessor of healthcare  equipment in the
United  States with over $500 million in assets owned or managed in 1993.  Based
on   statements   made  to  the  Company  by   individuals   familiar  with  the
securitization  industry as well as its own research,  the Company believes that
it was the first equipment lessor in the U.S. to securitize healthcare equipment
leases and related residual values.

     The Company commenced its Select Growth Finance  operations in 1986 through
its  sponsorship  and  management  of limited  partnerships,  a portion of whose
business was providing  equipment lease  financing to emerging growth  companies
primarily in the healthcare and information technology industries.  Beginning in
1992, the Company focused Select Growth Finance on leasing  essential  operating
equipment to such emerging companies for its own account. The Company originated
over $36 million in new leases through its Select Growth  Finance  activities in
1999 and has originated over $174 million in such leases since 1993.

     The Company first entered the  Portfolio  Finance  business in 1988 through
the  acquisition  of  Scientific  Leasing  Inc.,  the  majority of whose  assets
consisted of a portfolio of leases of healthcare equipment. In 1994, the Company
sold its healthcare  equipment  leasing and portfolio  acquisition and servicing
business to LINC Anthem  Corporation  ( LINC  Anthem ),  a subsidiary  of Anthem
Insurance Companies,  Inc. In connection with the sale, the Company entered into
a  non-competition  agreement  that  effectively  restricted  the  Company  from
participating in Portfolio Finance  activities and from originating leases other
than to  emerging  growth  companies  until  September  1997  (the   Non-Compete
Agreement ).  From 1988  through  the end of 1996,  the  Company and LINC Anthem
purchased or financed  over $600 million in leases  originated  by other smaller
lessors.  Upon  the  expiration  of  the  Non-Compete  Agreement,   the  Company
reinitiated  its  Portfolio  Finance  operations.   In  1999  Portfolio  Finance
originated lease volume in excess of $119 million.

     The Company's Rental and Distribution activities were developed through the
acquisition  in 1991 of a business  founded by Robert E.  Laing,  the  Company's
current  President and Chief Operating  Officer,  and the acquisition in 1992 of
the analytical  instruments  business of AT&T Capital  Corporation.  The Company
recently  expanded its  Distribution  activities  through the acquisition of the
business and assets of Internet  Finance and Equipment,  Inc., a distributor and
lessor of  telecommunications  and  networking  equipment.  The  Company  is now
conducting this business as LINC IF+E.

     The  expiration  of  the  Non-Compete  Agreement  allowed  the  Company  to
reinitiate  its Portfolio  Finance  business and to establish its Vendor Finance
business unit in 1998.  Since 1998, the Company has developed its Vendor Finance
business unit and expanded its distribution capabilities through the acquisition
of the following companies.

o    Comstock  Leasing Inc. This company was acquired by the Company in February
     1998, with offices in Minneapolis and San Francisco, specializes in leasing
     a variety  of  equipment,  including  office-based  information  technology
     equipment, largely originated by third-party brokers.

o    Monex  Leasing,  Ltd.  This  business  was acquired by the Company in March
     1998,  headquartered  in  Houston,  is a lessor of  telecommunications  and
     business equipment, primarily in Texas and the Southwest.

o    Spectra Precision Credit Corp. This business was acquired by the Company in
     June 1998 and was based in  Dayton,  Ohio,  and was  formerly  the  finance
     subsidiary of Spectra  Precision  Group, an  international  manufacturer of
     laser-based  leveling,  alignment and surveying  instruments  and software.
     Through  this   operation,   the  Company   continues  to  lease  equipment
     manufactured by Spectra Precision Group,  primarily to the construction and
     agricultural  industries,  and has  diversified  its leasing  activities to
     include broadcast and medical equipment.

o    Connor  Capital  Corporation.  This  company was acquired by the Company in
     January 1999 and is a Chicago-based  lessor that  specializes in developing
     finance  programs for  equipment  vendors,  primarily in the machine  tool,
     printing and woodworking industries.

o    Internet  Finance &  Equipment,  Inc.  This  business  was  acquired by the
     Company  in  August  1999 and  based in  Charlotte,  North  Carolina,  is a
     distributor and lessor of Internet access equipment manufactured by several
     companies.  Its acquisition has further enhanced the synergies  between the
     Company's Vendor Finance and Rental and Distribution activities.

     Following is a description of the Company's business activities by Business
Unit.

     Select Growth Finance

     General.  The Company's Select Growth Finance  activities consist primarily
of  the  origination   (directly  and  through   strategic   relationships)   of
non-cancelable, full pay-out leases and other asset-based financing transactions
(primarily  accounts receivable lines of credit) to emerging growth companies in
the   telecommunications,    high-tech   manufacturing,   internet-related   and
information  technology  industries.  Such companies  include  manufacturers and
developers of technological products,  software developers,  information service
providers,  and Internet and telecommunications  service companies.  Since 1993,
the Company has provided leasing to over 175 companies  including Northern Light
Technology, Inc., Usinternetworking,  Inc., iOwn Holdings, Inc., Goto.com, Inc.,
Corvis Corporation,  Verio, Inc.,  Shopnow.com,  Inc., and The Spinner Networks,
Inc. A majority of the Company's  Select Growth Leasing clients are supported by
institutional private equity investors, which provide equity and working capital
and  management  resources  to such  customers.  Such private  equity  investors
include Kleiner Perkins, Accel Ventures,  Institutional Venture Partners, Draper
Fisher Jurvetson,  idealab! Capital Partners, Oak Investment Partners, and Menlo
Ventures.

     The Company believes that expansion of the information  technology industry
and  development of new  technologies  have promoted the formation and growth of
new companies of the type served by its Select Growth Finance  activities.  Such
companies  typically  have limited access to financing  from  commercial  banks,
diversified finance companies and traditional  leasing companies.  The Company's
experience in its targeted  industries  allow it to serve the specific  needs of
its customer base more  effectively  than its competitors by providing a variety
of  financing  alternatives,  such as  flexible  lease  structures,  asset-based
financing, sale-leaseback transactions and secured credit lines.

     Select Growth leases to individual  customers  typically include items with
an  aggregate  cost  ranging  from  $250,000  to $3.0  million and cover a broad
variety of  equipment,  each with original  purchase  prices which are generally
less than $100,000 per item. These leases are generally for essential  operating
equipment,  including  data  processing  equipment,  production  equipment,  and
analytical  instruments,  but may  include  furniture  and  fixtures  and  other
equipment necessary for administrative support.

     In 1999 compared to 1998, Select Growth Finance lease fundings decreased to
$36.0 million from $52.4 million. This decrease was primarily as a result of the
de-emphasis of this business activity by the Company due to capital  constraints
that arose during the third and fourth  quarters of 1999.  As a  consequence  of
continuing  capital  constraints,  the Company is currently in discussions which
may lead to the sale of substantially all of its  non-securitized  Select Growth
lease  portfolio,  the proceeds of which will be used to repay  borrowings under
the Loan Agreement and outstandings under the CP Conduit Facility and to provide
liquidity  to the  Company.  Management's  plans are  subject  to the review and
approval of the secured  creditors.  No assurances  can be made that the secured
creditors  will allow the Company to implement its plans.  In the event that the
Company is unsuccessful in completing such a sale, the Company may liquidate the
related  portfolio.  Any  strategy  adopted  by the  Company  is  subject to the
approval of its lenders.  See  Liquidity and Capital  Resources in  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     In a significant  number of its Select  Growth  Finance  transactions,  the
Company  receives  warrants or other  equity  participation  rights that provide
additional  opportunities  for  profitability  upon the realization of value and
sale  of  such  rights.  As of  December  31,  1999,  the  Company  held  equity
participation  rights in 65 companies,  thirteen of which were  publicly  traded
companies.  The  Company  has  realized  gains  on  disposition  of such  equity
participation  rights in each year since 1996 and expects to realize  additional
gains in the future.

     Sales and Marketing. Select Growth Leases are originated by representatives
of the Company located in Chicago and San Francisco,  often through a network of
independent  lease  brokers and  referrals  from  institutional  private  equity
investors.  The Company has been able to identify  prospective  clients  through
marketing personnel having investment  banking,  financial analysis and industry
specific  experience;  attention  to  selective  information  regarding  venture
capital  investments  in  targeted  industries;   direct  mail  advertising  and
representation  at major venture capital  conferences and symposia.  The Company
also pursues an active telemarketing strategy to identify potential lessees.

     To ensure prompt customer response,  the Company's marketing personnel have
direct access to the Company's customer information data bases which assist them
in responding to sales leads,  preparing  lease  proposals  and  monitoring  the
progress of a transaction  through the underwriting  process.  In addition,  the
Company's  sales  personnel are trained in  structuring  Select  Growth  Finance
transactions.

     Underwriting.  The Company  has  adopted  credit  policies  and  procedures
applicable to each of its business units that are  periodically  reviewed by the
Credit Policy Committee of its Board of Directors.  In addition, the Company has
established  a  Commitments  Committee,  the members of which are the  Company's
Chairman,  its  President,  its Chief  Financial  Officer,  and its Senior  Risk
Officer.  Because of the  nature of its Select  Growth  Finance  activities  the
preponderance  of the  transactions  originated  by its  Select  Growth  Finance
business  unit are reviewed for credit  approval by the  Company's  Commitment's
Committee.  The Company's Select Growth Finance underwriting process is based on
due diligence regarding a potential  customer's business,  management,  product,
cash flows and institutional  investors,  as well as the type of equipment to be
leased.

Portfolio Finance

     General.  The Company reinitiated its Portfolio Finance activities upon the
expiration of the  Non-Compete  Agreement on September  29, 1997.  The Portfolio
Finance division  finances the leases generated by other equipment  lessors.  In
1999  compared to 1998,  Portfolio  Finance lease  fundings  decreased to $119.4
million from $146.0  million.  This  decrease  was  primarily as a result of the
de-emphasis of this business activity by the Company due to capital  constraints
that arose during the third and fourth quarters of 1999. In the first quarter of
2000,  the Company  indefinitely  suspended  the  acquisition  of new  portfolio
finance  business  due to  insufficient  capital to support this  activity.  See
 Dependence on External  Funding  in  Forward-Looking  Statements and Associated
Risks and   Liquidity  and Capital  Resources  in  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations.

     The  Company  has had  portfolio  finance  relationships  with more than 20
companies and has acquired a total portfolio of over 60,000 leases.  The Company
finances  leasing  companies  characterized  by: (i) strong  customer  or vendor
relationships;  (ii)  lease  transactions  which  range in size  from  $1,000 to
$250,000; (iii) needs for committed financing and servicing  relationships;  and
(iv) a focus on customers which are not effectively  served by more  traditional
funding  sources.  During  the  later  part of 1999 the  Company  curtailed  its
Portfolio Finance activities due to capital constraints.  The Company expects to
continue to  de-emphasize  its Portfolio  Finance  activities  unless it obtains
additional  sources of capital that permit it to fund this line of business on a
competitive   basis.  See  Liquidity  and  Capital   Resources  in  Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     Sales and Marketing.  In connection  with the  acquisition and financing of
lease  portfolios,  the Company  offers two distinct  programs to its customers.
Under its Warehouse Line Programs,  the Company provides limited  warehouse loan
facilities  to lessors on a recourse  basis.  Following a warehouse  period that
typically will not exceed six months,  the Company purchases the related pool of
performing  warehoused  leases from the  originating  lessor on either a partial
recourse or  non-recourse  basis.  The  purchase is usually  credit  enhanced by
either a holdback  reserve and/or,  if the  creditworthiness  of the originating
lessor  is  acceptable,   a  recourse  obligation  of  the  originating  lessor.
Substantially  all of the leases the Company acquires through its Warehouse Line
Programs are non-cancelable, full pay-out leases.

     Under its Portfolio  Finance Programs,  the Company acquires  portfolios of
leases originated over a specified period of time by the originating lessor. The
purchase is usually credit enhanced by either a holdback reserve and/or,  if the
creditworthiness of the originating lessor is acceptable,  a recourse obligation
of the originating  lessor. Such credit enhancement is intended to reduce losses
under this program. Substantially all of the leases the Company acquires through
its Portfolio Finance Programs are non-cancelable, full pay-out leases.

     Underwriting.  The Company has developed established underwriting processes
for the  management  of its  Portfolio  Finance  activities  based on the  prior
experience  of its  management.  The Company  performs a detailed due  diligence
review of each  potential  customer  prior to approval  of a  Warehouse  Line or
Portfolio  Finance  Program.  The due diligence  process includes site visits, a
review of the potential  customer's  documentation  standards,  credit policies,
customer base, management team, equipment focus and servicing  capabilities.  In
connection with its due diligence,  the Company re-underwrites  individual lease
transactions to the extent it deems necessary under the circumstances.

<PAGE>

     Rental and Distribution

     General.  The Company's Rental and Distribution  activities  consist of the
rental,  distribution  and leasing of  analytical  instruments,  such as gas and
liquid chromatographs,  mass spectrometers and atomic absorption systems through
its LINC Quantum Analytics Division headquartered in Foster City, California and
the distribution and leasing of Internet access equipment,  routers, networking,
telecommunications  and other information  technology equipment through its LINC
Internet Finance + Equipment Division located in Charlotte, North Carolina.

     LINC Quantum

     Analytical  instruments typically cost between $15,000 and $60,000 each and
are used by companies serving the  environmental,  chemical,  pharmaceutical and
biotechnology  industries  to measure the chemical  composition  of a variety of
substances.

     Certain segments of the market for analytical  instruments have undergone a
fundamental change over the past several years in that vendors have increasingly
relied upon independent  companies,  such as the Company, to take responsibility
for the  distribution  and rental of such  equipment.  This is consistent with a
trend toward  outsourcing among providers of a variety of products and services.
These vendors have increasingly focused on the manufacture of such equipment and
allowed  independent  companies  to  focus on other  functions  such as  rental,
inventory  management and distribution.  The Company believes that its expertise
has allowed it to become a leading  independent  distribution and rental company
in the analytical instrument market.

     The Company is a distributor for most of the significant  manufacturers  of
this type of equipment, including Agilent Technologies,  Varian Associates Inc.,
and Apex  Technologies,  Inc.  The  Company  is a  designated   Premier  Channel
Partner  for Agilent Technologies and believes,  based on its own research, that
it is the largest independent source of analytical instruments in the U.S. As an
outgrowth of its relationship with Agilent Technologies, the Company, in concert
with Agilent Technologies,  has extended its sales and rental programs in Europe
to accommodate U.S.-based and new European customers.  The Company's position as
a distributor of certain types of equipment allows it to purchase such equipment
at a discount, which varies, from manufacturer to manufacturer.

     Sales and Marketing. The Company provides analytical instruments, which are
customized,  calibrated  and made  ready  for use by the  Company.  The  Company
typically delivers  equipment from its centralized  warehouse within 24 hours of
receipt of an order.  The  Company  services  over 2,500  analytical  instrument
customers through its sales force of product  specialists and orders directed to
the  Company by its  vendors.  The  Company's  customers  include  environmental
testing   laboratories,    pharmaceutical   and   chemical   manufacturers   and
biotechnology  companies.  The Company's  five largest  Rental and  Distribution
customers are New York City Medical Examiner, Quanterrra Environmental Services,
Inc., Dow Chemical Co., Cargill, Inc., and Battelle Memorial Institute, Inc. The
Company will seek  opportunities  to capitalize on its  distribution  and rental
expertise and its knowledge of the healthcare market by developing relationships
with vendors of medical  equipment and acquiring  other  established  rental and
distribution companies.

     The  Company's  LINC  Quantum  Analytic  Division  offers  its  Rental  and
Distribution customers generally three types of rental and leasing arrangements:
(i)  short-term  rentals  with terms  ranging  from as short as two weeks to one
year; (ii) operating  leases with terms ranging from 12 to 48 months;  and (iii)
full-payout  leases with terms  ranging  from 36 to 60 months.  Customers  under
rental arrangements and operating leases are also offered incentives to purchase
the related analytical  instrument either during the term of the lease or at the
end of the  lease by  applying  a portion  of the  rental  payments  made by the
customer to the purchase price of the equipment.  The Company  believes that its
ability to provide a wide range of rental, leasing and purchase options provides
it with a competitive advantage over other providers of analytical instruments.

     To further promote awareness of its Rental and Distribution activities, the
Company  advertises in trade  publications  targeted at key customer  groups and
participates in numerous trade shows  worldwide.  In addition,  specific mailing
lists targeting selected market segments are purchased from specialized database
providers. Product-specific marketing literature is mailed on a regular basis to
target segments of the Company's over  15,000-account  mailing list. Direct mail
targeted  at  prospective  users of  analytical  equipment  has  proven  to be a
cost-effective  way to attract  rent,  lease and sale  customers and to increase
awareness and stimulate demand.

     The Company recently implemented a Business-to-Business electronic commerce
web site,  www.lincquantum.com.  This industry  state-of-the-art web site allows
users to access marketing,  sales, and support  information through a variety of
subject  links.  In addition,  all core  products can be accessed in the Product
Store  where  over 1,300  product  line items are  available  with part  number,
product  description,  US list price,  and in many cases,  with brochures,  tech
notes, site prep guides, etc., available for download. Systems can be configured
and added to a shopping cart and the final  configuration can be submitted for a
quotation or a direct sale order.  Lease quotes on customer  configured  systems
can be accomplished  through a built-in  calculator for estimates of the monthly
rate and followed up on by an inside sales representative after submission.  The
Company  believes  this  development  will  have a major  impact  with  both its
customers and vendors and will enhance overall profitability.

     The Company  recently  expanded  its  Distribution  activities  through the
acquisition of the business and assets of Internet Finance and Equipment,  Inc.,
a distributor and lessor of  telecommunications  and networking  equipment.  The
Company is now conducting this business as LINC IF+E. This business was acquired
by the Company in August 1999 and based in Charlotte,  North  Carolina.  It is a
distributor  and lessor of internet  access  equipment  manufactured  by several
companies.  This  acquisition  has further  enhanced the  synergies  between the
Company's Vendor Finance and Rental and Distribution activities.

     Operations.  When the Company's LINC Quantum  Analytics  Division sells new
analytical instruments,  the equipment is subject to a manufacturer's  warranty.
When the Company sells used analytical  instruments,  it typically  reconditions
the  equipment  and  provides a 90-day  warranty.  When the  Company  rents such
instruments,  it exchanges any instruments requiring service with units from its
centralized  inventory or provides for on-site service from the  manufacturer or
an independent service organization.  The Company maintains its rental inventory
and customizes  analytical  instruments  to meet its customers'  needs through a
complete repair and reconditioning facility.

     The Company's  LINC Quantum  Analytics  Division  utilizes a combination of
proprietary  software and software licensed to it by a third party in its rental
and distribution activities.  All items in the Company's Rental and Distribution
inventory  are  separately  bar-coded and tracked.  Its systems  permit users to
access information regarding account history, current activity,  status of items
in its inventory,  utilization,  pricing,  billing and collections  on-line. The
Company  believes  that the  long-term  experience  of it and its  management in
utilizing  these  systems  provides  it with the  ability to rapidly  respond to
customer inquiries and a high level of control over its rental inventory.

     LINC Internet Finance + Equipment

     The  operations  of the LINC IF+E  Division,  acquired in August 1999,  are
conducted  separately  from  those  of the LINC  Quantum  Analytics.  LINC  IF+E
distributes  and  leases  Internet  access   equipment,   routers,   networking,
telecommunications  and other information  technology equipment  manufactured by
such  companies as Lucent  Technologies,  Cisco  Systems and 3-Com  directly and
through its web site,  www.internetfinance.com,  to Internet service  providers,
competitive  local exchange  carriers and other companies engaged in e-commerce,
and also re-markets used Internet access equipment through its auction web site,
www.ispconsign.com.

Vendor Finance

     General.  As  part of the  sale of its  healthcare  equipment  leasing  and
portfolio  acquisition  and servicing  businesses  in October 1994,  the Company
entered into the Non-Compete  Agreement that effectively  restricted the Company
from originating  leases other than to emerging growth companies until September
1997. On September 29, 1997 this Non-Compete  Agreement  expired and the Company
began to develop a Vendor Finance business unit.

     Acquisitions.   The  Company  has  focused  on  acquiring  smaller  leasing
companies  that  appeared  to  have  potential  to  grow  significantly.   These
acquisitions  have  been  intended  to  give  the  Company   significant  vendor
relationships  that  the  Company  can  leverage  in its  other  three  business
segments.

     Since the expiration of the Non-Compete  Agreement the Company has acquired
four leasing  companies or substantially all their business assets which fit the
parameters  of its  acquisition  strategy.  These leasing  company  acquisitions
compliment  the Company's  core  competencies  in  customizing  lease  financing
arrangements to respond to the needs of vendors and equipment end-users,  and in
training the vendor's staff in the use of the Company's lease financing products
to provide an additional flow of financing volume.

     Comstock  Leasing  Inc. In  February  1998 the  Company  acquired  Comstock
Leasing  Corporation  ( Comstock ),   a  small-ticket  lessor  with  offices  in
Minneapolis  and San  Francisco  to create  the LINC  Comstock  Division  of the
Company  ( LINC  Comstock ).  LINC  Comstock  supports  third-party  brokers and
vendors  as  a  lessor  of  a  variety  of  equipment,   including  office-based
information   technology  equipment.   The  majority  of  its  lease  volume  is
concentrated in Minnesota and California.  The average lease  transaction has an
original equipment cost of $25,000.

     Monex Leasing,  Ltd. In March of 1998, the Company  acquired  substantially
all the assets of Monex  Leasing,  Ltd.  ( Monex ),  a  vendor-driven  equipment
lessor headquartered in Houston,  Texas to create the LINC Monex Division of the
Company  ( LINC  Monex ).  LINC Monex  works with  distributors  and  vendors of
telecommunications,  business and medical equipment,  primarily in Texas and the
Southwest.

     LINC  Monex  originates   leasing  volume  primarily   through  its  direct
relationships  with vendors and  distributors.  Vendors are motivated to promote
leasing since LINC Monex will pay the vendor  immediately  for the equipment and
then  service the lease with the end user,  alleviating  the  vendor's  concerns
regarding  payment from the end user. The vendor's  salespeople  often find that
monthly lease payments over time are less daunting to a customer than paying the
full  purchase  price up front and therefore  rely on leasing to increase  their
sales volumes. The average lease has an original equipment cost of $25,000.

     Spectra  Precision Credit Corp. The Company acquired  substantially  all of
the assets and business of Spectra Precision Credit Corp.  ( Spectra Credit ) in
June  1998,   including  its  $34.7  million  lease  portfolio.   Prior  to  the
acquisition,  Spectra  Credit was the finance  subsidiary of Spectra  Precision,
Inc. ( Spectra Precision ),  a division of Sweden-based Spectra Precision Group,
an international  manufacturer of laser-based leveling,  alignment and surveying
instruments and software used in the  construction,  agricultural  and surveying
markets.  As part of the acquisition,  the Company and Spectra Precision entered
into a seven-year  vendor  agreement  in which the Company  will have  exclusive
rights to  provide  financing  services  to Spectra  Precision's  clients in the
United States, Canada, and Europe.

     The acquisition of Spectra Credit which has become the LINC Vendor Services
Division of the Company ( LINC Vendor  Services )  expanded the Company's vendor
financing  business,  introduced  the  Company  to new  equipment  and  end-user
markets, and provided an international presence for the Company with LINC Vendor
Service's  office in the  United  Kingdom.  Through  its formal  agreement  with
Spectra  Precision,  LINC  Vendor  Services  provides a  comprehensive  array of
leasing  options,  progress  payment  programs,  floor plan financing and rental
services to 24 direct  sales  offices and more than 140  dealer/distributors  of
Spectra  Precision's  products  in the  United  States,  Canada  and the  United
Kingdom.  The leases originated by LINC Vendor Services have an average original
equipment cost of $18,000.

     LINC Vendor  Services  has  increased  its leasing  volume by  establishing
additional  leasing programs with distributors in other niche industries such as
medical and dental, broadcasting and telecommunications,  and materials handling
equipment.  The Company  targets  middle-market  manufacturers  that do not have
existing   finance  programs  and  works  with  these  companies  in  developing
strategies that will increase unit sales and margins.  As part of these efforts,
LINC Vendor  Services  provides  the  manufacturers  with  inventory  management
assistance  that  focuses  on  business  growth  and  sales  seminars  aimed  at
developing more effective  salespeople  through reduced sales cycles,  increased
selling efficiencies, and wider margins.

     Connor Capital  Corporation.  In January 1999, the Company  acquired Connor
Capital  Corporation  ( Connor ),  located in  Chicago  to form the LINC  Connor
Division of the Company  ( LINC  Connor ).  LINC Connor  specializes  in captive
vendor finance programs, primarily in the machine tool, printing and woodworking
industries.

     Vendor  Finance  lease  fundings  increased to $168.1  million in 1999 from
$48.0  million in 1998.  During the fourth  quarter  the Company  commenced  the
consolidation  of certain  of its Vendor  Finance  activities  into its  Chicago
headquarters in order to increase operating efficiencies and to more effectively
implement an Internet based leasing  e-commerce  system  (e-LINC  online.com) as
well as an automated credit scoring system for smaller transactions.

     In March  2000,  the  Company  ceased  originations  of new  leases in LINC
Connor. Currently, the Company is in discussions to sell or refinance components
of its other Vendor Finance business  marketing units and to use the proceeds to
reduce borrowings under the Loan Agreement and to reduce  outstandings under the
CP Conduit Facility as well as to provide  additional  liquidity.  The Company's
strategy of selling or refinancing  components of its Vendor Finance business is
subject to approval from its lenders. No assurances can be made that the secured
creditors  will allow the Company to implement its plans.  In the event that the
Company is unable to sell individual leasing business units and related elements
of its lease  portfolio,  the Company may further  downsize  its Vendor  Finance
business.

     As a result of the operating  results of its Vendor Finance  activities and
re-evaluation  of the  expected  future  cash flows from these  activities,  the
Company  recognized  an  impairment  of the  goodwill  related to certain of its
Vendor Finance companies and charged off $13.9 million in 1999.

Lease Portfolio

     Equipment Type. The following table sets forth the Company's  percentage of
net  investment  in direct  finance  leases  and loans and the net book value of
operating  leases,  including  leases  securitized,  as of December 31, 1999, by
equipment type:

<TABLE>
<CAPTION>
                                                                                                      % Of Portfolio
<S>                          <C>                                                                            <C>
Equipment Type                                             Examples
Point-of-Sale Devices        Credit card verification equipment                                             18.7%
Production & Machine
   Tools                     Pharmaceutical manufacturing, labeling and dispensing equipment                18.3
Information Systems          Personal computers, area networks and workstations                             18.1
Laser Surveying &            Laser-based leveling and alignment instruments, machine control
   Construction                 systems, and surveying instruments                                          11.6
Telecommunications           Microwave transmitters, multiplexing equipment and telephone
                                Systems                                                                      9.9
 Medical                     X-ray machines, infusion pumps and surgical equipment                           6.4
 Furniture and Fixtures      Medical and other office furniture                                              6.2
Analytical Instruments       Gas and liquid chromatographs and mass spectrometers                            6.0
 Miscellaneous               Various equipment accessories and other                                         4.8
                                  Total                                                                  ---------
                                                                                                           100.0%
                                                                                                         =========
</TABLE>

     Terms of Equipment Leases. Substantially all equipment leases originated by
the Company are full  pay-out net leases  with  specified  non-cancelable  terms
ranging from three to six years.  The essential  terms and  conditions of all of
the Company's leases are substantially  similar.  In most cases, the lessees are
contractually  required to: (i)  maintain,  service and operate the equipment in
accordance with the  manufacturer's  and  government-mandated  procedures;  (ii)
insure the equipment  against  property and casualty  loss;  (iii) pay all taxes
associated  with the equipment;  and (iv) make all scheduled  contract  payments
regardless of the performance of the equipment.  The Company's standard forms of
leases  provide  that in the event of a default by the  lessee,  the Company can
require payment of liquidated damages and can seize and remove the equipment for
subsequent sale, refinancing or other disposal at its discretion. Any additions,
modifications or upgrades to the equipment, regardless of the source of payment,
are typically automatically incorporated into and deemed a part of the equipment
financed.

     Residual Values.  Residual  equipment values on the Company's balance sheet
as of December 31, 1999  totaled  approximately  $20.8  million.  The  Company's
experience in remarketing  equipment and conservative policies toward estimating
residual values has resulted in the Company  consistently  recognizing  gains on
the  remarketing  of leased  equipment on a historical  basis.  During 1999, the
Company recognized gains from residual values of approximately $1.3 million.

     Equity  Participation  Rights Held in Select Growth  Finance  Lessees.  The
Company frequently receives warrants or other equity  participation  rights from
Select Growth Finance Lease clients in connection  with its leases to them. Such
warrants or equity rights entitle the Company to purchase  common stock or other
equity  securities of the client at a price  generally  based on the most recent
price paid by the  client's  private  equity  investors.  The Company  typically
obtains the rights to have such shares  included  in certain  registered  public
offerings of the client's  stock.  At the time of receipt,  the warrant or other
equity  participation  right is recorded by the  Company as an  investment.  The
Company  recognizes  a gain or loss on such  securities  when  sold or when  the
Company  intends  to  sell  such  securities  in  the  near  term.  The  Company
periodically  evaluates its portfolio of equity participation rights and expects
to sell its equity  participation rights as its portfolio companies mature based
on its  evaluation  of  the  market  trends  for  the  related  clients'  equity
securities.  As of December  31,  1999,  the Company  held equity  participation
rights in 65 companies,  thirteen of which were publicly traded  companies.  The
Company has  realized  gains of equity  participation  rights in each year since
1996. During 1999, the Company recognized gains on certain equity  participation
rights of $1.6 million,  approximately $1.1 million of which related to one such
company.  These results may not be indicative of future  performance.  Potential
gains on both residual  values and sale of equity  participation  rights provide
additional sources of revenue to offset the possibility of losses,  which may be
incurred on Select Growth Finance lessees.

Loss Experience

     The following table sets forth the amount of  delinquencies as a percentage
of Gross  Contract  Balance  of  leases  included  in the  Company's  owned  and
securitized  lease portfolio as of the period indicated and net charge-offs as a
percentage of the Company's  remaining net  investment in direct  finance leases
and loans as of the end of the period  indicated.  Additionally,  the table sets
forth the loss reserves  provided for on the Gross  Contract  Balance as well as
holdback  reserves  on  portfolio  acquisitions  as of the  end  of  the  period
indicated.


<PAGE>
<TABLE>
<CAPTION>

                                                                Year Ended December 31,
                                                     -----------------------------------------
                                                           1999          1998           1997
                                                     ------------  ------------   ------------
                                                              (Dollars in thousands)
<S>                                                      <C>           <C>            <C>
Select Growth Finance:
        Gross Contract Balance                           $79,980       $75,882        $56,654
        31 - 60 days past due                              1.08%         3.07%         11.31%
        61 - 90 days past due                              0.66%         0.07%              -
        Over 90 days past due                              1.20%         1.52%              -

Portfolio Finance:
        Gross Contract Balance                          $223,538      $175,885        $31,630
        31 - 60 days past due                              2.65%         2.13%          0.39%
        61 - 90 days past due                              1.60%         1.27%          0.18%
        Over 90 days past due                              0.08%         0.20%          0.02%

Rental and Distribution:
        Gross Contract Balance                           $12,450       $10,064         $9,352
        31 - 60 days past due                              6.48%         8.88%         11.70%
        61 - 90 days past due                                  -             -          5.76%
        Over 90 days past due                              0.07%             -          9.98%

Vendor Finance:
        Gross Contract Balance                          $224,253        92,478              -
        31 - 60 days past due                              3.31%         3.37%              -
        61 - 90 days past due                              1.34%         0.61%              -
        Over 90 days past due                              1.70%         1.16%              -

Totals:
        Gross Contract Balance                          $540,221      $354,309        $97,636
        31 - 60 days past due                              2.78%         2.85%          7.81%
        61 - 90 days past due                              1.31%         0.81%          0.61%
        Over 90 days past due                              0.92%         0.73%          0.96%

Net investment in leases and loans owned
     and managed                                        $465,704      $307,843        $84,127

Average net investment in leases and
     loans owned and managed                            $394,628      $242,757        $61,069

Net charge-offs                                           10,104         3,116            171
Net charge-off percentage                                  2.56%         1.28%          0.28%

Allowance for Doubtful receivables included in:
     Net investment in direct finance
       leases and loans                                  $11,918        $3,791         $2,173
     Securitization retained interest                         78         1,808            328
                                                     ------------  ------------   ------------
         Total Allowance                                 $11,996        $5,599         $2,501

Holdback reserves on portfolio acquisitions                2,386         6,104            603
                                                     ------------  ------------   ------------
Total allowance and holdbacks                            $14,382       $11,703         $3,104
                                                     ============  ============   ============

Recourse to Portfolio Finance customers in
   addition to holdback reserves on                  ------------  ------------   ------------
   portfolios acquired                                   $16,665       $10,407           $  -
                                                     ============  ============   ============
</TABLE>

Rental Inventory

     Equipment  Type.  As of December 31, 1999 and 1998,  the Company  owned and
managed an inventory of analytical  instruments having an original cost of $27.9
million and $26.0 million, respectively. The Company's inventory of equipment at
December 31, 1999  includes  over 4,000 items  representing  more than 500 model
types and has an average age of approximately 25 months.

     The following  table sets forth the  composition  of the  Company's  rental
inventory by equipment type as of December 31, 1999:

<TABLE>
<CAPTION>

<S>                              <C>                                               <C>                          <C>
                                                                                                                  % of
Equipment Type                                        Use                               Price Range             Inventory
--------------                                      ------                            --------------          -------------
Gas Chromatographs               Analysis of evaporated organic compounds          $15,000         $20,000        50.3%
Mass Spectrometers               Separation and analysis of organic compounds       50,000          60,000         15.2
Liquid Chromatographs            Analysis of dissolved organic compounds            15,000          50,000         17.9
Atomic Absorption Systems        Analysis of metals                                 25,000         125,000          3.7
Spectrace                        Analysis of organic vapor                          50,000          60,000          2.9
Accessories                      Accessories and automatic samplers                  8,000          12,000         10.0
                                                                                                  Total           ------
                                                                                                                  100.0%
                                                                                                                  ------
</TABLE>


     Customers.  The following table sets forth the Company's percentage of 1999
revenues  from  the  rental  and  sale of  analytical  instruments  by  customer
industry:

        Type Of Customer                         % of Revenue
       -----------------                        --------------
        Environmental                                32.4%
        Manufacturing                                12.3
        Chemical                                     11.1
        Pharmaceutical                                9.8
        Government                                    9.1
        Medical                                       6.2
        Research                                      5.6
        Food                                          4.3
        Other                                         9.2
                                                    ------
            Total                                   100.0%
                                                    ------

     Terms of Equipment  Rental  Agreements.  The terms and conditions of all of
the Company's rental agreements are substantially similar.  Substantially all of
the rental  agreements have terms ranging from two weeks to one year. Unlike the
Company's  typical  lease,  the rental  agreements  require  the Company to: (i)
maintain,   service  and  operate  the   equipment   in   accordance   with  the
manufacturer's  and  government-mandated  procedures;  (ii) insure the equipment
against  property and casualty loss; and (iii) pay all taxes associated with the
equipment.

     Remarketing.  Analytical  instruments rented by the Company have relatively
long economic lives and have not been subject to rapid obsolescence. The Company
generally  depreciates  its rental  inventory  over a seven-year  period to zero
salvage value.  The Company has realized gains from the sale of used  analytical
instruments in each year since the inception of this business.

Capital Resources and Securitizations

     In addition to the  issuance of equity  securities,  the Company  funds its
activities  through a senior,  secured  revolving credit facility  provided by a
group of banks (the  Loan Agreement ),  commercial paper conduit  securitization
facilities,  the term  issuance of  securitized  lease  backed  instruments  and
partial-recourse  and non-recourse  financing  arrangements  provided by various
institutions.

     As of December  31,  1999,  the Company had $117.0  million  available  for
borrowing  under the Loan  Agreement,  of which the Company had  borrowed  $99.7
million,  with a  weighted-average  interest rate of 7.65%. In January 2000, the
amount  available under the Loan Agreement was reduced to $107.0 million and the
facility was renewed  through  December 31, 2000.  However,  in March 2000,  the
Company  became aware that, at December 31, 1999, it was in violation of certain
of the covenants under the Loan Agreement,  which it reported to its lenders. As
a result of such  discussions,  the  Company's  lenders'  severely  limited  the
Company's ability to borrow.

     The Company,  through a special purpose subsidiary,  has a commercial paper
conduit securitization  facility available in an amount of $289 million (the  CP
Conduit  Facility ).  At  December  31,  1999,  $141  million  of the CP Conduit
Facility was utilized. The terms of the CP Conduit Facility permit the financing
of  substantially  all of the  leases  originated  in  the  Company's  Portfolio
Finance,  Vendor Finance, and Rental and Distribution  activities as well as the
majority  of the  leases  originated  in the  Company's  Select  Growth  Finance
activities.  The lease  receivables  and  leased  equipment  are first sold to a
special purpose entity,  which then sells the receivables and pledges a security
interest in the equipment to the financing parties, with limited recourse to the
Company.

     In July 1999, the Company completed a term  securitization in the amount of
$237 million (the  July Term Securitization ).  $199 million of A-1 Certificates
rated AAA by  Standard  and  Poor's  and Fitch  IBCA,  Inc.  and Aaa by  Moody's
Investor Service,  Inc., $9 million of B-1 Certificates rated BBB by Fitch IBCA,
Inc.,  and $9 million of B-2  Certificates  rated BB by Fitch IBCA,  Inc.,  were
issued in the private market. A portion of the B-2  Certificates  (approximately
$3 million) and the C Certificate of $17 million were retained by the Company.

     The Company also arranges  structured  financings in which the  receivables
from   individual   leases  or  portfolios  of  leases  are  sold  to  financial
institutions or pledged as collateral for a loan from these institutions,  which
also  receive a security  interest  in the leased  equipment.  These  structured
financings are done on a non-recourse or limited recourse basis.

     The  Company's  financing  objective is to maximize the spread  between the
yield received on its leases and its cost of funds by obtaining  favorable terms
on its various financing transactions.  As a result of the Company's established
track record in the specialty finance industry,  the Company believes that terms
of its Loan  Agreement and its  securitization  facilities are comparable to the
terms  obtained by other  companies  in its  industry of similar size and credit
characteristics.

     On January 31, 2000, in order to provide  additional capital to the Company
and to satisfy conditions  established by its lenders to obtain a renewal of its
Loan  Agreement  facility,  the  Company  entered  into an  agreement  to  issue
$5,625,000 of 8% Series A Cumulative  Redeemable Preferred Shares (the  Series A
Preferred Stock ) on February 1, 2000.

     The Company is currently not in compliance with certain covenants under the
Loan Agreement, the CP Conduit Facility and certain covenants under the terms of
agreements  relating  to  the  July  Term  Securitization.  The  Company  is  in
discussions with the lenders under the Loan Agreement,  the liquidity  providers
under the CP Conduit  Facility and appropriate  parties related to the July Term
Securitization  regarding  forbearance from enforcement of remedies available to
such parties as a result of the Company's  failure to comply with the applicable
covenants. During these forbearance discussions, the Company is not permitted to
borrow  additional funds under its Loan Agreement.  New lease  originations have
therefore been substantially  curtailed. In the event that the Company is unable
to  successfully  obtain such a forbearance  from these secured  creditors for a
period that enables it to sell individual leasing businesses and elements of its
lease  portfolio,  the Company  may not be able to  continue  some or all of its
business and may be required to seek  protection  under the Bankruptcy  Code. No
assurances can be made as to the Company obtaining such forbearances, that lease
originations  will commence at a level to support the operations of the Company,
or that the  secured  creditors  will  allow  management  to  implement  various
strategic  plans. In addition,  even if the Company was to  successfully  obtain
such  forbearance and  successfully  sell individual  leasing business units and
elements of its lease portfolio,  there can be no assurance that the proceeds of
such sales will  provide the Company with  sufficient  liquidity to continue its
remaining  operations.  For further  information,  see   Dependence  on External
Financing  in Forward-Looking Statements and Associated Risks and  Liquidity and
Capital  Resources   in  Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

     Competition

     The Company  competes in the  equipment  financing  market with a number of
national,  regional and local  finance  companies.  In addition,  the  Company's
competitors include those equipment manufacturers that finance the sale or lease
of their products  themselves and other traditional types of financial  services
companies,  such as commercial banks and savings and loan  associations,  all of
which provide financing for the purchase of equipment. The Company's competitors
include many larger, more established  companies that may have access to capital
markets and to other funding  sources which may not be available to the Company.
Many  of  the  Company's   competitors  have  substantially  greater  financial,
marketing and  operational  resources and longer  operating  histories  than the
Company.

     Employees

     As of March 30, 2000, the Company employed 196 people on a full-time basis.
Sixty-one  personnel were involved in marketing and sales, 130 were in lease and
rental processing,  servicing and administrative support and five were corporate
executive  employees.  No  employees of the Company are  represented  by a labor
union.

<PAGE>

     Executive Officers and Directors of the Registrant

     The  executive  officers and  directors  of the  Company,  their ages as of
December 31, 1999, and their backgrounds are as follows:

<TABLE>
<CAPTION>
      Name                      Age                        Position
    -------                   -------                    ------------
<S>                             <C>      <C>
Martin E. Zimmerman             62       Chairman of the Board and Chief Executive Officer(1)
Robert E. Laing                 55       President, Chief Operating Officer and Director
Allen P. Palles                 59       Executive Vice President, Chief Financial Officer and Director
William F. DeMars               50       Senior Vice Presiden-Select Growth Finance
William J. Erbes                49       Senior Vice President-Vendor Finance
Gerard M. Farren                58       Senior Vice President-Rental and Distribution
Mark A. Arvin                   52       Senior Vice President, Finance
Stanley Green                   61       Director
Curtis S. Lane                  43       Director
Terrence J. Quinn               48       Director
___________
(1)  As of March 31, 2000 Mr. Zimmerman resigned as Chief Executive Officer.
</TABLE>

     Martin E.  Zimmerman  served as Chairman  of the Board and Chief  Executive
Officer of the Company  until March 31, 2000.  Mr.  Zimmerman  resigned as Chief
Executive   Officer  of  the  Company  on  March  31,  2000  and   continues  as
non-executive  Chairman  of the  Company's  Board of  Directors.  Mr.  Zimmerman
founded  the  Company in 1975 and has served as  Chairman of the Board and Chief
Executive  Officer since the  formation of the Company.  From October 1994 until
October 1996, he also served as President  and Chief  Executive  Officer of LINC
Anthem and, after the sale of LINC Anthem to Newcourt,  its subsidiary  Newcourt
LINC  Financial  Inc.  ("Newcourt  LINC").  Before  founding  the  Company,  Mr.
Zimmerman  founded and served for seven years as  President  of Telco  Marketing
Services,  Inc., a leader in the hospital  equipment leasing field and the first
independent dealer in used medical equipment. Mr. Zimmerman earned a B.S. degree
in  electrical  engineering  from M.I.T.  in 1959 and an M.B.A.  in finance from
Columbia University Graduate School of Business; where he was a Kennecott Copper
Fellow and McKinsey Scholar in 1961.

     Robert  E.  Laing  serves as  President  and Chief  Operating  Officer  and
Director of the  Company.  Mr. Laing joined the Company in 1991 when it acquired
his analytical  instruments  rental and distribution  business and has served as
President, Chief Operating Officer and Director of the Company since 1994. Prior
to founding such business in 1989, he was employed for 17 years by U.S.  Leasing
in various  capacities,  including Executive Vice President and Group Executive,
Retail  Group,  President  of U.S.  Instrument  Rental and  Distribution,  Chief
Executive Officer of U.S.  Portfolio Leasing and Chief Operating Officer of U.S.
Fleet  Leasing.  Previously,  he  held  marketing  positions  with  Data  Action
Corporation and IBM Corporation.

     Allen P. Palles serves as Executive Vice President, Chief Financial Officer
and  Director  of the  Company.  Mr.  Palles  joined the Company in 1983 and has
served as Chief Financial Officer and a Director of the Company since 1984. From
October 1994 until December 1996, he also served as Chief  Financial  Officer of
LINC Anthem and Newcourt LINC.  Before joining the Company,  he was Treasurer of
The Marmon Group,  Inc. and held various  senior  financial and tax positions at
Pullman,  Inc.  Mr.  Palles is a certified  public  accountant  and attorney and
specializes in lease securitization.

     William F. DeMars serves as Senior Vice President-Select  Growth Finance of
the Company.  Mr.  DeMars joined the Company in April 1998.  Before  joining the
Company,  Mr.  DeMars  spent six years as  Executive  Vice  President  and Chief
Operating Officer of a manufacturing company. From 1973 to 1991, Mr. DeMars held
various  positions  with  Marine  Midland  Bank,  most  recently  as senior vice
president.

     William  J. Erbes  serves as Senior  Vice  President-Vendor  Finance of the
Company.  Mr.  Erbes  joined  the  Company  in 1993 and  served as  Senior  Vice
President-Business  Development  from  1995  to  1998.  In  January  1999 he was
promoted to his current position.  Before joining the Company,  he was President
of Narco  Medical  Services,  Inc. and Senior Vice  President of Medirec Inc., a
leading medical equipment rental company.

     Gerard M. Farren serves as Senior Vice President-Rental and Distribution of
the Company. Dr. Farren joined the Company in 1991 when the Company acquired its
analytical  instrument  rental and  distribution  business and has served in his
current position since that time.  Previously,  he was Senior Vice President and
General  Manager  of U.S.  Analytical  Instruments,  Inc.,  a  division  of U.S.
Leasing, and worked with The Perkin-Elmer Corporation in product development and
sales management. Dr. Farren earned a Ph.D. in physical chemistry from Ireland's
Northern University.

     Mark A. Arvin serves as Senior Vice President,  Finance of the Company. Mr.
Arvin joined the Company in December 1998. Before joining the Company,  over the
prior six years Mr.  Arvin was a  co-founder  and  co-owner  of three  companies
specializing  in  leasing  and  equipment  finance.  From  1988 to 1992,  he was
Executive  Vice  President  and Chief  Financial  Officer  of  Meridian  Leasing
Corporation.  Prior to 1988, he was a Partner with the public accounting firm of
KPMG LLP.

     Stanley  Green  serves as a Director  of the Company and is a member of the
Company's  Office of the  Chairman.  Mr.  Green  was  Senior  Vice-President  of
PacifiCorp  Capital  Corporation  from 1987  until  1992.  Mr.  Green  served as
President of Thomas Nationwide Computer Corporation, a company he founded, until
1987 when it was sold to PacifiCorp Capital  Corporation.  He is also an officer
and Director of BioSterile  Technologies,  Inc. and Thomas Computer  Corporation
and has been  employed by M.A.  Berman and Co. from 1986  through  December  31,
1999. He has served as a Director of the Company since 1996.

     Curtis S. Lane serves as a Director of the  Company.  Mr. Lane is a Partner
of Evercore  Partners,  Inc., a private equity fund.  From 1985 to 1998 he was a
Senior Managing Director of Bear, Stearns & Co., Inc. and head of its healthcare
investment-banking group. He has served in various investment banking capacities
with Bear,  Stearns & Co.,  Inc.  and also served on the board of  directors  of
Bear, Stearns & Co., Inc. He has served as a Director of the Company since 1989.

     Terrence  J. Quinn  serves as a Director  of the Company and is a member of
the Company's Office of the Chairman. Mr. Quinn is President and Chief Executive
Officer of Quinn Capital Services, Inc., a financial advisory firm and President
of LFC Capital, Inc., a company controlled by Martin E. Zimmerman,  Chairman and
Chief Executive Officer of the Company.  From March 1991 until December 1993, he
was President of the Company.  Previously,  he was  President of Medirec,  Inc.,
Matrix  Leasing  International  Inc. and Churchill  Capital  Partners,  L. P., a
subordinated debt fund. He has served as a Director of the Company since 1991.

Compliance With Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities to file reports
of securities  ownership and changes in such  ownership  with the Securities and
Exchange  Commission  (the   SEC ).  Officers,  directors  and greater  than ten
percent beneficial owners also are required, by rules promulgated by the SEC, to
furnish the Company with copies of all Section 16(a) forms they file.

     Based  solely  upon a review of the  copies  of such  Section  16(a)  forms
furnished to the Company, or written representations that no Form 5 filings were
required,  the Company believes that during 1999 all of its officers,  directors
and greater than ten percent  beneficial  owners  complied  with  Section  16(a)
filing requirements applicable to them.

Forward-Looking Statements and Associated Risks

     This Form 10-K contains  certain  forward-looking  statements  that involve
substantial risks and uncertainties.  When used in this Form 10-K, the words and
phrases "expects",  "intends",  "believes",  "will seek", and "will realize" and
similar expressions as they relate to the Company or its management are intended
to identify  such  forward-looking  statements.  The Company's  actual  results,
performance  or   achievements   could  differ   materially  from  the  results,
performance or achievements  expressed in, or implied by, these  forward-looking
statements.  Factors that could cause or contribute to such differences include,
but are not limited to, risks and  uncertainties  described  below.  In light of
these risks and  uncertainties,  there can be no assurance that the  performance
and results referred to in the forward-looking  statements contained herein will
in fact occur.

     Dependence on Creditworthiness of Lessees

     The Company  provides  financing to emerging growth  companies  through its
Select Growth Finance Leasing activities and to smaller and mid-sized businesses
through it Portfolio Finance and Vendor Finance activities.  Leasing to emerging
growth   companies  and  to  small   businesses   presents  a  greater  risk  of
non-performance than leasing to well-established or larger companies,  which are
generally  more  creditworthy  and more readily able to utilize other sources of
financing.  The Company has in the past and may in the future suffer losses as a
result of such risk of non-performance.  Beginning in the third quarter of 1999,
the  Company  experienced  significantly  greater  credit  losses in each of its
activities  than in recent prior  periods.  While the Company  believes that its
allowances  for credit  losses are adequate to provide for future  losses in its
current  lease  portfolio,  no  assurances  can  be  made  that  future  events,
including,   but  not  limited  to  such  events  as  economic   downturns   and
deterioration  of credit  worthiness of existing  lessees will not result in the
need for additional provisions for credit losses relating to such portfolio.

     The  recourse  and  holdback  provisions  included  in the  terms  of lease
portfolio purchase and financing agreements  mitigate,  but do not eliminate the
economic risk of the purchased  lease  portfolios.  The failure of the Company's
lessees to perform  under  their  leases or the  failure of the sources of lease
portfolios to perform under their  recourse  obligations  could result in leases
becoming  ineligible for funding under the Loan  Agreement and commercial  paper
conduit facilities.  Excessive delinquencies and defaults would adversely affect
the Company's  ability to obtain funding and therefore it's financial  condition
and  results  of  operations.  No  assurance  can be given  that  the  Company's
experience, criteria or procedures, will afford adequate protection against such
risks.

     Dependence on Capital

     The Company's  activities  are capital  intensive  and require  access to a
substantial  amount of capital to fund new equipment leases.  During 1999 and in
the first quarter of 2000,the Company was unable to obtain additional capital to
continue its prior rate of growth.  As a consequence the Company does not expect
to be able to  continue  to  operate  its  business  as it has  been  previously
conducted.  While the Company expects to refocus its business  activities on its
Rental  and  Distribution   business,  the  Company's  ability  to  successfully
accomplish this objective is dependent on its lenders approval of a plan and its
ability to successfully sell a portion of its leasing businesses and segments of
its lease  portfolios in order to pay down debt under the Loan Agreement and the
CP Conduit Facility and provide additional liquidity.  Furthermore,  the Company
is currently not in compliance with certain  covenants under the Loan Agreement,
the CP Conduit  Facility  and the July Term  Securitization.  The  Company is in
discussions with the lenders under the Loan Agreement,  the liquidity  providers
under the CP Conduit  Facility and appropriate  parties related to the July Term
Securitization  regarding  forbearance from enforcement of remedies available to
such parties as a result of the Company's  failure to comply with the applicable
covenants. In the event that the Company is unable to successfully obtain such a
forbearance  from these  secured  creditors for a period that enables it to sell
individual leasing  businesses and elements of its lease portfolio,  the Company
may not be able to continue  some or all of its  business and may be required to
seek protection  under the Bankruptcy  Code. No assurances can be made as to the
Company obtaining such forbearances,  that lease originations will commence at a
level to support the  operations of the Company,  or that the secured  creditors
will allow management to implement various strategic plans. In addition, even if
the Company was to successfully  obtain such forbearance and  successfully  sell
individual leasing business units and elements of its lease portfolio, there can
be no  assurance  that the  proceeds of such sales will provide the Company with
sufficient liquidity to continue its remaining operations.

     Dependence on External Financing

     The  Company  funds  substantially  all of the  equipment  leases  that  it
acquires or originates as well as its rental and distribution  inventory through
a combination of its Loan Agreement,  CP Conduit Facility,  term securitizations
and partial-recourse and non-recourse loans and sales of lease receivables.  The
Company  depends  on the  pooling  of  leases in  securitizations  (in which the
receivables  are first  sold to a special  purpose  entity  which  then sells or
pledges the  receivables to the financing  parties on a limited  recourse basis)
such as the July Term  Securitization  or other structured  financings (in which
receivables  are sold or pledged  directly to the  financing  party on a limited
recourse basis) for refinancing of amounts  outstanding  under it Loan Agreement
and to obtain  liquidity in its CP Conduit  Facility.  Any adverse impact on the
Company's  ability to  complete  securitizations,  or to  otherwise  permanently
finance  its  leases,  could have a  material  adverse  effect on the  Company's
ability to obtain or maintain financing facilities or the amount available under
such facilities. Any failure by the Company to successfully obtain a forbearance
from  enforcement of remedies under the Loan Agreement,  the CP Conduit Facility
and the July Term  Securitization  and to  subsequently  renew its existing Loan
Agreement or obtain  additional  facilities  or other  financings  with pricing,
advance  rates and other terms  consistent  with its existing  facilities  could
result in the Company's  inability to  effectively  downsize its  operations and
refocus its activities on its Rental and  Distribution  business and will have a
material adverse impact on the Company's  financial condition and its ability to
continue as a going concern.

     In general,  the  recourse  to the Company as a result of a  securitization
transaction  is limited to the  repurchase  of  receivables  upon  breach of the
representations  and  warranties  made  by the  Company  with  respect  to  such
receivables  when they were  transferred  to the special  purpose entity and the
financing  parties.  However,  the Company  will  generally  retain the residual
interest in the  financing  entity,  which  represents  the right to receive any
excess cash flows after payment of the  obligations on the securities  issued in
the  securitization.  The Company's  right to receive this excess cash flow will
generally  be subject  to certain  conditions  specified  in the  securitization
documents,  which are  intended  to provide  additional  credit  enhancement  to
holders  of the  securities  issued  in the  securitization.  The  owner  of the
residual  interest  generally bears the risk of loss on the entire  portfolio of
securitized receivables,  and fluctuations in charge-off rates and other factors
could have a material  adverse effect on the Company's  ability to fully recover
such residual interest and could have a material adverse effect on the Company's
financial condition and results of operations.  In the event that the Company is
unable to  successfully  complete a forbearance  agreement  under the CP Conduit
Facility or the July Term  Securitization  or to successfully  renegotiate their
terms and  conditions,  the cash flow  available to the Company  relating to its
residual interest and its servicing rights under such facilities will be delayed
and possibly impaired.  This delay and potential impairment will have a material
adverse impact on the Company's  financial condition and its ability to continue
as a going concern.

     Interest Rate Risk

     Leases originated or acquired by the Company are non-cancelable and require
payments to be made by the lessee at fixed rates for specified  terms. The rates
charged by the Company are based on interest  rates  prevailing in the market at
the time of lease  commencement or acquisition.  Until the Company's  leases are
securitized  or otherwise sold or permanently  financed,  the Company  generally
funds such leases  under its Senior  Credit  Facility or from  working  capital.
Should the Company be unable to  securitize  or  otherwise  sell or  permanently
finance  leases  with  fixed  rates  within a  reasonable  period of time  after
funding,  the  Company's  operating  margins  could  be  adversely  affected  by
increases  in  interest  rates  under its Senior  Credit  Facility.  The Company
expects to undertake to hedge against the risk of interest rate  increases  when
its equipment lease portfolio exceeds certain amounts.  As of December 31, 1999,
the Company  entered into interest rate swap or cap  agreements  with respect to
all lease  receivables sold under its conduit facility and term  securitization.
Such  hedging  activities  limit the  Company's  ability to  participate  in the
benefits of lower interest rates with respect to the hedged portfolio of leases.
In addition,  there can be no assurance  that the Company's  hedging  activities
will  completely  insulate the Company from interest rate risks. At December 31,
1999,  the Company had $99.7  million in loans  outstanding  that were not fixed
rate loans or otherwise protected against interest rate risks.

     Risks Related to Residual Values

     The Company retains a residual interest in the equipment covered by certain
of its leases.  The  estimated  fair market value of the equipment at the end of
the  contract  term of the  lease,  if any,  is  reflected  as an  asset  on the
Company's  balance sheet. The Company's  results of operations  depend,  to some
degree,  upon its  ability to realize  these  residual  values.  Realization  of
residual  values  depends  on many  factors,  several of which are  outside  the
Company's control, including general market conditions at the time of expiration
of the lease,  whether  there has been  unusual wear and tear on, or use of, the
equipment,  the cost of comparable new equipment,  the extent,  if any, to which
the equipment has become  technologically  or  economically  obsolete during the
contract  term  and  the  effects  of  any  additional  or  amended   government
regulations. If, upon the expiration of a lease, the Company sells or refinances
the underlying equipment and the amount realized is less than the recorded value
of the residual  interest in such  equipment,  a loss  reflecting the difference
will be  recognized  as a loss and could have a material  adverse  effect on the
Company's financial condition and results of operations.

     Risks Related to Equity Participation Rights

     The  Company  frequently  obtains  warrants or other  equity  participation
rights in its Select Growth leasing  clients in connection  with leases to them.
At the time of receipt,  the warrants or other equity  participation  rights are
recorded  as  investments.  The  Company  recognizes  a gain  or  loss  on  such
securities when they are sold or classified as trading securities.  Fluctuations
in the market price of such rights or the  underlying  securities and the timing
of the exercise or sale of such rights or the  underlying  securities may result
in significant  fluctuations in the Company's operating results.  Failure of the
Company  to  realize  gains  from  their  sale may have an impact on the  future
earnings of the Company.

     Risks Related to Utilization of Rental Portfolio

     The  profitability  of the  Company's  Rental and  Distribution  activities
depends, in part, on the demand for the rental and sale of specific items in the
Company's  Rental  and  Distribution  inventory  and  the  cost  of  maintaining
inventory in ready to use  condition.  In  addition,  the  Company's  rentals of
analytical instruments are generally of short duration and the Company's ability
to profit  from its  investment  in  analytical  instruments  held for rental is
dependent  in large part on its ability to continue to rent or  profitably  sell
such equipment. A decline in the demand for such equipment or failure to rent or
profitably  sell such  equipment  could  have a material  adverse  effect on the
Company's financial condition and results of operations.

     Dependence on Vendor Relationship

     A material  portion of the Company's  revenue and net income from it Rental
and Distribution activities depends on it relationship with Agilent Technologies
as a  distributor.  In 1999,  approximately  87% of the Rental and  Distribution
business  unit  revenues  were  derived  from the  rental,  leasing and sales of
analytical  instruments  manufactured by Agilent Technologies.  However, the net
profits  from  sales of  Agilent  Technologies  products  represented  a smaller
percentage of the Company's  overall net profits.  The Company's  agreement with
Agilent  Technologies  is  renewable  annually  and the current  term expires on
September  30,  2000.  In event that the  Company's  relationship  with  Agilent
Technologies  was to be terminated,  such failure could have a material  adverse
effect  on  the  Company's  financial  condition,   results  of  operations  and
liquidity.

     Economic Conditions

     For the past few years,  the  Company  has been  operating  in a  favorable
economic environment. Any decline in economic conditions in the United States in
the future may have an impact on the  ability of the  Company's  lessees to make
their  lease   payments  and  therefore  on  the  rate  of  lease  defaults  and
charge-offs.  The Company's  financial condition and results of operations would
consequently be adversely impacted.

     Fluctuations in Quarterly Results

     The  Company has in the past and may in the future  experience  significant
fluctuations  in  quarterly  operating  results  due  to a  number  of  factors,
including,  among others,  the timing and volume of sales of lease  receivables,
the timing of realization of residual values,  fluctuations in the market values
of trading  securities,  the sale of equity  participation  rights,  and special
charges such as  additional  provisions  for credit  losses.  As a result of the
fluctuations,  results  for any one  quarter  should not be relied upon as being
indicative of performance in future quarters.

     Concentration of Ownership

     Mr. Zimmerman and members of his family  beneficially own (including shares
held by other  members of  management  for which Mr.  Zimmerman  holds  proxies)
approximately  49.8% of the  outstanding  shares of Common Stock of the Company.
Mr. Zimmerman and members of his family  beneficially own approximately 28.2% of
the  outstanding  shares  of Series A  Preferred  Stock of the  Company  and the
related  detachable  warrants.  Accordingly,  these  stockholders  will have the
ability to control or significantly  influence all matters requiring approval by
the  stockholders  of the  Company,  including  the  election of  directors  and
approval of significant corporate transactions.

Item 2.  Properties

     The Company's  principal  executive  offices and its Select Growth Finance,
Portfolio  Finance,  and a substantial  portion of Vendor Finance activities are
located  at  303  East  Wacker  Drive,   Chicago,   Illinois  60601  and  occupy
approximately 44,000 square feet of office space. This space is occupied under a
lease, which expires on June 30, 2006. An unrelated third party has committed to
sublease  8,200 square feet of this space  through June 30, 2006.  The Company's
Rental and Distribution  activities  conducted through it LINC Quantum Analytics
Division are located in Foster City,  California and occupy approximately 23,500
square feet of  warehouse,  laboratory  and office  space  under a lease,  which
expires on May 31, 2002. The Company's  IF+E Division  operates out of an office
located in Charlotte,  North Carolina which occupies  approximately 1,600 square
feet of equipment storage and office space under a lease,  which expires on July
31, 2000. The Company expects to relocate its IF+E Division to larger facilities
in the third quarter of 2000 to accommodate this division's growth. A portion of
the Company's Vendor Finance  activities operate out of two full service offices
(where marketing, credit analysis, and other functions are performed) located in
Minneapolis,  Minnesota, and Houston, Texas, which occupy approximately 9,000 to
15,000  square feet of office  space and are leased  under leases that expire on
July  31,  2004  and  February  28,  2003,  respectively.   The  Company  is  in
negotiations to terminate the lease of facilities in Minneapolis, Minnesota. The
Company believes that its current corporate  headquarter  facilities are surplus
to its existing  requirements  and is seeking to sublease  these  facilities and
anticipates relocating to more suitable space during the second half of 2000.

Item 3.  Legal Proceedings

     There are no  material  pending  legal  proceedings,  other  than  ordinary
routine litigation  incidental to its business,  to which the Company is a party
or of which any of its  property is the  subject.  The Company is  currently  in
default of certain of its obligations  relating to the acquisition of one of its
Vendor Finance  origination  units and has been  threatened with litigation as a
consequence of such default.

Item 4.  Submission of Matters to Vote of Security Holders

     No matter was  submitted  to a vote of security  holders  during the fourth
quarter of the year ended December 31, 1999.

                                     Part II

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

     Price Range of Common Stock

     The Company's  Common Stock is traded on the Nasdaq  National  Market under
the symbol "LNCC".  The following table sets forth for the periods indicated the
high and low sale  prices for the  Company's  Common  Stock as  reported  by the
Nasdaq National Market.

            1999                                     High                Low
           ------                                   -------             ------
        First Quarter                               $10.13              $7.50
        Second Quarter                               $9.75              $7.38
        Third Quarter                                $9.63              $3.88
        Fourth Quarter                               $6.88              $4.00

            1998
          -------
        First Quarter                               $18.75             $16.50
        Second Quarter                              $20.50             $16.25
        Third Quarter                               $18.75              $8.00
        Fourth Quarter                               $9.63              $6.00


     At March 30,  2000,  there were  approximately  35 holders of record of the
Common Stock. The Company  believes that the beneficial  ownership of the Common
Stock is substantially greater than the number of holders of record.

     Dividend Policy

     The Company did not pay any dividends in 1999 or 1998. The Company  intends
to retain  earnings for use in the operation of its business and therefore  does
not  anticipate  declaring  any  cash  dividends  on  its  common  stock  in the
foreseeable  future.  The payment of dividends on common stock,  if any, will be
made at the discretion of the Company's Board of Directors and will depend upon,
among  other  things,  the  Company's  future  earnings,   operations,   capital
requirements and financial condition, as well as general business conditions and
other factors.  The Senior Credit Facility also contains provisions limiting the
Company's ability to pay dividends.

     The Series A Preferred  Stock issued on February 1, 2000 accrues  dividends
at 8% per annum  through  December  31,  2000,  10% from January 1, 2001 through
December 31, 2001,  and 12%  thereafter.  Payment of the dividends is subject to
declaration of the Board of Directors.

     The Company is precluded  from paying  dividends on its common or preferred
stock while it is in violation of its Loan Agreement.

     Recent Sales of Unregistered Securities

     On March 31, 1999, the Company issued 16,176 shares of Common Stock, valued
at $7.63 per share,  to the former owner of Monex  Leasing,  Ltd. as part of the
consideration  for the acquisition of Monex Leasing Ltd.,  which was exempt from
registration under the Securities Act of 1933 pursuant to Section 4 (z).

Item 6.  Selected Financial Data

     The selected  financial  data set forth below should be read in conjunction
with the Company's Financial Statements and related notes thereto and with  Item
7.  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations.

<PAGE>
<TABLE>
<CAPTION>

                                                                         Years Ended December 31,
                                                ---------------------------------------------------------------------------
                                                    1999           1998            1997            1996           1995
                                                -------------  -------------   -------------   -------------  -------------
                                                                  (In thousands, except per share data)
<S>                                                  <C>          <C>            <C>             <C>            <C>
Statement of Operations Data:
Revenues:
     Sales of equipment                              $34,941      $32,929        $23,131         $22,595         $13,852
     Direct finance lease income                      33,438       12,300          5,981           3,055           1,467
     Interest income                                   3,573        2,194            877             283              47
     Rental and operating lease revenue               10,942        9,412          7,492           7,034           9,043
     Servicing fees and other income                   6,603        3,792          2,026           2,376           3,168
     Gain on sale of lease receivables                 1,284        6,839            880               -               -
     Gain on equipment residual values                 1,321        1,752            860             450              44
     Gain on equity participation rights               1,603        3,824            430             263               -
                                                  ------------  ----------    -----------     ----------       ---------
     Total revenues                                   93,705       73,042         41,677          36,056          27,621
                                                  ------------  ----------    -----------     -----------      ---------

Expenses:
     Cost of equipment sold                           28,526       26,789         18,549          18,242          11,477
     Selling, general and administrative (net)        23,790       17,824          8,973           8,008           7,524
     Interest                                         24,686        8,956          4,298           2,545           1,750
     Depreciation of equipment                         7,273        6,073          4,226           3,647           4,054
     Amortization of intangibles                       1,428          502            280             226             212
     Provision for credit losses                      15,966        5,280          1,253             749           1,060
     Impairment loss on assets                        14,177            -              -               -               -
     Restructuring charges                               700            -              -               -               -
                                                  ------------  ----------  -------------   -------------     -----------
     Total expenses                                  116,546       65,424         37,579          33,417          26,077
                                                  ------------  ----------  -------------   -------------     -----------

Earnings (loss) from continuing operations
     before provision for income taxes and
     minority interest                              (22,841)        7,618          4,098           2,639           1,544
Income tax expense (benefit)                         (1,307)        3,024          1,627           1,084             747
                                                  ------------  ----------  -------------   -------------     -----------

Net earnings (loss) from continuing operations
     before minority interest                       (21,534)        4,594          2,471           1,555             797
Minority interest                                         -             -           (13)           (120)              34
                                                  ------------  ----------  -------------   -------------     -----------
Net earnings (loss) from continuing operations    $ (21,534)      $ 4,594        $ 2,458         $ 1,435         $   763
                                                  ============  ==========  =============   =============     ===========

Net earnings (loss) from continuing
    operations per common share:
     Basic                                       $    (4.10)  $       .89    $       .73    $        .48     $      0.25
     Diluted                                          (4.10)          .86            .72             .45            0.25
Shares used in computing net income
     per common share:
     Basic                                             5,254        5,171          3,372           2,991           3,006
     Diluted                                           5,254        5,347          3,397           3,162           3,103

Dividends declared per common share                        -            -              -     $       .26               -

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                         Years Ended December 31,
                                                ---------------------------------------------------------------------------
                                                      1999           1998            1997            1996           1995
                                                -------------  -------------   -------------   -------------  -------------
                                                                              (In thousands)
<S>                                                  <C>          <C>            <C>            <C>             <C>
Operating Data:
Leasing:
     Lease fundings:
        Select Growth Finance                        $36,005      $52,405        $32,568         $16,604         $16,320
        Portfolio Finance                            119,376      146,051         39,671           1,795               -
        Rental and Distribution (1)                    9,645        6,916          7,001           5,674           4,159
        Vendor Finance (2)                           168,101       48,012              -               -               -
                                                --------------  ----------  -------------   -------------   -------------
     Total fundings (1),(2)                         $333,127     $253,384        $79,240         $24,073         $20,479
                                                ==============  ==========  =============   =============   =============

                                                     $27,868      $48,426        $31,170          $5,864          $8,609
     Backlog of unfunded leases (3)
     Leases and loans owned and
        managed  (3)                                 465,704      307,843         84,127          34,554          17,861
     Unearned lease income, net (3)                   74,062       31,847         13,276           6,820           4,333
     Net charge-off percentage (4)                      2.6%         1.3%           0.3%            1.6%            0.8%
Rental and Distribution:
     Net margin on sales of equipment                  18.4%        18.6%          19.8%           19.3%           17.1%
     Equipment held for rental and
        operating leases, net (3)                    $26,115      $30,659        $22,007         $15,048         $18,500



                                                                                  As of December 31,
                                                  ---------------------------------------------------------------------------
                                                      1999           1998            1997            1996           1995
                                                  -------------  -------------   -------------   -------------  -------------
                                                                              (In thousands)
Balance Sheet Data:
Net investment in direct finance leases and
    loans                                           $436,820     $164,970        $67,653            $34,778         $17,861
Equipment held for rental and operating
     leases, net                                      26,115       30,659         22,007             15,048          18,500
Securitization retained interest                         444       17,026          3,017                  -               -
Total assets                                         512,888      248,884        108,977             67,200          58,604
Senior credit facility and other senior
     notes payable                                   102,754       96,646         38,117             29,605          31,914
Recourse debt                                          3,898        8,017          2,955              3,361             882
Nonrecourse debt                                     347,352       68,616         17,951              8,276           4,997
Subordinated debentures                                6,059        5,694          5,386              5,127           4,953
Total liabilities                                    491,637      207,443         72,273             53,258          46,411
Stockholders' equity                                 $21,215      $41,441        $36,704            $13,942         $12,193
____________
<FN>
(1)  Excludes lease portfolios acquired in connection with company acquisition in 1999 of $0.6 million.
(2)  Excludes lease portfolios acquired in connection with company  acquisitions  totaling $10.8 million and $55.7 million for 1999
     and 1998, respectively.
(3)  At period end.
(4)  As a percentage of net investment in direct finance leases and loans owned and managed before allowance for doubtful accounts.
</FN>
</TABLE>



<PAGE>

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

     The  information  contained  in this  section,  which  relates  only to the
Company's  continuing  operations,  should  be  read  in  conjunction  with  the
Consolidated Financial Statements and notes thereto.

         Introduction

     The Company's Select Growth Finance,  Portfolio  Finance and Vendor Finance
activities consist largely of direct finance leases and loans. The Company funds
these  leases  and  loans  through  its  revolving  credit  and   securitization
facilities  and  other  recourse  and  nonrecourse   debt.  In  its  Rental  and
Distribution  activities,  the  Company  rents,  leases  and  sells new and used
analytical   instruments  and  related  equipment  and  funds  these  activities
primarily through its revolving credit facility. The following briefly describes
some of the principal accounting practices applicable to the Company's business.

     Direct Finance  Leases.  Direct finance leases transfer  substantially  all
benefits  and risks of equipment  ownership to the lessee.  A lease is accounted
for as a  direct  finance  lease if the  collectibility  of  lease  payments  is
reasonably  certain and it meets one of the  following  criteria:  (i) the lease
transfers ownership of the equipment to the lessee by the end of the lease term;
(ii) the lease  contains  a bargain  purchase  option;  (iii) the lease  term at
inception  is at  least  75% of  the  estimated  economic  life  of  the  leased
equipment;  or (iv) the present value of the minimum lease  payments is at least
90% of the fair value of the leased  equipment at  inception  of the lease.  The
present value of the future lease payments and the present value of the residual
value are  recorded as the  initial  investment  in such  leases.  This  initial
investment  generally  represents the cost of leased  equipment.  Unearned lease
income is equal to the  difference  between (i) the future  lease  payments  and
residual  value and (ii) their  corresponding  present  values.  Unearned  lease
income  is  amortized  and  recorded  as  revenue  over the term of the lease by
applying a constant  periodic rate of return to the  declining  net  investment.
Initial  direct  costs  incurred in  originating  leases,  such as salaries  for
marketing  personnel  and  commissions,  are  capitalized  as  part  of the  net
investment and amortized over the lease term. The Company records direct finance
leases as "net investment in direct finance leases and loans." At the end of the
lease, a remarketing gain or loss is recorded to the extent the proceeds of sale
or re-leasing of the equipment exceed or are less than the originally  estimated
residual value. When the Company's Rental and Distribution  business unit leases
equipment,  such leases are  accounted for  similarly to direct  finance  leases
except that the Company  records the sales value of the equipment as revenue and
the carrying value as cost of equipment sold, thus  recognizing its distribution
margin ( sales type leases ).

     In July 1999, the Company completed a term  securitization of $237 million.
In connection  with the term  securitization,  the Company  repurchased  certain
leases,  which had previously  been financed in the conduit  securitization  and
removed from the balance sheet. In accordance with generally accepted accounting
principles,  $93.8 million,  the amount of the repurchase price, was restored to
the net  investment  in leases and loans on the  balance  sheet,  including  the
unearned lease income.  (Included in the additional $93.8 net investment was $99
million  of  gross  lease  receivables.)  Direct  finance  lease  income  on the
statement of operations  includes the  amortization  of income earned on the net
investment of previously sold leases.  The difference between the purchase price
of the restored leases and the net investment of the restored leases at the time
of the term  securitization is recorded as an offset to unearned income which is
amortized  over the life of the  term  securitization  by  applying  a  constant
periodic rate of return to the declining net  investment  and included in direct
finance lease income in the consolidated statements of operations.

     Secured Loans. Loans made by the Company, which are secured by equipment or
other assets of the borrowers, are recorded as "net investment in direct finance
leases and loans" at the  present  value of the future  note  payments.  Initial
direct costs  incurred in originating  loans are  capitalized as part of the net
investment  and amortized over the term.  Income is recognized  over the term of
the note by applying a constant  periodic rate of return to the  declining  note
balance and is recorded as "interest income".

     Rentals and Operating  Leases.  All rental and lease  contracts that do not
meet the criteria of direct  finance  leases or sales type leases are  accounted
for as  operating  leases.  Terms on rental  contracts  are shorter  than twelve
months,  while terms on operating  leases are longer.  Rental and lease payments
are  recorded as "rental and  operating  lease  revenue."  Related  equipment is
recorded  at the  Company's  cost as  "equipment  held for rental and  operating
leases" and  depreciated  on a  straight-line  basis.  The  Company  depreciates
analytical  instruments over a seven-year life,  assuming no salvage or residual
value at the end of this life.  The Company has realized  gains from the sale of
used  analytical  instruments  each year since the  inception  of its Rental and
Distribution  activities.   Other  leased  equipment  is  depreciated  over  its
estimated useful life to its salvage or residual value.

     Equity  Participation  Rights. The Company frequently  receives warrants or
other equity  participation  rights in  connection  with leases to Select Growth
Finance clients.  Such warrants or rights entitle the Company to purchase common
stock or other equity securities of the client at a price generally based on the
most recent price paid by the client's  private  equity  investors.  The Company
typically  obtains the right to have such shares  included in registered  public
offerings of the client's  stock.  At the time of receipt,  the warrant or other
equity  participation  right is recorded as an investment  at cost.  The Company
recognizes a gain or loss on such  securities  when sold or when the  securities
are  classified  as trading  securities.  The Company  periodically  reviews its
portfolio of equity  participation  rights based on its evaluation of the market
trends for the related clients' equity  securities.  The Company expects to sell
its equity participation rights as its portfolio companies mature.

     Realization of Equipment Residual Values.  Residual values are estimated at
the  inception  of a lease  and  reviewed  periodically  over  the  lease  term.
Estimated residual values of leased equipment may be subsequently  reduced,  but
not  increased.  Reductions  in estimated  residual  values are made as the need
becomes  apparent  and are  reflected  by  increased  depreciation  expense  for
operating  leases or by decreased earned lease income for direct finance leases.
When  equipment is sold,  the net proceeds  realized in excess of the  estimated
residual  value are  recorded as a "gain on equipment  residual  values," or the
amount by which  the  estimated  residual  value  exceeds  the net  proceeds  is
recorded as a loss.  The Company has not had a net loss from the  realization of
residual values for any quarterly period.

     Servicing Fees. The Company  realizes  revenue for off-balance  sheet lease
receivables   serviced   under  the  terms  of  its   securitization   facility.
Additionally,  the Company engages in the business of servicing lease portfolios
originated  by third parties but has not entered into a new agreement to service
leases for third parties since December 1994. Revenues from these activities are
classified as "servicing fees and other income."

     Securitizations of Lease Portfolios. In a securitization  transaction,  the
Company sells a pool of leases to a wholly-owned  special purpose entity,  which
then  transfers  or pledges  the leases to the  lender.  The  Company  generally
retains  the right to receive  any  excess  cash  flows of the  special  purpose
entity.  Until  October 1, 1998,  the Company  recognized  a gain on the sale of
leases in securitizations equal to the excess of the net proceeds from the sale,
after  deducting  issuance  expenses,  over the cost basis of the  leases  sold.
Effective  October 1, 1998, the Company  eliminated  gain-on-sale  treatment for
securitized  leases by modifying  the structure of its  securitization  facility
such that it is  considered  a  non-recourse  debt  instrument  under  generally
accepted  accounting  principles.   Accordingly,   no  gain  on  sale  of  lease
receivables in  securitization  transactions  has been recorded since October 1,
1998.

     Provision for Credit Losses. Each of the Company's activities involves risk
of credit loss.  Management evaluates the collectibility of the Company's leases
and loans  based on the  creditworthiness  of the  related  lessee  or  obligor,
delinquency statistics,  historical loss experience, current economic conditions
and other relevant factors.  The Company provides a reserve for credit losses at
the time that the lease or loan commences and periodically evaluates the reserve
based on current delinquency  experience and the financial status of its lessees
or  obligors,  as well as any  holdbacks  or  recourse  from  Portfolio  Finance
customers that serve as credit enhancement.

         Results of Operations

         1999 Compared to 1998

     Sales of equipment  increased to $35.0  million from $32.9 million and cost
of equipment  sold  increased to $28.5 million from $26.8 million due in part to
the acquisition of Internet Finance & Equipment,  Inc. assets in August 1999 and
the development of LINC IF+E which  distributes  and leases  telecommunications,
routing and internet enabling equipment. This increase was partially offset by a
2.3%  decrease in both sales of analytical  instruments  and the related cost of
equipment sold in the Company's Rental and Distribution business. Net margins on
sales of equipment  decreased to 18.4% from 18.6% primarily due to lower margins
obtained by LINC IF+E compared to margins on the sale of analytical instruments.

     Net direct  finance  lease  income  increased  to $33.4  million from $12.3
million as a result of a substantially higher level of finance lease receivables
outstanding,  arising from acquired portfolios, internal lease originations, and
discontinuance  of  gain-on-sale  accounting in October,  1998.  Average finance
lease receivables  outstanding  increased 163%. In addition,  during the quarter
ended September 30, 1999,  $99.0 million in lease  receivables  were repurchased
from  the  Company's  commercial  paper  conduit  facility  in  connection  with
completion of a term securitization and included in the Company's balance sheet.
As a result, commencing in the third quarter of 1999 direct finance lease income
for 1999 includes the net amount of the direct finance lease income  relating to
such repurchased receivables.

     Interest income increased to $3.6 million from $2.2 million,  primarily due
to an increase in interest-bearing notes receivable held by the Company.  Direct
finance lease income and interest  income,  minus  interest  expense,  was $12.3
million,  or 33.3% of direct  finance  lease  income and  interest  income  (the
Interest  Margin ) compared to $5.5 million,  or 38.2%,  in the prior year.  The
decrease  in the  Interest  Margin  is  due to an  increase  in  interest  rates
throughout  the  second  half of the  year and a  decrease  in  interest  income
recorded on the Company's  securitization  retained interest  resulting from the
repurchase  of lease  receivables  from the Company's  commercial  paper conduit
facility in connection with completion of a term securitization.

     Rental and  operating  lease  revenue  increased to $10.9 million from $9.4
million  primarily due to  acquisitions  of portfolios of operating  leases made
during  1998 and  increased  rental  utilization  in the  Company's  Rental  and
Distribution business unit.

     Servicing  fees and  other  income  increased  to $6.6  million  from  $3.8
million. Servicing fees and other income primarily consists of fees received for
servicing  off-balance  sheet  securitized  leases,  fees received for servicing
third party lease  portfolios,  interim rents received by Select Growth Finance,
and late fees. The increase over the prior year period primarily relates to $1.2
million in deferred  incentive  fees realized in connection  with servicing of a
portfolio  owned by a third party,  $0.5 million  realized on the termination of
interest rate swap and cap agreements, and an increase in late fees collected by
the Company's Vendor Finance business unit. This increase is partially offset by
a  decrease  in fees  received  for  servicing  securitized  leases.  Since  the
elimination of gain-on-sale  treatment effective October 1, 1998, the balance of
off-balance sheet lease receivables  continues to decline.  In addition,  during
the quarter ended September 30, 1999, $99.0 million in lease receivables,  which
were  originally   recorded  as  off-balance  sheet  securitized   leases,  were
repurchased  from the Company's  commercial paper conduit facility in connection
with a term securitization and restored to the balance sheet.

     Gain on the sale of lease  receivables  was $1.3 million for the year ended
December 31, 1999. This amount  represented  gains on lease  receivables sold to
third  parties.  The $6.8  million  gain for the year ended  December  31,  1998
represented gains on securitized leases.  Effective October 1, 1998, the Company
eliminated  gain-on-sale  treatment  for  securitized  leases by  modifying  the
structure of its securitization  facility such that it is considered nonrecourse
debt under generally accepted  accounting  principles.  Accordingly,  no gain on
sale of securitized receivables was recorded during 1999.

     Gains on  equipment  residual  values  decreased  to $1.3 million from $1.8
million. Gains on equipment residual values fluctuate based on the dollar volume
of the leases maturing in a given year.

     During  1999,  the  Company  recognized  a gain of $1.6  million on certain
equity  participation  rights versus $3.8 million in 1998. Equity  participation
gains  fluctuate  from  year to year  based on the  value of  securities  in the
Company's portfolio and the timing of the sale of these securities.

     Selling,  general and administrative  expenses, net of initial direct costs
capitalized,  increased  to $23.8  million  from  $17.8  million.  The  increase
resulted  primarily  from the  administrative  and  operational  effects of four
acquisitions  completed  since  February  1998 in the Company's  Vendor  Finance
business  unit,  the  acquisition  of LINC IF+E in August 1999 in the  Company's
Rental and Distribution  business unit, senior and middle  management  personnel
added to support the Company's growth,  and increased  activity in the Company's
other business segments.  The number of people employed,  including employees of
companies  acquired,  increased  50% from  147 at the end of 1998 to 221  during
1999.

     Interest  expense  increased  to  $24.7  million  from  $9.0  million,  due
primarily to increased  borrowings  resulting from growth in lease originations,
lease portfolios  acquired,  and discontinuance of gain-on-sale  accounting.  In
addition  interest  expense  increased  over  1998  levels  as a  result  of the
repurchase by the Company  during the quarter ended  September 30, 1999 of $99.0
million in lease  receivables  previously  sold to its commercial  paper conduit
facility utilizing proceeds of a term  securitization  which increased the level
of nonrecourse  debt.  Average finance lease receivables  outstanding  increased
163%.

     Depreciation  of equipment  increased  to $7.3  million from $6.1  million,
which was attributable to an increase in equipment under rental agreements.  The
average  net book  value of  equipment  held for  rental  and  operating  leases
increased approximately 8% over the prior year.

     Amortization  of  intangibles  increased to $1.4 million from $0.5 million,
due to the  amortization  of goodwill  relating to five  acquisitions  completed
since February 1998 and to the  amortization  of issuance costs resulting from a
term securitization completed during the third quarter of 1999.

     The  provision  for credit  losses  increased  to $16.0  million  from $5.3
million,  due to a  substantially  higher  volume of new leases  originated  and
substantially  higher  rates of lease  defaults in the Select  Growth and Vendor
Finance business segments.

     At December 31, 1999,  the Company  recognized an impairment  loss of $14.2
million primarily relating to the impairment of goodwill in the Company's Vendor
Finance business unit. After evaluating 1999 results of operations and projected
future cash flows, the Company decided to write off the goodwill associated with
the  acquisitions  of  Comstock  Leasing  Inc.,  Monex  Leasing,  Ltd.,  Spectra
Precision  Credit Corp. and Connor Capital  Corporation  since projected  future
cash flows were insufficient to cover the recorded  goodwill.  Substantially all
of this goodwill is deductible for Federal income tax purposes.

     During the third  quarter of 1999,  the  Company  recorded a  restructuring
charge of $0.7  million  relating to  consolidating  additional  Vendor  Finance
functions in Chicago,  Illinois from Dayton,  Ohio and Wheeling,  Illinois.  The
charge primarily  consists of personnel related expenses,  such as severance for
terminated  employees,   recruiting  expenses  for  replacement  personnel,  and
relocation costs, as well as write-offs of certain assets,  including  leasehold
improvements   and   furniture  and   fixtures.   Through   December  31,  1999,
approximately  $0.4 million of the  restructuring  charge was utilized for these
items.

     For 1999,  the Company  recorded an income tax benefit of $1.3 million on a
pre-tax loss of $22.8 million.  The 1999 income tax benefit is the result of the
utilization of investment  tax credits for which no benefit had previously  been
recognized.  The Company  recorded income tax expense of $3.0 million on pre-tax
income of $7.6 million for 1998.

         1998 Compared to 1997

     Sales of equipment  increased to $32.9 million from $23.1 million and costs
of analytical  instruments  sold  increased to $26.8 million from $18.5 million,
due to an increase in volume.  Net  margins on sales of  analytical  instruments
declined to 18.6% from 19.8%  primarily  as a result of lower  gross  margins on
sales type leases  originated in the Company's Rental and  Distribution  segment
during the first half of 1998.

     Direct  finance  lease income more than doubled to $12.3  million from $6.0
million as a result of a substantially higher level of finance lease receivables
outstanding,  coming from  acquisitions  and from internal  lease  originations.
Average finance lease receivables outstanding increased 134%.

     Interest income increased to $2.2 million from $0.9 million,  primarily due
to an increase in interest-bearing  notes receivable and equipment loans held by
the Company,  as well as the income  recognized on the Company's  securitization
retained  interest.  The Interest Margin was $5.5 million,  or 38.2% compared to
$2.6 million, or 37.3% in the prior year. The increase in the Interest Margin is
due to the income recognized on the Company's  securitization  retained interest
in 1998.

     Rental and  operating  lease  revenue  increased  to $9.4 million from $7.5
million primarily due to acquisitions of portfolios of operating leases upon the
Company's  re-entry in the Portfolio  Finance  segment after the expiration of a
non-compete agreement in September 1997.

     Servicing  fees and  other  income  increased  to $3.8  million  from  $2.0
million. Servicing fees and other income primarily consists of fees received for
servicing  securitized  leases,  fees received for  servicing  third party lease
portfolios,  interim rents received by Select Growth Finance, and late fees. The
increase  over the prior year  period is  primarily  due to the  increase in the
volume of Select Growth Finance leases originated, late fees collected by Vendor
Finance, an increase in servicing fees relating to a third party lease portfolio
serviced by the Company,  and an increase in fees  received in  connection  with
servicing  securitized leases. This increase was partially offset by the decline
in the number of leases serviced by the Company for unrelated parties.

     During 1998 and 1997, the Company  securitized  leases with a book value of
$200.2  million and $15.2  million,  respectively,  net of bad debt reserves and
customer  holdbacks of $7.7 million and $0.3 million.  In connection  with these
securitizations,  the Company realized gains on the sale of lease receivables of
$6.8 million and $0.9 million in 1998 and 1997, respectively.  Effective October
1, 1998, the Company eliminated gain-on-sale treatment for securitized leases by
modifying  the  structure  of  its  securitization  facility  such  that  it  is
considered  nonrecourse  debt under generally  accepted  accounting  principles.
Accordingly, no gain on sale of lease receivables was recorded during the fourth
quarter of 1998.

     Gains  from sale and  re-leasing  of  leased  equipment  increased  to $1.8
million from $0.9  million.  The increase was the result of a greater  number of
leases maturing in 1998.

     During  1998,  the Company  experienced  increases  in the value of certain
equity participation rights held by the Company and consequently elected to sell
a portion of these rights,  realizing a gain of $3.8 million.  During 1997,  the
Company  sold  certain  equity  participation  rights,  realizing a gain of $0.4
million.

     Selling,  general and administrative  expenses, net of initial direct costs
capitalized, increased to $17.8 million from $9.0 million. The increase resulted
primarily from additional  operations,  marketing and sales personnel associated
with the Company's re-entry into Portfolio Finance, senior and middle management
personnel added to support the Company's growth, three acquisitions completed in
1998,  and increased  activity in the Company's  other  business  segments.  The
number of people employed,  including employees of companies acquired, increased
75% to 147 during 1998.

     Interest expense increased to $9.0 million from $4.3 million, due primarily
to increased lease  originations,  lease portfolios  acquired,  and retention of
more  leases on the  balance  sheet  following  discontinuance  of  gain-on-sale
accounting,  with the  resulting  increase in  borrowings.  Lease  originations,
including portfolios of acquired companies, increased 290% over the prior year.

     Depreciation  of equipment  increased  to $6.1  million from $4.2  million,
which was  attributable  to an increase in equipment held for operating  leases.
The average net book value of  equipment  held for rental and  operating  leases
increased approximately 42% over the prior year.

     Amortization  of  intangibles  increased to $0.5 million from $0.3 million,
due to three acquisitions completed in the first half of 1998.

     The  provision  for  credit  losses  increased  to $5.3  million  from $1.3
million,  due to a  substantially  higher  volume of new leases  originated  and
re-evaluation  of reserves.  Lease fundings,  excluding  portfolios  acquired in
connection with the Company's acquisitions, increased 220% over the prior year.

     The Company's effective tax rate was 39.7% for 1998 and 1997.

         Liquidity and Capital Resources

         General

     The  Company's  activities  are capital  intensive  and  require  access to
substantial  amounts of credit to fund new  equipment  leases.  The  Company has
financed its  operations to date  primarily  through cash flow from  operations,
borrowings  under its Loan  Agreement with its senior lenders and its CP Conduit
Facility,  other  non-recourse and recourse loans, the July Term  Securitization
and the sale of equity.  Access to large  amounts of capital will continue to be
necessary to acquire equipment for lease and rental.

     The Company is currently not in compliance with certain covenants under the
Loan Agreement, the CP Conduit Facility and certain covenants under the terms of
agreements  relating  to  the  July  Term  Securitization.  The  Company  is  in
discussions with the lenders under the Loan Agreement,  the liquidity  providers
under the CP Conduit  Facility and appropriate  parties related to the July Term
Securitization  regarding  forbearance from enforcement of remedies available to
such parties as a result of the Company's  failure to comply with the applicable
covenants. During these forbearance discussions, the Company is not permitted to
borrow  additional funds under its Loan Agreement.  New lease  originations have
therefore been substantially  curtailed. In the event that the Company is unable
to  successfully  obtain such a forbearance  from these secured  creditors for a
period that enables it to sell individual leasing businesses and elements of its
lease  portfolio,  the Company  may not be able to  continue  some or all of its
business and may be required to seek  protection  under the Bankruptcy  Code. No
assurances can be made as to the Company obtaining such forbearances, that lease
originations  will commence at a level to support the operations of the Company,
or that the  secured  creditors  will  allow  management  to  implement  various
strategic  plans. In addition,  even if the Company was to  successfully  obtain
such  forbearance and  successfully  sell individual  leasing business units and
elements of its lease portfolio,  there can be no assurance that the proceeds of
such sales will  provide the Company with  sufficient  liquidity to continue its
remaining operations.

         Cash Flow

     Cash flows from operating and financing  activities are generated primarily
from  receipts on direct  finance and  operating  leases,  rentals of analytical
instruments, gross profit on the sale of analytical instruments,  realization of
equipment residual values,  and financing of new lease  origination's and rental
inventory  through  credit  facilities  and  securitizations.  Cash  flows  from
operating and financing  activities for 1999, 1998 and 1997 were $341.8 million,
$326.1 million, and $79.8 million,  respectively.  The increase between 1999 and
1998  results  primarily  from the  increase  in the  volume of  securitizations
completed in 1999 and payments received on direct finance leases;  whereas,  the
increase between 1998 and 1997 results primarily from securitizations  completed
in 1998 and additional borrowings under the Company's credit facilities.

         Credit Facilities

     The Company utilizes its secured  revolving  credit facility  provided by a
syndicate  of  banks  under  the Loan  Agreement  to fund  the  acquisition  and
origination of leases and the purchase of rental and distribution  inventory. As
of December 31, 1999,  the Company had $117.0  million  available  for borrowing
under the Loan Agreement,  of which the Company had borrowed $99.7 million, with
a weighted-average interest rate of 7.65%. In January 2000, the amount available
under the Loan  Agreement  was reduced to $107.0  million and the  facility  was
renewed through December 31, 2000.

     As of December 31,  1999,  the Company was and is currently in violation of
certain  covenants  under the Loan Agreement and is in discussions  with lenders
intended to lead to a  forbearance  of  enforcement  of remedies  under the Loan
Agreement during a period in which the Company  downsizes its operations by sale
of certain elements of its leasing businesses and lease portfolio.  A portion of
the  proceeds  of such sale would be used to repay  indebtedness  under the Loan
Agreement  and to  provide  liquidity  to the  Company's  remaining  activities.
Following  such  forbearance  period the  Company  anticipates  refinancing  the
remaining  indebtedness,  the  largest  portion  of which  would  relate  to the
Company's  rental and  distribution  activities.  If the  Company is not able to
achieve such a forbearance and to successfully refinance such indebtedness,  the
Company may not be able to continue as a going concern.

         Commercial Paper Conduit Securitization Facilities

     The Company,  through a special purpose subsidiary,  has a commercial paper
conduit  securitization  facility in an amount of $289  million (the  CP Conduit
Facility ). At December 31, 1999, $141 million of the facility was utilized. The
terms of the facility  permit the financing of  substantially  all of the leases
originated in the Company's  Portfolio Finance,  Vendor Finance,  and Rental and
Distribution  activities as well as the majority of the leases originated in the
Company's Select Growth Finance  activities.  The facility is subject to renewal
on April 28, 2000.  The Company is  currently in violation of certain  covenants
under the CP Conduit Facility and is in discussions with the liquidity providers
to such facility to forbear from  enforcement of remedies under the facility and
to extend the maturity of the facility for an interim  period  during which time
the  Company  anticipates  that  sales  of  lease  portfolios  will  be  used to
substantially  reduce the outstanding  amount under the CP Conduit Facility.  If
the Company is unable to  successfully  achieve a  forbearance  by the liquidity
providers, the cash flows available to the Company from its retained interest in
the leases included in the CP Conduit  Facility as well as its servicing  rights
may be interrupted  permanently or  temporarily.  In such a case the Company may
not be able to continue as a going concern.

     At the time of placing leases in the securitization facilities, the Company
enters  into  interest  rate cap and  interest  rate swap  agreements  to manage
interest rate risk.

         Term Securitization

     In July 1999, the Company, through a special purpose subsidiary,  completed
a  term   securitization   in  the  amount  of  $237  million  (the   July  Term
Securitization ).  $199  million of A-1  Certificates  rated AAA by Standard and
Poor's and Fitch  IBCA,  Inc.  and Aaa by Moody's  Investor  Service,  Inc.,  $9
million of B-1 Certificates rated BBB by Fitch IBCA, Inc., and $9 million of B-2
Certificates  rated BB by Fitch IBCA, Inc., were issued in the private market. A
portion of the B-2 Certificates (approximately $3 million) and the C Certificate
of $17 million were retained by the Company.

     The Company is currently in violation of certain  covenants  under the July
Term  Securitization  and is in discussions with applicable  parties intended to
lead to their  forbearance  from  enforcement  of  remedies  under the July Term
Securitization  while  the  Company  downsizes  its  operations  as  well  as to
renegotiate  certain of its  terms.  If the  Company  is unable to  successfully
achieve a  forbearance  and  renegotiation  of certain of the terms of such July
Term  Securitization,  the cash flows available to the Company from its retained
interest in the July Term  Securitization as well as its servicing rights may be
interrupted  permanently or  temporarily.  In such a case the Company may not be
able to continue as a going concern.

<PAGE>

         Non-recourse and Partial Recourse Lease Financing Facilities

     During 1999,  the Company  completed  financing or sale of $67.3 million in
leases  through  the  use  of  non-recourse  and  partial   recourse   financing
facilities.

          Preferred Stock

     On  February  1,  2000,  the  Company  issued  $5,625,000  of  Series  A 8%
Cumulative  Redeemable  Preferred  Stock ( the Series A Preferred Stock ).  The
issuance of this series of preferred stock was coupled with warrants to purchase
326,250  shares of the  Company's  common  stock at $5.49 per share.  Additional
warrants  for up to 652,500  shares may be issued on a  pro-rata  basis  through
September 30, 2000, if the Series A Preferred  Stock is not redeemed as a result
of a change  of  control  or a  refinancing  prior to that  time.  The  Series A
Preferred Stock accrues cumulative  preferred  dividends at 8% per annum through
December 31, 2000, 10% per annum from January 1, 2001 through  December 31, 2001
and 12% per annum  thereafter.  The Series A  Preferred  Stock is required to be
redeemed  by the  Company  upon a change of  control  or on  January  31,  2005,
whichever occurs first. As a result of the violation of certain  covenants under
the Loan  Agreement,  the Company  was unable to declare or make  payment of the
dividend  on  the  Series  A  Preferred  Stock  due  on  March  31,  2000.  As a
consequence,  the Company may be in default of certain  provisions  of the terms
and  conditions  of the Series A Preferred  Stock and the dividend  rate on such
preferred stock accruing after March 31, 2000 has been increased by 1 percentage
point.

          Other

     Year 2000  compliance  refers  to the  ability  of  computer  hardware  and
software to respond to the  problems  posed by the fact that  computer  programs
have  traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer systems will not be
able to  differentiate  between  the year  2000  and  1900.  As a result  of the
calendar  year  change  to 2000,  neither  the  Company  nor,  to the  Company's
knowledge  any  of its  significant  third  parties,  including  parites  to the
Company's credit facilities and its signifcant Portfolio Finance customers, have
experienced  any material  adverse effects to their  respective  businesses as a
result of the Year 2000  issue.  The Company  will  continue to monitor the year
2000 issue on its own systems and those of significant  third parties with which
the Company  conducts  business and will  promptly  address any latent Year 2000
issues that may arise.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

     The Company's  primary market risk exposure is interest rate risk,  largely
related to the  Company's  Loan  Agreement.  Otherwise,  the  Company is able to
mitigate the effects of changes in interest  rates through  financing  leases or
loans on a nonrecourse or partial recourse basis at fixed interest rates,  which
maintains the spread on lease or loan  transactions over their respective terms.
In addition,  the Company manages  exposure to fluctuations in interest rates by
establishing  fixed  interest  rates on the lease  portfolios  in the  Company's
securitization facility through interest rate swap and cap agreements.  Interest
rates  associated  with new  originations  of leases or loans can be adjusted to
compensate  for changes in the interest rate  environment.  The Company does not
use derivative financial instruments for trading purposes.

     The Company is exposed to adverse  fluctuations  in interest  rates as they
relate to the Company's securitization retained interest and to leases and loans
funded under its Loan Agreement.  Additionally,  the Company could be negatively
impacted by the early termination of its interest rate swap or interest rate cap
agreements based on the fair value of these derivative financial  instruments on
the date of termination.  At December 31, 1999, termination of the interest rate
swap and  interest  rate cap  agreements  would  have  resulted  in a credit  to
earnings of $2.1 million.

     The  Company  funds  a  portion  of its  lease  portfolio  under  its  Loan
Agreement. Loan Agreement provides for interest at LIBOR plus 1.50% to 1.75% or,
at the Company's option,  prime plus up to 0.25% or the CD rate or the Fed Funds
rate plus 1.55% to 1.80%,  with the precise rate  dependent on certain  leverage
tests.  An increase in these interest rates would cause a decrease in the spread
between the yield on each fixed rate lease or loan contract  financed  under the
facility and the Company's borrowing costs. At December 31, 1999, the net effect
of a 100 basis point  decrease or increase in LIBOR over a  twelve-month  period
would result in a $1.1 million  decrease or increase in interest expense for the
period.

     If actual interest rates are different from those estimated by the Company,
the net impact of interest rate risk on the Company's earnings may be materially
different than disclosed above.

     The Company is also  subject to foreign  currency  rate risk  relating to a
limited number of leases denominated in Canadian dollars and British pounds. The
Company has  determined  that hedging of these assets is not cost  effective and
instead  attempts to minimize  currency  exposure risk through  working  capital
management. The Company does not believe that any foreseeable change in currency
rates  would  have a material  effect on its  financial  position  or results of
operations.

     The table below  presents the principal  (or notional)  amounts and related
weighted average interest rates of the Company's debt obligations and derivative
financial instruments by expected year of maturity.

<TABLE>
<CAPTION>
                                      2000         2001        2002         2003         2004      Thereafter           Total
                                  ------------ ----------- ------------ ------------ ------------ --------------   ------------
                                                                        (In thousands)

<S>                                 <C>            <C>         <C>          <C>          <C>           <C>            <C>
Liabilities:
   Senior credit facility            $99,700        $-           $-           $-           $-            $-             99,700
     Variable rate                     7.65%         -            -            -            -             -              7.65%

   Other notes payable              $  1,549       $798         $707          $-            -             -             $3,054
     Weighted average
      interest rate                   11.64%     13.00%       13.00%           -                          -             12.31%

   Recourse and nonrecourse debt    $133,528   $106,973      $67,847     $ 31,183      $10,457        $1,260          $351,249
     Weighted average
      interest rate                    7.30%      7.15%        7.18%        7.31%        7.55%            -              7.25%

   Subordinated debt                     -          -         $1,581       $6,178          -              -             $7,759
    Weighted average
      interest rate                      -          -          8.25%        8.25%          -              -              8.25%

   Derivative financial
   instruments:
     Interest rate swaps            $103,412   $ 89,029     $ 57,886     $ 22,655      $ 7,208         $ 859          $318,653
      Weighted average fixed
          interest rate                6.11%      6.14%        6.19%        6.31%        6.42%         6.32%             6.14%

     Interest rate caps              $11,490     $9,892       $6,432       $2,517         $801           $95           $35,406
      Weighted average
         fixed interest rate           6.11%      6.14%        6.19%        6.31%        6.42%         6.32%             6.14%

<FN>
          The table above  reflects the expected  maturity of the Company's debt
     obligations  and derivative  financial  instruments as of December 31, 1999
     and  does  not  reflect  changes,   which  could  arise  after  that  time.
     Additionally, because the Company's lease portfolio is not presented in the
     table  above,  the  information  presented  therein has limited  predictive
     value.  As a result,  the  Company's  ultimate  realized  gain or loss with
     respect to interest rate  fluctuations  will depend on exposures that arise
     during the respective period, the Company's hedging strategies at the time,
     and actual  interest  rates.  For  information  regarding the fair value of
     financial instruments, see note 9 to the Consolidated Financial Statements.
</FN>
</TABLE>

Item 8.  Financial Statements and Supplementary Data

         The financial statements begin on page F-1.

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

         None.

Item 10. Directors and Executive Officers of the Registrant

     The  information  required by this Item with  respect to the  identity  and
business  experience  of the Company's  executive  officers and directors is set
forth in Part I, Item 1 under the caption  Executive  Officers and  Directors of
the Registrant.

Items 11.     Executive Compensation

     The following table presents certain  information  concerning  compensation
earned for services  rendered  during 1999,  1998 and 1997 to the Company by the
Chief Executive Officer and each of the four most highly  compensated  executive
officers.  A substantial portion of the compensation paid to Messrs.  Zimmerman,
Laing and Palles  during 1997 was with respect to  operations of LFC Capital and
other  discontinued  operations  of the Company and was charged to LFC  Capital.
Effective November 12, 1997, the Company entered into employment  contracts with
Messrs.  Zimmerman,  Laing,  Palles and Dr.  Farren.  In  addition,  the Company
entered into an employment contract with Mr. DeMars upon his employment with the
Company in 1998. See Employment Contracts.

<PAGE>
<TABLE>
<CAPTION>

                                            Summary Compensation Table

                                                   Annual Compensation                 Long Term Compensation
                                                ------------------------             --------------------------
                                                                        Other Annual     Awards          All Other
Name and Principal Position           Year    Salary         Bonus      Compensation     Options(#)      Compensation
                                     ------  --------      --------    ---------------  ------------  ----------------
<S>                                   <C>       <C>          <C>          <C>            <C>             <C>
Martin E. Zimmerman................   1999     $312,385(1)  $  -         $51,248(2)          -            $4,800
   Chairman and Chief Executive       1998      297,669      137,500      48,249(2)        58,141          5,000
   Officer                            1997      555,193        -          89,012(2)        20,000          4,750

Robert E. Laing....................   1999      271,154(1)     -            -                -             4,800
   President and Chief Operating      1998      258,210      120,000        -              36,107          5,000
   Officer                            1997      269,504        -            -              10,000          4,750

Allen P. Palles....................   1999      197,411(1)     -            -                -             4,800
   Executive Vice President and       1998      197,718       92,500        -              36,107          5,000
   Chief Financial Officer            1997      230,066        -            -              10,000          4,750

Gerard M. Farren...................   1999      211,475(1)    60,000        -               5,000          4,800
   Senior Vice President-Instrument   1998      204,600      100,000        -                -             5,000
   Rental and Distribution            1997      204,600       70,200        -               7,500          4,750

William F. DeMars..................   1999      176,469(1)     -            -              10,000          4,800
   Senior Vice President-Select       1998      114,519       75,500        -              20,000          4,750
   Growth Finance                     1997      -              -            -                -             4,750


---------------------------------------------------------------------------------------------------------------------
<FN>
(1)        This amount includes base salary and customary benefits and perquisites as provided in each person's
              employment contract.
(2)        This amount consists of life insurance premiums and tax preparation services paid for by the Company.
</FN>
</TABLE>

     The following table sets forth the number of shares of the Company's Common
Stock subject to stock options granted to the individuals  listed in the Summary
Compensation Table through December 31, 1999, together with related information.

                                            Option Grants in 1999

<TABLE>
<CAPTION>
                                                           Individual Grants
                                                                                             Potential realizable
                                               Percent of                                    value at assumed annual
                                             total options     Exercise                      rates of stock price
                                               granted to      or base                       appreciation for option
                                 Options       employees        price       Expiration               term (1)
       Name                      granted (#)    in 1999       ($/Share)        date          5%                10%
     -------                   -------------  -------------  -----------    ----------     ------            ------
<S>                              <C>               <C>          <C>         <C>            <C>            <C>
Martin E. Zimmerman.......            -              -             -              -             -               -
Robert E. Laing...........            -              -             -              -             -               -
Allen P. Palles...........            -              -             -              -             -               -
Gerard M. Farren..........         5,000           3.4%         $8.62       02/01/09       $27,105         $68,690
William F. DeMars.........        10,000           6.9%         $8.62       02/01/09       $54,211        $137,381
------------------------------
<FN>
(1)      In calculating the potential realizable value, the Company used the grant price per share as of the date of grant.
</FN>
</TABLE>


     The following table sets forth the number of shares of the Company's Common
Stock  subject  to stock  options  exercised  by the  individuals  listed in the
Summary Compensation Table during 1999, together with related  information,  and
the value of the unexercised options.
<TABLE>
<CAPTION>

                                          Aggregated Option Exercises in 1999,
                                             and 1999 Year-End Option Values

<S>                          <C>                                <C>                            <C>
                                Shares                                Number of                Value of unexercised
                             acquired on        Value            Unexercised options           in-the-money options
 Name                         exercise (#)     Realized         At December 31, 1999         at December 31, 1999 (1)
------                      -------------     ----------       ----------------------       --------------------------
                                                            Exercisable    Unexercisable   Exercisable   Unexercisable
                                                           -------------  --------------- ------------- ---------------
Martin E. Zimmerman....               -            $  -          49,391          28,750         $ -              $ -
Robert E. Laing(2).....           51,986         361,006         62,536          37,492       77,934           58,486
Allen P. Palles........               -               -          48,724          22,858       42,990           21,462
Gerard M. Farren.......               -               -           3,750           8,750           -                -
William F. DeMars......               -               -           5,000          25,000           -                -
------------------------------
<FN>

(1)      Based upon the difference between the closing price of the common stock on the Nasdaq National Market on
     December 31, 1999 of $4.75 and the exercise price.
(2)      Based upon the difference between the closing price of the common stock on the Nasdaq National Market on
     the exercise date of $8.88 and the exercise price.
</FN>
</TABLE>

         Employment Contracts

     Effective as of November 12, 1997,  the Company  entered into an employment
contract with Mr. Zimmerman.  The employment contract provides for (i) an annual
base salary of $275,000 per year,  subject to increase at the  discretion of the
Board of Directors;  (ii)  reimbursement of premiums at an annual estimated cost
of  approximately  $50,000  for a life  insurance  policy;  and (iii)  customary
benefits and perquisites.  The agreement has a three-year  evergreen term unless
either  the  Company  or  Mr.  Zimmerman  gives  ninety  (90)  days'  notice  of
termination.  If the  agreement is  terminated  by the Company  without cause or
within six months prior to or one year after a change of control,  Mr. Zimmerman
will be  entitled  to  severance  pay  equal to three  times  the sum of (i) his
then-current annual base salary; (ii) his most recent annual bonus and incentive
payment; and (iii) employer  contributions to his retirement plan for the twelve
(12) months preceding such  termination,  plus an additional amount if necessary
to make the executive  whole with respect to any excise taxes on such  severance
pay. The agreement provides that Mr. Zimmerman will not engage in other business
activities  without  the  consent  of the  Company,  except for  charitable  and
professional  trade  associations and passive personal  investments,  and except
that Mr.  Zimmerman  may serve as chairman  and as an officer and director of an
affiliated  company,  LFC Capital,  so long as such activity does not materially
interfere with his duties to the Company.  The agreement prohibits Mr. Zimmerman
from competing  with the Company for one year  following the  termination of his
employment with the Company. Effective June 29, 1999 the Company entered into an
amendment of that employment  contract with Mr. Zimmerman.  The amendment to the
contract  provides for (i) reimbursement for tax preparation and estate planning
expenses,  commencing January 1, 1998, not to exceed $15,000 in any one year and
not to exceed $30,000 in the aggregate from January 1, 1998 through December 31,
1999 and (ii) payment or reimbursement of life insurance premiums by the Company
on Mr.  Zimmerman's  life for any policies owned by Mr. Zimmerman so long as the
annual  premiums  do  not  exceed  the  $50,000  amount   described  above.  Mr.
Zimmerman's employment contract and his employment as Chief Executive Officer of
the Company was  terminated by mutual  agreement on March 31, 2000.  Pursuant to
such agreement,  Mr.  Zimmerman will receive  severance  payments equal to three
months of base salary to be paid bi-weekly until June 30, 2000.

     Also,  effective  November 12, 1997,  the Company  entered into  employment
contracts  with Messrs.  Laing and Palles and Dr.  Farren  providing  for (i) an
annual base salary of $240,000  for Mr.  Laing,  $185,000  for Mr.  Palles,  and
$195,000 for Dr. Farren,  all subject to increase at the discretion of the Board
of Directors and (ii) customary benefits and perquisites.  The agreements have a
one-year  evergreen  term and may be terminated by the Company or the applicable
executive upon sixty (60) days' notice.  If the agreements are terminated by the
Company  without  cause or within  six (6)  months  prior to or one year after a
change of control,  the  applicable  executive will be entitled to severance pay
equal to the sum of (i) his  then-current  base  salary;  (ii)  his most  recent
annual bonus and incentive  payment;  and (iii)  employer  contributions  to his
retirement  plan for the 12 months  preceding such  termination.  The agreements
prohibit the  applicable  executive  from competing with the Company for one (1)
year  following  the  termination  of his  employment  with  the  Company.  Such
employment agreements require that the applicable executive devote substantially
all of his business time to the Company's  affairs,  except for  charitable  and
professional  trade  associations  and passive  personal  investments,  and with
respect to Mr. Palles, except for his services as a director of LFC Capital. Mr.
Palles' employment contract was amended by mutual agreement on March 31, 2000 to
delete provisions relating to the payment of severance benefits in consideration
of  elimination  on  restrictions  on Mr.  Palles'  ability to engage in certain
activities.  The Company currently  anticipates that Mr. Palles will continue as
Executive  Vice  President  and Chief  Executive  Officer of the Company for the
foreseeable future.

     On April 6, 1998,  the  Company  entered  into an  employment  letter  with
William F. Demars  providing for (i) an annual base salary of $175,000,  subject
to increase  at the  discretion  of the Board of  Directors  and (ii)  customary
benefits and perquisites.  The employment  letter does not have a specified term
and DeMars's  employment  thereunder  may be terminated  by the Company  without
prior notice.  If the  employment  is  terminated  by the Company  without cause
DeMars will be entitled to  severance  pay equal to his current  base salary for
twelve (12)  months from the date of such  termination.  The  employment  letter
prohibits  DeMars from competing with the Company for one (1) year following the
termination of his employment with the Company.

         Compensation of Directors

     Each director who is not an officer of the Company received fees of $18,000
in 1999 for attending Board and Board Committee  meetings and was reimbursed for
out-of-pocket   expenditures  incurred  to  attend  Board  and  Board  Committee
meetings.  The Company's  directors are eligible to be granted options under the
Company's  Non-Employee  Director  Stock Option Plan. No options were granted to
directors  in 1999.  Messrs.  Quinn and  Green,  as members of the Office of the
Chairman,  which was formed in March 2000, are entitled to receive  compensation
equal to $275 per hour, not to exceed $2,220 per day in connection with services
rendered by them at the Company's  headquarters.  The Company  anticipates  that
Messrs.  Green and Quinn will devote  approximately two days per week during the
course of the next 90 days to the Company's affairs at its headquarters.

         Stock Option Plans

     The Company  adopted its 1994 Stock Option Plan,  1997 Stock Incentive Plan
and Non-Employee  Director Option Plan to align the interests of its executives,
employees and directors with those of its shareholders. Options covering 488,928
shares of Common Stock were  granted  pursuant to the 1994 Stock Option Plan (of
which, options covering 90,482 shares were outstanding as of March 30, 2000) and
no further options can be granted under such plan.

     The 1997 Stock  Incentive Plan permits the grant of stock options and other
equity based awards with respect to 375,000 shares of Common Stock to executives
and employees of the Company and its subsidiaries. In May 1999, the shareholders
approved  an  amendment  to the  1997  Stock  Incentive  Plan  (the   1997  Plan
Amendment )  to increase  the number of shares of Common  Stock with  respect to
which  options may be granted under the 1997 Stock  Incentive  Plan to 1,000,000
and  increased  the  number of  options  which may be  granted to any one person
during  any one year  from  50,000 to  75,000.  The  Board of  Directors  or the
Compensation  Committee is authorized to select  recipients and to establish the
exercise price, number of shares, option term and other provisions of any grant.
As of March 30,  2000,  options  covering  594,592  shares of Common  Stock were
granted  pursuant  to the 1997  Stock  Incentive  Plan  (523,392  of which  were
outstanding as of such date).

     During 1999, Messrs.  Farren and DeMars were granted options under the 1997
Stock  Incentive  Plan with respect to 5,000 and 10,000  shares of Common Stock,
respectively.  The options  granted to Messrs.  Farren and DeMars vest  annually
over four years following the grant date based upon continued  employment by the
Company over such period.  (See the table captioned   Option Grants in 1999  for
the exercise price applicable to those options. )

     The  Non-Employee  Director  Stock Option Plan permits the grant of options
with respect to 100,000 shares of Common Stock to the non-employee  directors of
the Company.  In May 1999, the shareholders of the Company approved an amendment
to the  Non-Employee  Director Stock Option Plan (the  Director Plan Amendment )
to increase the number of shares of Common  Stock with respect to which  options
may be granted under the Director Plan to 150,000.  As of March 30, 2000 options
covering 58,332 shares of Common Stock were granted pursuant to the Non-Employee
Director  Stock Option Plan (44,999 of which were  outstanding as of such date).
During  1999,  no options  were  granted to the  non-employee  directors  of the
Company with respect to shares of Common Stock.

     With the exception of the grant under the 1994 Stock Option Plan, the grant
of options under the Non-Employee  Director Option Plan and the grant of options
under the 1997 Stock Option Plan, the Company has no other option plans.

         Executive Incentive Compensation Plan

     Effective  as of the  Company's  initial  public  offering,  the  Board  of
Directors  adopted the Executive  Incentive  Compensation  Plan (the   Incentive
Plan ).  The Incentive  Plan provides for the payment of additional  annual cash
bonuses if the  Company's  after-tax  earnings  for the fiscal year  (determined
without  regard to  payments  under the  Incentive  Plan)  exceeds  17.5% of the
Company's  Average Common Equity (as defined below) for such fiscal year. If the
threshold  is  satisfied  in  any  given  fiscal  year,   the  aggregate   award
compensation  that will be paid  under the  Incentive  Plan for that  particular
fiscal  year  (the   Incentive  Pool )  will be equal  to 2.5% of the  Company's
pre-tax  earnings  (determined  after deduction for payments under the Incentive
Plan),  to the extent that after-tax  earnings  (determined  after deduction for
payments  under the  Incentive  Plan) are not less than  17.5% of the  Company's
Average  Common Equity for such fiscal year.  The Average Common Equity for such
fiscal  year  is the  average  of the  balance  of  equity  attributable  to the
outstanding Common Stock of the Company (including par value, additional paid in
capital and retained earnings),  as reflected in the financial statements of the
Company at the end of each quarter  during the fiscal year. The entire amount in
each  Incentive  Pool will be paid in cash to the  Incentive  Plan  participants
within three and one-half  months after the last day of the fiscal year to which
such  Incentive  Pool relates.  Not more than 75% of the Incentive  Pool will be
paid to the Chief  Executive  Officer,  the  President  and the Chief  Financial
Officer of the  Company,  with each such  individual's  share of such  aggregate
amount to be determined by the Chief  Executive  Officer and subject to approval
of the Board of  Directors.  The balance of the  Incentive  Pool will be paid to
other  senior  management  employees of the Company as  determined  by the Chief
Executive  Officer and subject to the  approval  of the Board of  Directors.  No
awards were made under the Incentive Plan for 1999 or 1998.

         Report of the Compensation Committee

     During 1999 the Compensation Committee (hereinafter,  the "Committee"), was
comprised of two out of six of the Company's directors, Stanley Green and Curtis
S. Lane.  The  Committee  reviews and approves the  compensation  of each of the
executive officers of the Company (hereinafter,  the "Officers").  The Committee
also administers employee stock option plans and other benefit plans.

     The Company's  compensation program for Officers is designed to reward such
officers for their individual  performance and contribution to the Company while
at the same time being tied directly to the Company's overall  performance.  The
Committee and the Board of Directors believe that a direct relationship  between
Officers'  compensation and the Company's performance is a very important factor
in achieving  the  Company's  objective of  maximizing  shareholder  value.  The
Company's  executive   compensation   program  consists  of  a  base  salary,  a
discretionary  cash bonus plan, and  participation  in the 1997 Stock  Incentive
Plan and the Incentive Plan.

     During 1999, the Compensation  Committee, on recommendation of the Chairman
and Chief  Executive  Officer,  authorized  the  granting of options to purchase
145,541 shares of the Company's  common stock to  forty-three  (43) employees of
the Company under the 1997 Stock  Incentive  Plan. No awards were made under the
Executive Incentive Compensation Plan for 1999.

     During 1999, the Chief Executive Officer received a base salary of $302,500
plus other  amounts  as  provided  for in his  employment  agreement.  The Chief
Executive  Officer did not  receive a cash bonus for 1999.  In  determining  the
Chief Executive Officer's  compensation package, the Compensation Committee uses
the  same  criteria  as for  all  other  Officers,  as  well  as the  comparable
compensation  packages of other  chief  executive  officers  in other  financial
service companies and considers the extensive  experience of the Chief Executive
Officer in the  development of specialty  finance  companies.  The  Compensation
Committee did not recommend the payment of a cash bonus after  consideration  of
the Company's failure to achieve sufficient  numbers of key business  objectives
in 1999.


                             COMPENSATION COMMITTEE

                                                              Stanley Green
                                                              Curtis Lane


                  Stock Price Performance Graph

     The following graph compares the total return of the Company's Common Stock
with the Center for Research in Securities  Prices  ("CRSP")  Total Return Index
for the Nasdaq Stock  Market (U.S.  Companies)  (the  Nasdaq  Stock  Market-U.S.
Index ) and the CRSP Total Return Index for Nasdaq Financial Stocks (the  Nasdaq
Financial  Index ) during the period commencing on November 6, 1997, the date of
the Company's  initial  public  offering,  and ending on December 31, 1999.  The
comparison assumes $100 was invested on November 6, 1997 in the Company's Common
Stock,  the Nasdaq Stock  Market-U.S.  Index, and the Nasdaq Financial Index and
assumes the reinvestment of all dividends, if any.
<TABLE>
<CAPTION>

                                           11/6/97*               12/31/97        12/31/98        12/31/99
                                        ------------           ------------    ------------    ------------
<S>                                           <C>                   <C>              <C>             <C>
LINC Capital, Inc.                            $100                  $135             $57             $33
Nasdaq Stock Market - U.S. Index               100                    97             137             247
Nasdaq Financial Index                         100                   107             104             103
         *The Company's Common Stock began trading publicly on November 6, 1997.

</TABLE>

<PAGE>

Item 12.      Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 30, 2000, (a) by each person
known  by the  Company  to own  beneficially  more  than  five  percent  of such
outstanding  Common  Stock,  (b) by each  director,  (c) by the Chief  Executive
Officer and the next four most highly compensated executive officers, and (d) by
all  executive  officers and  directors of the Company as a group.  Each of such
shareholders  has sole voting and  investment  power as to shares  shown  unless
otherwise noted.

<TABLE>
<CAPTION>
                                                                           Shares Owned      Percent of
         Name                                                             Beneficially (2)      Class

         <S>                                                                <C>                 <C>
         Martin E. Zimmerman (1)(5)(7)..........................            2,919,129           51.4%
         Wellington Management Company, LLP (3).................              513,200            9.4
         Allen P. Palles (4) (5)(7).............................              352,033            6.2
         Robert E. Laing (4)(5)(7)..............................              350,324            6.2
         Stanley Green (6).......................................             114,967            2.0
         Curtis S. Lane.........................................               69,659            1.2
         Terrence J. Quinn......................................               52,507             *
         Gerard M. Farren.......................................               18,200             *
         William F. DeMars......................................               12,500             *
         All directors and executive officers as a group (10
         persons)...............................................            4,428,636           77.9%
         _________________
      *  Represents less than 1%.
</TABLE>

(1)  Includes  624,674 shares held by Mr.  Zimmerman as trustee under trusts for
     the benefit of two of his children,  23,000 shares held by LFC Capital,  an
     entity controlled by Mr.  Zimmerman,  and 702,357 shares held by Mr. Laing,
     Mr. Palles  (including  30,000 shares held by The Palles Family Trust,  the
     beneficiaries  of which are Mr.  Palles'  wife and children and under which
     Mr. Palles has disclaimed a beneficial interest) and 146,986 shares held by
     a former employee of the Company for which Mr. Zimmerman holds proxies.

(2)  Includes  shares  obtainable  upon  exercise of stock  options which are or
     become exercisable prior to May 30, 2000 as follows: Mr. Zimmerman,  55,641
     shares;  Mr. Palles,  55,389 shares;  Mr. Laing,  78,496 shares;  Mr. Lane,
     13,333 shares;  Mr. Green,  18,333 shares;  Mr. Quinn,  13,333 shares;  Dr.
     Farren,  5,000 shares;  Mr. DeMars,  12,500  shares;  and all directors and
     executive officers as a group, 209,854 shares. The percentages set forth in
     the above table give effect to the exercise of these options.

(3)  Share  ownership  data was  provided  on Form 13G as of February 9, 1999 as
     filed by the holder on such date. The address of this entity as provided on
     Schedule 13G is 75 State Street, Boston, Massachusetts 02109

(4)  All shares are  subject to a proxy  held by Mr.  Zimmerman,  except  shares
     obtainable  upon exercise of stock  options under the 1997 Stock  Incentive
     Plan which are or become exercisable prior to May 30, 2000 as follows:  Mr.
     Palles, 20,532 shares and Mr. Laing, 43,639 shares.

(5)  This person's address is 303 East Wacker Drive,  #1000,  Chicago,  Illinois
     60601.

(6)  Includes  88,799  shares  held  by Mr.  Green  and  Danielle  Zimmerman  as
     trustee(s)  under a trust for the benefit of Justine and Lauren  Zimmerman,
     Mr. Zimmerman's daughters.

(7)  Includes  warrants issued in connection with Preferred Stock purchase.  The
     initial  grant was 87,000 for Mr.  Zimmerman,  14,500  for Mr.  Laing,  and
     11,600  for Mr.  Palles.  The  warrrants  vest the  last day of each  month
     starting  February  29, 2000 with the last  vesting  September  30, 2000 as
     follows: 21,750 per month for Mr. Zimmerman,  3,625 per month for Mr. Laing
     and 2,900 per month for Mr. Palles.

<PAGE>

Item 13.      Certain Relationships and Related Transactions

     Effective as of November 12, 1997 and simultaneously with completion of the
Company's initial public offering, the Company distributed all of the issued and
outstanding  stock  of  LFC  Capital,  Inc.  (formerly  known  as  LINC  Finance
Corporation)  ( LFC  Capital ) to Mr.  Martin E.  Zimmerman,  Chairman and Chief
Executive  Officer of the  Company  and Mr.  Allen P.  Palles,  a  Director  and
Executive  Vice  President  and  Chief  Financial  Officer  of the  Company,  in
redemption of 446,483 shares and 36,209 shares, respectively, of Common Stock of
the  Company  held by them.  The  principal  business  activity  of LFC  Capital
consists  primarily of managing  liquidation of a portfolio of leased diagnostic
imaging  equipment as well as managing  several limited  partnerships  and other
assets that were not used in the Company's  ongoing business.  In addition,  LFC
Capital  invests in real  estate and the  equity  and debt  securities  of other
companies. Mr. Zimmerman is Chairman of LFC Capital and Mr. Palles is a director
of LFC Capital and they are compensated by it for their services.

     Pursuant to an  agreement  (the   Servicing  Agreement )  with LFC Capital,
which  became  effective on November  12,  1997,  the Company  agreed to provide
limited  servicing,  including billing and cash application for the portfolio of
leases  owned by LFC Capital  until  December  31,  1999.  The Company  received
$156,000  and  $270,000   for  such   services   performed  in  1999  and  1998,
respectively.  The Company has agreed to provide such services to LFC Capital in
2000 on a month-to-month  basis for $4,000 per month. In addition,  LFC Capital,
Inc.  subleased  from the Company,  approximately  1,000 square feet in 1999 and
2,500 square feet in 1998 and 1997 of space adjacent to the Company's  executive
offices for  approximately  $27,000 in 1999 and $68,000 in 1998 and 1997,  which
was equal to the Company's cost for such space. In 2000, LFC Capital,  Inc. will
sublease from the Company on a month-to-month  basis,  approximately  600 square
feet for approximately $1,000 per month which is equal to the Company's cost for
such space.  Thirty-day  notice is required by either party to  terminate  these
agreements.  The Servicing  Agreement  prohibits LFC Capital from competing with
the  Company for the longer of (i) three years or (ii) the period of time during
which Messrs. Zimmerman or Palles are employed by the Company plus one year. The
Servicing  Agreement  also  requires LFC Capital to refer all lease  origination
opportunities  it encounters  to the Company.  Effective  January 31, 2000,  Mr.
Palles terminated his relationship with LFC Capital.

     In  connection  with the  distribution  of the  stock of LFC  Capital,  LFC
Capital has also agreed to pay the Company an aggregate of $2,508,000  until the
maturity  of the  Company's  8 1/4%  Subordinated  Debentures  due 2003 of which
$365,000 was paid during 1999 and $308,000 was paid during 1998.

     As of March 30,  2000,  LFC  Capital  owns 23,000  shares of the  Company's
Common Stock.

     Terrence J. Quinn,  a director of the Company  also serves as  President of
LFC Capital and is  compensated  for his services to LFC Capital by LFC Capital.
Mr.  Quinn also serves as a  consultant  to the Company  with respect to various
aspects of the  Company's  business  and  strategic  issues.  Fees paid for such
services by the Company were  $156,000 for the year ended  December 31, 1999 and
$188,000 for the year ended December 31, 1998 (including, a referral fee paid in
connection  with the  acquisition of Comstock  Leasing,  Inc.). A portion of the
such fees were paid pursuant to the terms of a one-year consulting agreement the
Company  entered  into with Mr.  Quinn on October  31,  1997 to perform  certain
consulting  services in  connection  with the Company's  activities  relating to
acquisitions  of  leasing  and  rental  companies  as  well as  other  strategic
initiatives  (the   Consulting  Agreement ).  Fees  paid  under  the  Consulting
Agreement  during  1998  were  dependent  on the  number  of days of  consulting
services  provided per month with a base monthly fee of $6,250 for three days of
consulting  services  provided per month and $2,500 per day for each  additional
day, plus reimbursement for travel and entertainment  expenses directly incurred
in connection  with the services  provided to the Company.  In 1998, the term of
the Consulting  Agreement was extended  through  October 31, 1999,  with the per
diem decreased  from $2,500 to $2,100 per day for each  additional day in excess
of the three (3) days.  The  Consulting  Agreement  with Mr.  Quinn has not been
renewed by the Company;  however,  the Company continues to engage Mr. Quinn for
consulting  services  on a per diem  basis.  The Company may also pay such other
additional fees relating to the success of an acquisition  transaction as may be
approved by the Compensation Committee of the Board of Directors. The Consulting
Agreement is subject to  termination  by the Company or Mr. Quinn on ninety (90)
days notice.

     During  1997,  Robert E.  Laing,  President,  Chief  Operating  Officer and
Director of the Company,  and Allen P. Palles,  Executive Vice President,  Chief
Financial Officer and Director of the Company issued promissory notes secured by
shares of the  Company's  Common  Stock to the  Company in  connection  with the
exercise of stock options by them. The secured promissory notes bear interest at
8%. In 1998, Mr. Laing repaid all of such indebtedness. As of December 31, 1999,
the indebtedness  outstanding  under the note issued by Mr. Palles was $203,000,
which was the largest indebtedness outstanding under the note for such year.

                                                                Part IV

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

(a)      (1) Financial Statements

            See Index to Financial Statements at page F-1.

                  (2) Financial Statement Schedules

     Schedule  II  Valuation  and  Qualifying  Accounts  is  at  page  S-2.  All
schedules,  other than those included  herein,  are omitted because they are not
applicable or the required  information is shown in the financial  statements or
notes. (3) Exhibits


(3) Exhibits

Exhibit                     Document Description
Number                      --------------------
------

3.1  Form of Restated Certificate of Incorporation of the Company  (incorporated
     by reference to Exhibit 3.1 to the Company's Registration Statement on Form
     S-1 (Registration No. 333-34729) ("Registration Statement 333-34729")

3.2  Form of  Restated  Bylaws of the  Company  (incorporated  by  reference  to
     Exhibit 3.2 on Registration Statement 333-34729)

4.1  Form of certificate  representing  shares of Common Stock, $0.001 par value
     per  share  (incorporated  by  reference  to  Exhibit  4.1 on  Registration
     Statement 333-34729)

4.2(a) Offering of Units of Series A 8% Senior Cumulative Preferred Stock; Stock
     Purchase Agreement

4.2(b) Certificate of  Designation of the Rights and  Preferences of Series A 8%
     Senior  Cumulative  Preferred  Stock 4.2(c) Stock  Purchase  Agreement  and
     Registration  Rights  Agreement  10.1(a)  Third  Amended and Restated  Loan
     Agreement,  among the  Company,  the  various  lending  institutions  named
     therein  and Fleet Bank,  N.A.,  as Agent  (incorporated  by  reference  to
     Exhibit 10.1(a) on Registration Statement 333-34729)

10.1 (b) Amendment No. 1 to Third Amended and Restated Loan Agreement, among the
     Company,  the various  lending  institutions  named therein and Fleet Bank,
     N.A.,  as  Agent   (incorporated   by  reference  to  Exhibit   10.1(b)  on
     Registration  Statement 333-34729) 10.1(c) Amendment No. 5 to Third Amended
     and  Restated  Loan  Agreement,  among the  Company,  and  various  lending
     institutions named therein and Fleet Bank, N.A., as Agent  (incorporated by
     reference  to the  Company's  Form  10-Q  for the  quarterly  period  ended
     September 30, 1998)

10.1 (d) Amendment No. 9 to the Third Amended and Restated Loan Agreement, among
     the Company, the various lending institutions named therein and Fleet Bank,
     N.A., as Agent  10.1(e)  Amendment No. 10 to the Third Amended and Restated
     Loan Agreement,  among the Company,  the various lending institutions named
     therein and Fleet Bank, N.A., as Agent

10.2 Agreement  between  the  Company  and  LINC  Finance   Corporation  ("LFC")
     regarding  distribution of LFC shares and related matters  (incorporated by
     reference to Exhibit 10.2 on Registration Statement 333-34729)

10.3 Employment  Agreement  for Mr.  Zimmerman  (incorporated  by  reference  to
     Exhibit 10.3 on Registration Statement 333-34729)

10.4 Form of Employment  Agreements  for Messrs.  Palles,  Laing,  Erbes and Dr.
     Farren (incorporated by reference to Exhibit 10.4 on Registration Statement
     333-34729)

10.5 Non-Employee  Director  Option Plan  (incorporated  by reference to Exhibit
     10.5 on Registration  Statement  333-34729)  10.5(a) Amendment No. 1 to the
     Non-Employee Director Option Plan (incorporated by reference to Exhibit A-2
     filed  with  the  Company's  Proxy  Statement  dated  April  28,1999)  10.6
     Executive Incentive Compensation Plan (incorporated by reference to Exhibit
     10.6 on  Registration  Statement  333-34729)  10.7 1994 Stock  Option  Plan
     (incorporated  by  reference  to  Exhibit  10.7 on  Registration  Statement
     333-34729)

10.8 1997 Stock  Incentive  Plan  (incorporated  by reference to Exhibit 10.8 on
     Registration Statement 333-34729)

10.8(a)  Amendment  No. 1 to the 1997  Stock  Incentive  Plan  (incorporated  by
     reference to Exhibit A-1 filed with the  Company's  Proxy  Statement  dated
     April 28, 1999)

10.9 Consulting  Agreement for Mr. Quinn  (incorporated  by reference to Exhibit
     10.9 on Registration Statement 333-34729)

10.10Form of Indemnification  Agreement for Non-Employee Directors (incorporated
     by reference to Exhibit 10.10 on Registration Statement 333-34729)

10.11(a) Receivables  Purchase  Agreement,  among the Company,  LINC Receivables
     Corporation,  Blue Keel  Funding,  LLC,  and  Fleet  Bank,  N.A.,  as agent
     (incorporated  by reference to the  Company's  Form 10-Q for the  quarterly
     period ended September 30, 1998)


<PAGE>




Exhibit
Number                         Document Description
-------                        --------------------

10.11(b) Second Amendment to Receivables Purchase Agreement,  among the Company,
     LINC Receivables Corporation, Blue Keel Funding, LLC, and Fleet Bank, N.A.,
     as agent  (incorporated  by  reference to the  Company's  Form 10-Q for the
     quarterly  period ended  September 30, 1998) 10.11(c)  Fourth  Amendment to
     Receivables  Purchase  Agreement,   among  the  Company,  LINC  Receivables
     Corporation, Blue Keel Funding, LLC, and Fleet Bank, N.A., as agent

10.12Asset Purchase Agreement by and among LINC Capital, Inc., Spectra Precision
     Credit Corp., Spectra Precision Funding Corporation, and Spectra Precision,
     Inc. dated June 30, 1998  (incorporated  by reference to the Company's Form
     8-K dated June 30, 1998)

10.13Receivables  Purchase Agreement,  among the Company,  LINC Receivables 1999
     Corporation,  Blue Keel Funding,  LLC, and Fleet Bank, N.A., as agent 10.14
     Sale  Agreement,  among LINC Capital,  Inc., as Seller,  and LINC Equipment
     Receivables  One,  LLC,  as  Purchaser  21.1  Subsidiaries  of the  Company
     (incorporated  by  reference  to  Exhibit  21.1 on  Registration  Statement
     333-34729)

27.1 Financial Data Schedule


         (b)      Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the last quarter of
the fiscal year ended December 31, 1999.

<PAGE>

                                   SIGNATURES

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

Dated: April 13, 2000

                              By:     /s/  Robert E. Laing
                                           ---------------
                                           Robert E. Laing
                                           President and Chief Operating Officer

                              By:    /s/   Allen P. Palles
                                           ---------------
                                           Allen P. Palles
                                           Executive Vice President and Chief
                                           Financial Officer

                                           (principal executive officers)

     Pursuant to the  requirements  of the  Securities  Exchange  of 1934,  this
report has been signed  below on April 13,  2000,  by the  following  persons on
behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
                     Signature                                                           Capacity
                    ------------                                                       ------------

<S>                                                                                <C>
            /s/ Martin E. Zimmerman
-----------------------------------------------------------
                  Martin E. Zimmerman                                              Chairman of the Board

            /s/ Allen P. Palles
-----------------------------------------------------------
                  Allen P. Palles                                           Chief Financial Officer and Director
                                                                                  (principal financial officer)

            /s/ Robert E. Laing
-----------------------------------------------------------
                  Robert E. Laing                                                         Director


            /s/ Stanley Green
-----------------------------------------------------------
                  Stanley Green                                                           Director


            /s/ Terrence J. Quinn
-----------------------------------------------------------
                 Terrence J. Quinn                                                        Director


            /s/ Curtis S. Lane
-----------------------------------------------------------
                  Curtis S. Lane                                                          Director

</TABLE>
<TABLE>
<CAPTION>
                                         LINC CAPITAL, INC. AND SUBSIDIARIES
                                                     Index to
                                         Consolidated Financial Statements


                                                                                                                 Page
    <S>                                                                                                           <C>

    Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          F-2

    Consolidated Balance Sheets, December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . .         F-3

    Consolidated Statements of Operations, years ended December 31, 1999, 1998,
      and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          F-4

    Consolidated Statements of Stockholders' Equity, years ended December 31, 1999, 1998, and 1997 . . .          F-5

    Consolidated Statements of Cash Flows, years ended December 31, 1999, 1998,
       and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         F-6

    Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-8

</TABLE>
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
 and Stockholders
LINC Capital, Inc.:

We have audited the  accompanying  consolidated  balance sheets of LINC Capital,
Inc.  and  subsidiaries  as of  December  31,  1999 and  1998,  and the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the years in the  three-year  period  ended  December  31,  1999.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsiblilty  is to report on these  consolidated  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 1998 and 1997 consolidated  finacial statements referred to
above present fairly, in all material  respects,  the financial position of LINC
Capital, Inc. and subsidiaries as of December 31, 1998, and the results of their
operations  and their  cash flows for each of the years in the  two-year  period
ended  December 31, 1998,  in  conformity  with  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that LINC Capital,  Inc. and subsidiaries  will continue as a going concern.  As
discussed in Note 2 to the consolidated  financial  statements,  the Company has
suffered a loss in 1999 and is not in compliance with certain debt convenants of
existing credit  facilities.  During April 2000, the Company's  primary group of
lending  banks has  effectively  ceased  advances  under the  revolving  line of
credit, and the Company has substantially  curtailed new lease originations.  At
December  31,  1999,  these  circumstances  raise  substantial  doubt  about the
entity's ability to continue as a going concern. Management's plans in regard to
these  matters are also  described  in Note 2. The 1999  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

Because of the  significance  of the  uncertainty  discussed  in the  preceeding
paragraph,  we are unable to express,  and we do not express,  an opinion on the
accompanying 1999 consolidated financial statements.


                                                         /s/ KPMG LLP

Chicago, Illinois
April 13, 2000
                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                                   LINC CAPITAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED BALANCE SHEETS

                              (Dollars in thousands, except per share data)



                                                                                                December 31,
                                                                                ----------------------------------------

                                Assets                                                  1999                   1998
                                                                                 ----------------         --------------
<S>                                                                                   <C>                    <C>

Net investment in direct finance leases and loans......................               $436,820               $164,970

Equipment held for rental and operating leases, net....................                 26,115                 30,659

Accounts receivable....................................................                 13,354                  7,593

Securitization retained interest.......................................                    444                 17,026

Restricted cash........................................................                 11,254                  3,935

Other assets ..........................................................                 17,282                 12,535

Goodwill                                                                                 3,225                 10,738

Cash and cash equivalents..............................................                  4,394                  1,428
                                                                            -------------------         ----------------

Total assets ..........................................................               $512,888               $248,884
                                                                            ===================         ================

                 Liabilities and Stockholders' Equity

Senior credit facility and other senior notes payable..................              $102,754                 $96,646

Recourse debt..........................................................                 3,152                   8,017

Nonrecourse debt.......................................................               348,098                  68,616

Accounts payable.......................................................                15,208                   7,443

Accrued expenses.......................................................                 8,795                   8,775

Customer holdbacks..........................................................            7,607                  10,328

Subordinated debentures................................................                 6,059                   5,694

Deferred income taxes..................................................                  ----                   1,924
                                                                               ----------------           ---------------

Total liabilities......................................................               $491,673               $207,443
                                                                               ----------------           ---------------


Stockholders' equity:

Common stock, $0.001 par value, 15,000,000 shares authorized;
    5,330,953 and 5,249,591 shares issued;
    5,265,050 and 5,183,688 shares outstanding..............................                  5                     5

Additional paid-in capital..................................................             29,797                29,567

Deferred compensation from issuance of options..............................               (12)                 (124)

Stock note receivable.......................................................              (182)                 (182)

Treasury stock, at cost; 65,903 shares......................................              (287)                 (287)

Accumulated other comprehensive income (loss)...............................                932                  (34)

Retained earnings (accumulated deficit).....................................            (9,038)                12,496
                                                                                ----------------          ----------------

       Total stockholders' equity...........................................             21,215                41,441
                                                                                ----------------           ---------------


       Total liabilities and stockholders' equity...........................           $512,888              $248,884
                                                                                ================           ===============

                                     See accompanying notes to consolidated financial statements.
</TABLE>
                                       F-3
<PAGE>

<TABLE>
<CAPTION>

                                          LINC CAPITAL, INC. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF OPERATIONS

                                     (Dollars in thousands, except per share data)

                                                                                Years ended December 31,
                                                                     ------------------------------------------------

                                                                           1999             1998              1997
                                                                      -------------     -------------     -----------
Revenues:

  <S>                                                                    <C>             <C>                <C>
  Sales of equipment............................................         $34,941         $32,929            $23,131

  Direct finance lease income...................................          33,438          12,300              5,981

  Interest income...............................................           3,573           2,194                877

  Rental and operating lease revenue............................          10,942           9,412              7,492

  Servicing fees and other income...............................           6,603           3,792              2,026

  Gain on sale of lease receivables.............................           1,284           6,839                880

  Gain on equipment residual values.............................           1,321           1,752                860

  Gain on equity participation rights...........................           1,603           3,824                430
                                                                   --------------      -------------       ------------

  Total revenues................................................          93,705          73,042             41,677
                                                                   --------------      -------------       ------------

  Expenses:

  Cost of equipment sold........................................          28,526          26,789             18,549

  Selling, general and administrative...........................          23,790          17,824              8,973

  Interest......................................................          24,686           8,956              4,298

  Depreciation of equipment under rental agreements and
    operating leases............................................           7,273           6,073              4,226

  Amortization of intangibles...................................           1,428             502                280

  Provision for credit losses...................................          15,966           5,280              1,253

  Impairment loss on assets.....................................          14,177             ---                ---

  Restructuring charges.........................................             700             ---                ---
                                                                    --------------      -------------     ------------

        Total expenses..........................................         116,546          65,424              37,57
                                                                    --------------      -------------     ------------

  Earnings (loss) from continuing operations before income taxes
     and minority interest........................................      (22,841)           7,618              4,098

  Income tax expense (benefit)....................................       (1,307)           3,024              1,627
                                                                      -------------    --------------    -------------

  Earnings (loss) from continuing operations before minority
     interest.....................................................      (21,534)           4,594              2,471

  Minority interest...............................................         ---               ---               (13)
                                                                      -------------    --------------    -------------

  Net earnings (loss) from continuing operations..................      (21,534)           4,594              2,458

  Discontinued operations:

         Loss from discontinued operations, net of
             income tax benefit for the year ended 1997
             of $258..............................................          ---               ---              (402)
                                                                    ------------       --------------     -------------

  Net earnings (loss).............................................     $(21,534)           $4,594             $2,056
                                                                    =============       ==============    =============
  Per common share:
      Net earnings (loss) from continuing operations:
        Basic  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ (4.10)            $ .89             $  .73
        Diluted  . . . . . . . . . . . . . . . . . . . . . . . . . . .    (4.10)              .86                .72

      Net earnings (loss):
        Basic  . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (4.10)              .89                .61
        Diluted  . . . . . . . . . . . . . . . . . . . . . . . . . . .    (4.10)              .86                .61

                                   See accompanying notes to consolidated financial statements.


</TABLE>
                                       F-4
<PAGE>

<TABLE>

                                            LINC CAPITAL, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                       Years ended December 31, 1999, 1998 and 1997
                                       (Dollars in thousands, except per share data)


                                                                                         Compre-  Retained     Accumulated
                                          Additional  Deferred  Stock    Treasury Stock  hensive  Earnings     Other
                          Common Stock     Paid-in    Compen-   Note         at cost     Income  (Accumulated) Comprehensive
                          Shares  Amount   Capital    sation  Receivable Shares  Amount  (Loss)   Deficit      Income (Loss) Total

                       ------------------------------------------------------------------------------------------------------------
<CAPTION>
<S>                        <C>        <C>    <C>       <C>      <C>     <C>       <C>      <C>      <C>            <C>     <C>
Balance at
December 31,1996           3,012,757  $ 3    $ 978     $ -      $ -     61,999  $ (270)             $12,883      $ 348   $ 13,942
Comprehensive income:
   Net income............                                                                   $2,056    2,056                   205

   Other comprehensive
   income:
    Unrealized gains on
     Securities..........         -     -        -       -        -         -        -         578                 578        578
                                                                                          ---------
Comprehensive income.....         -     -        -       -        -         -        -      $2,634
                                                                                          ---------
Purchase and sale of
stock, net............... 2,669,626     2     27,672      -     (511)    3,904     (17)                   -          -     27,146
Distribution of LFC
  Capital,
  Inc. ..................  (482,792)    -       (81)     -        -         -        -               (7,037)         -    (7,118)
Income tax benefit from
stock options exercised..         -     -         50     -        -         -        -                    -          -         50
Deferred compensation from
   issuance of stock
options..................         -     -        221   (171       -         -        -                    -          -         50
                            ---------------------------------------------------------------          -------------------------------
Balance at December 31,1997 5,199,591   5     28,840   (171)   (511)    65,903    (287)                7,902       926     36,704
                            ---------------------------------------------------------------          -------------------------------

Comprehensive income:
   Net income..............       -     -         -      -        -         -        -       $4,594    4,594         -      4,594
                                                                                            ---------
   Other comprehensive
   income:
   Unrealized loss on
     Securities............       -    -         -      -        -          -        -         (862)       -         -
  Translation adjustment...       -    -         -      -        -          -        -          (98)
                                                                                            ---------
  Other Comprehensive
  loss....................                                                                     (960)               (960)    (960)
                                                                                           ----------
Comprehensive income              -    -         -      -        -         -         -       $ 3,634       -         -          -
                                                                                           ----------
Purchase and sale of
stock, net................    50,000    -       727     -        -         -         -                     -         -        727
Payment received on note..         -    -         -      -      329         -         -                    -         -        329
Deferred compensation from
   issuance of stock
options...................         -    -         -      47       -         -         -                     -         -        47
                            ----------------------------------------------------------------          -----------------------------
Balance at December 31,
1998...................... 5,249,591  $ 5   $29,567  $(124)  $ (182)   65,903   $(287)                $12,496     $(34)    41,441
                           -----------------------------------------------------------------          ------------------------------

Comprehensive loss:
   Net loss................       -       -          -         -           -     -        - $(21,534) ( 21,534)      -    (21,534)
Other comprehensive                                                                         --------
   income:
    Unrealized gain on
     Securities............       -       -          -         -         -       -        -      707                 -           -
    Translation adjustment.       -       -          -         -         -       -        -      259        -        -           -
                                                                                             ---------
   Other comprehensive
   income..................        -      -          -         -         -       -        -      966        -        966       966
                                                                                             --------
Comprehensive loss.......          -      -          -         -         -       -        -  $(20,568)      -         -         -
                                                                                             ---------
Purchase and sale of
 stock, net................    81,362     -        395         -         -       -        -                 -         -        395

Deferred compensation from
   issuance of stock
options..................          -      -       (165)      112         -       -        -                 -         -        (53)
Balance at December 31,     -----------------------------------------------------------------           ---------------------------
1999......................   5,330,953   $ 5    $29,797     $(12)    $(182)  65,903   $ (287)           $(9,038)    $932   $21,215
                            -----------------------------------------------------------------           ---------------------------

                                     See accompanying notes to consolidated financial statements.
                                       F-5

</TABLE>


<TABLE>


                                           LINC CAPITAL, INC. AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   (Dollars in thousands)


                                                                          Years ended December 31,
                                                              -------------------------------------------------

                                                                  1999              1998             1997
                                                              -------------     -------------    --------------
<CAPTION>
<S>                                                              <C>                  <C>              <C>
Cash flows from operating activities:

   Net earnings (loss).....................................      $(21,534)            $4,594            $2,056

     Adjustments to reconcile net earnings to net
        cash provided by continuing operations:

          Net loss from discontinued operations............           --                --                  402

          Depreciation and amortization....................          9,668             6,904              4,665

          Direct finance lease income......................       (33,438)          (12,300)            (5,981)

          Payments on direct finance leases................        153,319            66,961             27,148

          Deferred income taxes............................        (2,357)             2,269              1,194

          Provision for credit losses......................         15,966             5,280              1,253

          Gain on sale of lease receivables................        (1,284)           (6,839)              (880)

          Gain on equity participation rights..............        (1,603)           (3,824)              (430)

          Impairment loss on assets........................         14,177                --                 --

          Amortization of discount.........................            365               308                259

          Deferred compensation............................           (53)                47                 50

          Minority interest................................            --                 --                 13

     Changes in assets and liabilities:

          Decrease (increase) in receivables...............        (5,687)                44            (4,688)

          Decrease (increase) in restricted cash...........        (7,319)           (3,252)                293

          Increase in other assets and goodwill............        (4,777)           (6,119)            (5,111)

          Increase (decrease) in accounts payable..........          6,050             1,334              (119)

          Increase (decrease) in accrued expenses .........           (36)             2,855                843

          Increase (decrease) in customer holdbacks .......        (2,721)             6,993                417
                                                              -------------     -------------    --------------

Cash provided by continuing operations.....................        118,736            65,255             21,384

     Cash flows from discontinued operations...............           ---               ---              10,198
                                                              -------------     -------------    --------------

Cash provided by operating activities......................        118,736            65,255             31,582
                                                              -------------     -------------    --------------

Cash flows from investing activities:

     Cost of equipment acquired for lease and rental ......      (339,293)          (274,304)          (78,366)

     Cash used in acquisitions, net of cash acquired ......        (4,977)           (39,180)                --

     Funding of securitization retained interest ..........            --            (20,077)           (3,381)

     Receipts on securitization retained interest .........         5,656              6,121                 --

     Fixed assets purchased................................       (1,801)            (1,092)              (753)

     Proceeds from disposal of discontinued operations.....            --                --               2,265

     Proceeds from sale of investments.....................         1,603              3,824                430
                                                              -------------     -------------    --------------

               Net cash used in investing activities.......      (338,812)         (324,708)           (79,805)
                                                              -------------     -------------    --------------



          See accompanying notes to consolidated financial statements.
</TABLE>
                                       F-6

                                      LINC CAPITAL, INC. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)

                                           (Dollars in thousands)

<TABLE>

                                                                             Years ended December 31,
                                                                 --------------------------------------------------

                                                                      1999              1998             1997
                                                                 ---------------    -------------    --------------
<CAPTION>
<S>                                                                    <C>               <C>               <C>
Cash flows from financing activities:
     Net increase in notes payable.........................              6,108           55,850            8,512

     Proceeds from recourse and nonrecourse debt...........            501,352           63,214           17,285

     Repayments of recourse and nonrecourse debt...........          (238,889)         (23,507)          (8,016)

     Proceeds from sale of lease receivables...............             35,259          164,995           16,822

     Repurchase of receivables from conduit facility, net
        of  securitizaton retained interest................           (81,183)             --                --

     Proceeds from stock notes receivable..................              --                 329              --

     Purchase of stock.....................................              --                 --              (38)

     Sale of stock.........................................               395               --            27,184

     Payment of notes from discontinued operations.........              --                 --           (13,526)
                                                                 --------------     -------------    --------------

               Net cash provided by financing
                  activities...............................            223,042           260,881          48,223
                                                                    ------------     -------------    --------------

Net increase in cash and cash equivalents .................              2,966             1,428              --

Cash and cash equivalents at beginning of year.............              1,428               --               --

                                                                  --------------     -------------    --------------
Cash and cash equivalents at end of year...................             $4,394           $1,428              $ --
                                                                  ==============     =============     ==============

Supplemental disclosures of cash flow information:

     Interest paid.........................................            $20,446           $8,542          4,644

     Income taxes paid.....................................              1,075              898            275

                                     See accompanying notes to consolidated financial statements.
</TABLE>
                                      F-7
<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


(1)      Summary of Significant Accounting Policies

   Nature of Business and Basis of Presentation

     LINC Capital,  Inc. (the  "Company")  is a specialty  finance  company that
provides leasing,  asset-based financing,  and equipment rental and distribution
services to growing businesses.  The Company's principal  businesses are (i) the
direct  origination  of leases and accounts  receivable  and other  asset-backed
financing to emerging growth companies primarily serving the telecommunications,
high-tech manufacturing,  Internet-related and information technology industries
(Select  Growth  Finance),  (ii) the  financing  of leases  generated by smaller
equipment  lessors  ( Portfolio   Finance ),   (iii)  the  rental,  leasing  and
distribution  of  analytical  instruments  and related  equipment  to  companies
serving the environmental,  pharmaceutical and biotechnology  industries and the
leasing and distribution of equipment to Internet-related  businessess  ( Rental
and  Distribution),   and  (iv)  the  establishment  of  leasing  programs  for
manufacturers and distributors ( Vendor Finance ).

     The accompanying  consolidated  financial statements include the operations
of the Company and all of its subsidiaries.  All material  intercompany accounts
and transactions have been eliminated in consolidation.

   Use of Estimates

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

   Direct Finance Leases

     For direct finance  leases,  the present value of the future lease payments
and the  present  value  of the  residual  value  are  recorded  as the  initial
investment in such leases. This initial investment generally represents the cost
of leased  equipment.  Unearned lease income is equal to the difference  between
(i) the future lease  payments and residual  value and (ii) their  corresponding
present values.  Unearned lease income is amortized and recorded as revenue over
the term of the lease by  applying  a  constant  periodic  rate of return to the
declining net investment.

                                       F-8
<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


   Operating Leases

     Rental income from operating  leases with terms of twelve months or greater
and short  term  rentals  of less than  twelve  months  is  recognized  as lease
payments  become due.  Such rentals are included in rental and  operating  lease
revenue in the consolidated statements of operations.

   Depreciation

     Equipment under  operating  leases is recorded at cost and depreciated on a
straight-line basis to its estimated salvage value at the end of the lease term.
The majority of rental equipment is fully depreciated over seven years.

   Initial Direct Costs

     Initial direct costs incurred by the Company in originating  direct finance
and  operating  leases are  capitalized  at lease  commencement.  Such costs for
direct  finance  leases are  amortized  over the term of the lease by applying a
constant  periodic rate of return to the declining net investment in each lease.
Such  costs  for  operating  leases  are  amortized  over  the  lease  term on a
straight-line method.

   Securitization retained interest

     Securitization  retained interest represents amounts receivable from assets
securitized. Income from the securitization retained interest is recognized over
the life of the securitized leases using the interest method.

     Through September 30, 1998, the Company  recognized a gain upon the sale of
leases in securitizations equal to the excess of the net proceeds from the sale,
after deducting issuance expenses, over the cost basis of the leases.  Effective
October 1, 1998, the Company eliminated  gain-on-sale  treatment for securitized
leases by modifying the structure of its securitization facility such that it is
considered nonrecourse debt under generally accepted accounting principles.

   Earnings Per Share

     Basic earnings per share is computed  using the weighted  average number of
common  shares  outstanding  during the periods.  Diluted  earnings per share is
computed  using  the  weighted  average  number of common  and  dilutive  common
equivalent shares outstanding during the periods.


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

   Goodwill

     Goodwill is amortized using the straight-line method over 20 years.

   Income Taxes

     Deferred  tax  assets and  liabilities  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.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

   Statement of Cash Flows

     For purposes of the  statement  of cash flows,  the Company  considers  all
short-term  investments  with a maturity date of three months or less at date of
purchase to be cash equivalents.

   Investments

     The   Company   has    classified    its   portfolio   of   securities   as
available-for-sale.  Available-for-sale securities are stated at fair value with
unrealized gains and losses included in stockholders'  equity. Fair value of the
securities is determined based on market prices. Securities for which no readily
determinable  market  price is  available  are  recorded  at  cost.  The cost of
securities sold is based on the specific  identification method. At December 31,
1999, the Company held available-for-sale  securities with estimated fair values
of $2,448,000,  consisting of gross unrealized gains on warrants or common stock
of $1,285,000, and a cost basis of $1,163,000.  Cash proceeds received and gross
realized gains on the sale of investments for the years ended December 31, 1999,
1998  and  1997  were  $1,603,000,   $3,824,000,  and  $430,000,   respectively.
Available-for-sale securities are included in other assets.

   Stock-based Compensation

     The Company utilizes the intrinsic value based method of accounting for its
stock-based compensation arrangements.





<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


   Impairment of Assets

     The Company  recognizes  impairment losses on equipment held for rental and
operating  leases and residual values of direct finance leases when the expected
future cash flows are less than the asset's  carrying  value,  in which case the
asset is written  down to its  estimated  recoverable  value.  The Company  also
recognizes  impairment  losses on goodwill when expected  future cash flows from
the related  operations are less than the carrying value. The Company recognized
an impairment loss of $13,914,000 in 1999 primarily for goodwill  related to the
Company's  Vendor Finance  business unit, as the estimated  expected future cash
flows were less than the carrying  value.  Factors  leading to impairment were a
combination of historical  performance  and inadequate  anticipated  future cash
flows.

     Derivative Financial Instruments

     The Company uses  interest  rate swap and interest  rate cap  agreements to
establish  fixed interest rates on securitized  leases to reduce its exposure to
adverse fluctuations in interest rates. Gains or losses resulting from the early
termination of  off-balance  sheet interest rate swaps or caps would be included
in the consolidated statements of operations in the period of termination.

   Reclassifications

     Certain  reclassifications have been made in the 1998 and 1997 consolidated
financial statements to conform to the 1999 presentation.

(2)      Going Concern of the Company

     The Company  incurred an operating  loss of  $21,534,000  in 1999,  and the
Company was not in compliance  with certain debt covenants at December 31, 1999.
During March 2000,  the Company made a strategic  decision to  de-emphasize  its
traditional  leasing activities and substantially  reduce overhead and debt. The
Company  indefinitely  suspended the Portfolio  Finance  business,  which it had
scaled back dramatically in the later part of 1999, and no longer is funding new
leases in LINC Connor, one of its Vendor Finance  origination units.  Currently,
the Company is in  discussions  to sell or  refinance  components  of its Select
Growth  business  and its Vendor  Finance  business  and to use the  proceeds to
reduce borrowings under its Loan Agreement and to reduce  outstandings under its
CP Conduit Facility  available to a special purpose subsidiary of the Company as
well as to provide additional liquidity. In the event that the Company is unable
to sell individual  leasing  business units and elements of its lease portfolio,
the Company may liquidate its Select Growth activities and dramatically  further
downsize its Vendor Finance  business.  The Company  intends that its focus on a
going-forward basis will be on its profitable distribution

                       LINC CAPITAL,INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




and rental  activities.  Mangement's  plans as to its  activities are subject to
review and approval of its secured creditors as more fully discussed below.

     Furthermore,  the Company was in  violation  of the  minimum  tangible  net
worth, minimum earnings, leverage and interest coverage covenants under its Loan
Agreement at December 31, 1999.  The  violations  under the Loan  Agreement have
also resulted in  cross-defaults  in the  agreements  relating to the CP Conduit
Facility  and  the  July  Term  Securitization.  The  Company  is  currently  in
discussions with the lenders under the Loan Agreement,  the liquidity  providers
under the CP Conduit  Facility and appropriate  parties related to the July Term
Securitization  regarding  forbearance from enforcement of remedies available to
such parties as a result of the Company's  failure to comply with the applicable
covenants. During these forbearance discussions, the Company is not permitted to
borrow  additional funds under its Loan Agreement.  New lease  originations have
therefore been substantially  curtailed. In the event that the Company is unable
to  successfully  obtain such a forbearance  from these secured  creditors for a
period that enables it to sell individual leasing businesses and elements of its
lease  portfolio  the  Company  may not be able to  continue  some or all of its
business and may be required to seek  protection  under the Bankruptcy  Code. No
assurances can be made as to the Company obtaining such forbearances, that lease
originations  will commence at a level to support the operations of the Company,
or that the  secured  creditors  will  allow  management  to  implement  various
strategic  plans. In addition,  even if the Company was to  successfully  obtain
such  forbearance and  successfully  sell individual  leasing business units and
elements of its lease portfolio,  there can be no assurance that the proceeds of
such sales will  provide the Company with  sufficient  liquidity to continue its
remaining  operations.  These  circumstances  raise  substantial doubt about the
Company's  ability  to  continue  as a  going  concern.  The  1999  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.
<PAGE>
(3)      Acquisitions

     Effective  January 1, 1999,  the Company  purchased all of the  outstanding
common stock of Connor Capital Corporation,  a lessor specializing in developing
captive finance programs for equipment vendors.  Additionally,  effective August
31, 1999,  the Company  acquired the assets of Internet  Finance + Equipment,  a
distributor  and lessor of Internet  access  equipment  manufactured  by several
companies.  Both  acquisitions have been accounted for using the purchase method
of accounting and the results of operations of the acquired businesses have been
included  in the  consolidated  financial  statements  since  the  dates  of the
acquisition.  These acquisitions had no material impact on results of operations
for the year ended December 31, 1999. See note 18.

    The  consideration for the 1999  acquisitions  included  $4,977,000 in cash
payments,  net of cash acquired,  and future  contingent  cash payments of up to
$12,250,000.  The fair value of assets purchased and liabilities  assumed in the
acquisitions  were  $12,876,000  and  $12,247,000,  respectively.  Total  future
payments contingent on earnings  performance or volume of lease fundings for all
acquisitions completed by the Company, including those consummated in 1999, were
$16,012,000 at December 31, 1999.

(1)       Net Investment in Direct Finance Leases and Loans

      Net investment in direct finance leases and loans is as follows:
<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                        -----------------------------------------
                                                                               1999                    1998
                                                                        -------------------       ---------------
                                                                                         (In thousands)
          <S>                                                                     <C>                   <C>
          Lease and loan contracts receivable in installments.........            $501,557              $191,278
          Estimated residual value of leased equipment................              17,386                 8,326
          Broker fees.................................................               3,857                 1,004
          Initial direct costs........................................               4,482                 2,447
          Unearned lease income.......................................            (78,544)              (34,294)
          Allowance for doubtful receivables..........................            (11,918)               (3,791)
                                                                        -------------------       ---------------
          Net investment                                                          $436,820              $164,970
                                                                        ===================       ===============
</TABLE>

     At  December  31, 1999  future  payments  to be received on direct  finance
leases and loans are as follows:



<TABLE>
<CAPTION>
                                                                                         Amount
                                                                                   ------------------
                                                                                     (In thousands)
             <S>                                                                         <C>

             Year Ending December 31,

                    2000.....................................................            $201,082

                    2001.....................................................             143,704

                    2002.....................................................              90,261

                    2003.....................................................              44,250

                    2004 and thereafter......................................              22,260
                                                                                ------------------

             Future payments                                                             $501,557
                                                                                ==================

<FN>

     At December  31, 1999  certain  future lease  contract  payments  have been
assigned to financial institutions (note 8).

</FN>
</TABLE>
<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(5)      Equipment Held for Rental and Operating Leases, Net

     The net book value of equipment held for rental and operating  leases is as
follows:
<TABLE>
<CAPTION>

                                                                                December 31,
                                                                        ------------------------------
                                                                           1999              1998
                                                                        -----------       ------------
      <S>                                                                   <C>                <C>
                                                                               (In thousands)
      Equipment under operating leases............................          $6,993            $13,905
      Equipment under rental agreements...........................          19,122             16,754
                                                                        -----------       ------------
      Net book value                                                       $26,115            $30,659
                                                                        ===========       ============

<FN>

     The book values  presented  above are net of  accumulated  depreciation  of
$9,464,000  and  $8,058,000,  at  December  31,  1999  and  1998,  respectively.
Equipment  under  rental   agreements  is  comprised   primarily  of  analytical
instruments.
</FN>
</TABLE>

     At December 31, 1999 future  contract  payments to be received on operating
leases are as follows:


<TABLE>
<CAPTION>
                                                                                     Amount
                                                                                ------------------
                                                                                 (In thousands)
             <S>                                                                           <C>
             Year Ending December 31,

                    2000.....................................................              $1,430

                    2001.....................................................               1,398

                    2002.....................................................               1,091

                    2003.....................................................                 584

                    2004 and thereafter......................................                 538
                                                                                ------------------
             Future payments                                                               $5,041
                                                                                ==================
<FN>
     At December 31, 1999 certain future contract payments have been assigned to
financial institutions (note 8).
</FN>
</TABLE>



<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(6)      Estimated Net Book Value of Equipment at Lease Termination

     The  following  table  represents  the  Company's  estimated net book value
(residual value) of equipment at lease  termination.  The residual values in the
following  table are recorded as components  of the Company's net  investment in
direct finance leases and loans of $17,386,000  and equipment held for operating
leases of $3,409,000 in the consolidated balance sheet at December 31, 1999.

   Year of                                                         Estimated net
   expected                                                        book value at
   termination                                                       termination
                                                             ------------------

                                                                  (In thousands)

   2000.....................................................              $4,561

   2001....................................................                3,494

   2002.....................................................               6,589

   2003.....................................................               2,832

   2004 and thereafter......................................               3,319
                                                                  --------------

                              Total                                      $20,795
                                                                   =============

<TABLE>
<CAPTION>

(7)            Other Assets

         Other assets are as follows:
                                                                                December 31,
                                                                      ------------------------------
                                                                         1999              1998
                                                                      -----------       ------------
     <S>                                                                  <C>                 <C>
                                                                             (In thousands)
     Inventory ..................................................        $ 2,815            $ 4,392
     Deposits on equipment ......................................          3,443              3,082
     Property and equipment, net.................................          2,479              1,555
     Holdback on lease fundings..................................          2,133              1,349
     Available-for-sale securities...............................          2,448              1,087
     Prepaid funding costs.......................................          2,627                197
     Prepaid expenses and miscellaneous..........................          1,337                873
                                                                      -----------       ------------

            Total.................................................       $17,282            $12,535
                                                                      ===========       ============

</TABLE>




<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 (8)     Debt
<TABLE>

   Notes Payable

     Notes payable to banks and others were as follows:
                                                                            December 31,

<CAPTION>
                                                                   -------------------------------
                                                                      1999               1998
                                                                   -----------        ------------
                                                                           (In thousands)
     <S>                                                              <C>                 <C>

     Senior credit facility.....................................      $99,700             $91,700
     Other......................................................        3,054               4,946
                                                                   -----------        ------------

            Total...............................................     $102,754             $96,646
                                                                   ===========        ============
<FN>
     At December 31, 1999 and 1998,  the Company had  available a senior  credit
facility (the Loan Agreement ) in the amount of $117,000,000  and  $155,000,000,
of which  $99,700,000  and  $91,700,000,  at  December  31,  1999 and 1998,  was
outstanding.  The  weighted-average  interest  rate  on the  Loan  Agreement  at
December 31, 1999 and 1998 was 7.65% and 6.58%,  respectively.  In January 2000,
the Loan Agreement was amended and renewed for $107.0 million  through  December
31, 2000. The Loan  Agreement,  as amended,  provides for interest at LIBOR plus
1.50% to 1.75% or, at the  Company's  option,  prime  plus up to 0.25% or the CD
rate or Fed Funds rate plus 1.55% to 1.80% with the precise  rate  dependent  on
certain leverage tests.  Additionally,  the Loan Agreement calls for the Company
to pay a quarterly commitment fee of 0.25% on the unused daily balance below 25%
of the facility and 0.50% on the unused daily balance above 25%. The facility is
secured by  substantially  all of the assets of the  Company  and is used by the
Company to finance the acquisition of equipment pending  completion of permanent
financing, financing of distribution and rental inventory and for normal working
capital  purposes.  As of December 31, 1999, the Company was in violation of the
covenants of this  facility  relating to minimum  earnings,  tangible net worth,
leverage and interest coverage.
</FN>
</TABLE>



<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     In connection  with the  acquisition  of Monex  Leasing,  Ltd., the Company
issued a note  payable  to the  former  owner of the  company.  Such note  bears
interest at 8% with principal payments over a three-year period. At December 31,
1999  and  1998,  $1,000,000  and  $2,679,000,  respectively,  was  outstanding.
Additionally,  the Company  has notes  payable to a third party in the amount of
$2,054,000  and  $2,267,000 at December 31, 1999 and 1998,  respectively,  at an
interest rate of 10% with various  payment terms and maturity  dates included in
other notes payable.

   Recourse and Nonrecourse Debt

     At December 31, 1999, the Company had a commercial  paper conduit  facility
available  for  funding  of up to  $289,000,000  in lease  receivables  (the  CP
Conduit   Facility ).   At  December  31,  1999  and  1998,   $140,534,000   and
$170,712,000,  respectively, of this facility was utilized. At December 31, 1999
and 1998, the Company had  $134,228,000  and  $44,676,000  of  nonrecourse  debt
recorded on its consolidated balance sheet under its securitization facility. In
connection with the CP Conduit Facility,  the Company transfers a pool of leases
to a wholly-owned, bankruptcy remote, special purpose subsidiary established for
the purpose of purchasing the Company's leases.  This subsidiary  simultaneously
transfers  its interest in the leases to a bank conduit  facility,  which issues
securities to  investors.  The  securities  are  collateralized  by an undivided
interest in the leases, the leased equipment, and certain collateral accounts. A
portion of the proceeds from the securitization of leases is required to be held
in a separate restricted account as collateral for the leases transferred.  This
amount is recorded as restricted  cash.  The Company,  through its  wholly-owned
bankruptcy remote, special purpose subsidiary retains a subordinated interest in
the cash  flows  related to the leases  funded by the CP  Conduit  Facility  and
retains the right to service such leases. The weighted-average  interest rate on
the CP  Conduit  Facility  at  December  31,  1999 and 1998 was 6.26% and 5.63%,
respectively. The facility is subject to renewal on April 28, 2000.

     During the nine months ended  September 30, 1998, the Company  recognized a
gain upon the sale of leases in  securitizations  equal to the excess of the net
proceeds from the sale, after deducting issuance  expenses,  over the cost basis
of  the  leases.  Under  gain-on-sale  treatment,   the  Company  reflected  the
difference between the aggregate principal balance of the leases securitized and
proceeds  received,  net  of an  allowance  for  doubtful  receivables,  as  the
securitization  retained  interest on the balance  sheet.  Effective  October 1,
1998, the Company  eliminated  gain-on-sale  treatment for securitized leases by
modifying  the  structure  of  its  securitization  facility  such  that  it  is
considered  nonrecourse  debt under generally  accepted  accounting  principles.
Subsequent  to  eliminating  gain-on-sale  treatment,  the Company has  recorded
non-recourse debt equal to the cash received.



                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     In July 1999, the Company  completed a term  securitization of $237 million
(the July Term  Securitization ). $199 million of A-1 Certificates  rated AAA by
Standard and Poor's and Fitch IBCA,  Inc. and Aaa by Moody's  Investor  Service,
Inc.,  $9 million of B-1  Certificates  rated BBB by Fitch  IBCA,  Inc.,  and $9
million of B-2  Certificates  rated BB by Fitch IBCA,  Inc.,  were issued in the
private market. A portion of the B-2 Certificates (approximately $3 million) and
the C  Certificate  of $17 million were  retained by the Company.  In connection
with the July Term Securitization, the Company repurchased certain leases, which
had  previously  been  financed in the CP Conduit  Facility and removed from the
balance sheet.  In accordance  with generally  accepted  accounting  principles,
$93,840,000,  the  amount  of the  repurchase  price,  was  restored  to the net
investment in leases and loans on the  consolidated  balance sheet. The proceeds
from the July  Term  Securitization  were  recorded  as  nonrecourse  debt.  The
weighted-average  interest rate on the term securitization facility is 6.24%. At
December 31, 1999 and December 31, 1998, $179,891,000 and $0, respectively,  was
recorded as nonrecourse debt under the term securitization.

     In  connection  with  the  July  Term  Securitization  and  the CP  Conduit
Facility,  the Company entered into amortizing  interest rate cap agreements and
interest rate swap  agreements  for  aggregate  notional  amounts,  equal to the
initial aggregate principal balances of the leases  securitized,  of $35,406,000
and $318,653,000,  respectively.  These agreements effectively established fixed
interest  rates  ranging  from  5.99% to 6.76% on a  substantial  portion of the
Company's  nonrecourse debt and all of its off-balance  sheet debt, to limit its
exposure to adverse  fluctuations in interest rates. The agreements terminate at
various dates from July 21, 2003 through December 20, 2006.

     The Company also permanently  finances leases with financial  institutions,
on either a nonrecourse  and/or partial recourse basis. In connection with these
financings, the Company receives a cash payment equal to the discounted value of
the future  rentals less, in certain cases, a holdback or cash reserve (note 7).
In the event of default by a lessee  under a lease which has been  assigned to a
lender under these financings,  the lender has recourse to the lessee and to the
underlying  leased equipment but no recourse to the Company except to the extent
of the  recourse  portion  of the  financing,  including  any  holdback  or cash
reserve. Proceeds from the financing of leases are recorded as debt. At December
31, 1999 and 1998, the Company had  $37,131,000 and  $31,957,000,  respectively,
outstanding  under these  financings.  Interest  rates in connection  with these
loans ranged from 6.50% to 10.99% at December 31, 1999.


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     At December 31, 1999 the future scheduled principal  maturities of recourse
and nonrecourse debt are as follows:

<TABLE>
<CAPTION>

                                                                                 Amount
                                                                           -------------------

                                                                             (In thousands)
      <S>                                                                           <C>
      Year Ending December 31,

             2000.....................................................               $133,528

             2001.....................................................                106,973

             2002.....................................................                 67,847

             2003.....................................................                 31,183

             2004 and thereafter......................................                 11,719
                                                                           -------------------


        Total recourse and nonrecourse
           discounted lease rentals...................................               $351,250
                                                                           ===================
</TABLE>

   Subordinated Debentures

     Subordinated  debentures  of the Company,  which bear interest at 8.25% per
annum,  are due June 15, 2003.  Interest is payable  semiannually in June and in
December.  Mandatory  sinking fund payments of $1,875,000 are required  annually
since June 15, 1993.  Sinking fund requirements have been satisfied through June
15, 2001. The 8.25% Subordinated Debentures are subordinated in right of payment
to all existing and future senior indebtedness of the Company.  The subordinated
debentures are convertible  prior to maturity into the right to receive $377.30,
in cash, per $1,000 face value of debentures.  The remaining  principal balances
of the debentures at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                 ----------------------------------
                                                                     1999                 1998
                                                                 --------------        ------------
                                                                          (In thousands)
   <S>                                                                  <C>                <C>

   Subordinated debentures....................................          $7,759              $7,759

   Less discount..............................................         (1,700)              (2,065)
                                                                 --------------        ------------


          Total...............................................          $6,059              $5,694
                                                                 ==============        ============
</TABLE>

   Covenants and Restrictions

     The Company's various debt agreements contain  restrictions on, among other
things,  the  payment  of  dividends,  capital  expenditures,  the  issuance  or
repurchase of capital stock,  and the maximum  percentage of delinquent  leases.
Furthermore, the Company is required to maintain a minimum adjusted tangible net
worth (as  defined),  and the Company may not exceed a specified  ratio of total
recourse liabilities (as defined) to adjusted tangible net worth and is required
to maintain minimum debt service coverage ratios (as defined). Additionally, the
Company was required to maintain a minimum  earnings level for the


<PAGE>
                       LINC CAPITAL,INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


fourth quarter of 1999. The Company was in violation of the minimum tangible net
worth, minimum earnings, leverage and interest coverage covenants under the Loan
Agreement  at December 31,  1999.  It is also in violation of similar  covenants
contained  in the  agreements  relating  to  the CP  Conduit  Facility  and  the
insurance   policy  that   provides   credit   enhancement   to  the  July  Term
Securitization. For further information, see note 2.

(9)      Fair Value of Financial Instruments

     The  Company  has   determined   the  estimated  fair  value  of  financial
instruments  using  appropriate  valuation  methodologies  or  available  market
information. The carrying values of accounts receivable, securitization retained
interest,  restricted  cash,   available-for-sale   securities,  cash  and  cash
equivalents,  borrowings under the senior credit facility, and subordinated debt
approximate  fair  values  at  December  31,  1999  and  1998  due to the  short
maturities,  quoted market prices, or the discounted expected cash flows of such
financial instruments.

     The fair values of recourse and  nonrecourse  debt and other notes  payable
has been  estimated by  discounting  future cash flows using rates  available at
each respective year end for debt with similar terms and remaining maturities.

<TABLE>
<CAPTION>                                                                           December 31,
                                                 ------------------------------------------------------------------
                                                              1999                               1998
                                                 --------------------------------   -------------------------------
                                                                          (in thousands)
                                                    Carrying           Fair            Carrying          Fair
                                                     Amount           Value             Amount          Value

<S>                                                  <C>              <C>                   <C>            <C>
                                                 ---------------  ---------------   --------------- ---------------
Liabilities
      Other notes payable.....................       $ 3,054          $ 3,213           $ 4,946         $ 5,362

      Recourse and nonrecourse debt...........       351,250          345,738            76,633          76,769


     The prior table excludes the notional amount outstanding and estimated fair
value of derivative financial instruments, which were as follows:


                                                                           December 31,
                                                 -----------------------------------------------------------------
                                                              1999                              1998
                                                 -------------------------------   -------------------------------
                                                                          (in thousands)
                                                    Notional           Fair             Notional          Fair
                                                     Amount            Value             Amount           Value
                                                 --------------- ---------------   --------------- ---------------
Derivative financial instruments
      Interest rate swap agreements...........      $318,653          $ 1,732          $165,576        $ (1,135)

      Interest rate cap agreements............        35,406              324            16,557               50

    The fair values of derivative financial instruments were estimated based on
their termination values.

</TABLE>

<PAGE>

                      LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(10) Stockholders' Equity

     Preferred Stock

     During  1997,  1,000,000  shares of $0.01 par value  preferred  stock  were
authorized. At December 31, 1999 no shares are outstanding. However, on February
1, 2000,  the Company  issued  $5,625,000 of Series A 8%  Cumulative  Redeemable
Preferred Stock. The issuance of this series of preferred stock was coupled with
warrants to purchase  326,250 shares of the Company's  common stock at $5.49 per
share.  Additional warrants for up to 652,500 shares may be issued on a pro-rata
basis through  September 30, 2000, if the preferred shares are not redeemed as a
result of a change of control or a refinancing prior to that time. The Preferred
Stock bears  dividends at 8% per annum through  December 31, 2000, 10% per annum
from January 1, 2001 through December 31, 2001 and 12% per annum thereafter. The
Preferred Stock is mandatorily redeemable upon a change of control or on January
31, 2005, whichever occurs first.


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     Other Comprehensive Income

     The changes in the  components  of other  comprehensive  income  (loss) are
reported net of income taxes, as follows:
<TABLE>
<CAPTION>

                                                                    Pre-Tax         Tax Expense/       Net-of-Tax
                                                                    Amount          (Benefit)          Amount
                                                               ---------------------------------------------------
<S>                                                                   <C>                 <C>             <C>
                                                                                       (in thousands)
Year ended December 31, 1999
         Unrealized gain on securities:
               Unrealized holding gains .........                   $  2,743         $   1,042        $   1,701
               Reclassification adjustment for gains
                    realized in net loss.........                    (1,603)             (609)             (994)
                                                              ---------------------------------------------------
               Net unrealized gain...............                      1,140               433              707
        Foreign currency translation adjustments.                        418               159              259
                                                              ---------------------------------------------------
        Other comprehensive income...............                    $ 1,558           $   592          $   966
                                                              ===================================================

Year ended December 31, 1998
       Unrealized gain (loss) on securities:
           Unrealized holding gains .......................         $  2,395           $   951        $   1,444
           Reclassification adjustment for gains
              realized in net earnings.....................          (3,824)           (1,518)           (2,306
                                                              ---------------------------------------------------
           Net unrealized loss.............................          (1,429)             (567)            (862)
       Foreign currency translation adjustments............            (163)              (65)             (98)
                                                              ---------------------------------------------------
       Other comprehensive loss............................        $ (1,592)         $   (632)        $   (960)
                                                              ===================================================

Year ended December 31, 1997
       Unrealized gain-on securities:
           Unrealized holding gains .......................         $  1,389            $  552           $  837
           Reclassification adjustment for gains
              realized in net earnings.....................            (430)              (171)            (259)
                                                              ---------------------------------------------------
           Net unrealized gains ...........................              959                381              578
       Foreign currency translation adjustments............               -                  -                -
                                                              ---------------------------------------------------
        Other comprehensive income .........................        $    959             $  381           $  578
                                                               ===================================================
<FN>
     Accumulated other comprehensive  income (loss), net of tax, at December 31,
1999,  1998,  and 1997 consists of  unrealized  gains on securities of $771,000,
$64,000, and $926,000, and accumulated foreign currency adjustments of $161,000,
$(98,000), and $0, respectively.
</FN>
</TABLE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(11)     Stock Options

     The  Company has four  non-qualified  stock  option  plans - the 1988 Stock
Option  Plan ( 1988 Plan ), the 1994 Stock  Option  Plan (1994  Plan),  the 1997
Stock  Incentive Plan, and the  Non-Employee  Director Option Plan. The 1988 and
1994 Plans have been  terminated  and no further  options will be granted  under
those plans. However, 90,481 options remain outstanding under the 1994 Plan with
exercise prices ranging from $1.51 per share to $2.69 per share. Options granted
under the 1994 Plan vest over various  periods,  but must be exercised within 10
years after the grant date.

     During  1997,  the Company  adopted the 1997 Stock  Incentive  Plan and the
Non-Employee  Director Option Plan  (collectively,  the  1997 Plans ).  The 1997
Stock  Incentive  Plan,  as  amended,  permits  the grant of  options  and other
equity-based  awards with respect to 1,000,000  shares of the  Company's  common
stock and the  Non-Employee  Director  Option Plan  permits the grant of options
with respect to 100,000  shares of the Company's  common  stock.  The 1997 Plans
provide for grants of options to employees and  directors to purchase  shares of
the Company's common stock at terms established by the Board of Directors or the
Compensation Committee.  Options granted under the 1997 Plans were granted at an
exercise  price equal to the fair value at the date of grant with ten-year terms
and vesting periods up to 4 years.

     In December  1998,  the Company  amended the 1997 Stock  Incentive  Plan to
reduce  the per  share  exercise  price of  257,196  stock  options  granted  to
employees,  other than senior management  officers,  to $7.06 per share from the
original  grant price.  The revised option grant price  represented  the average
fair value of the Company's  common stock during the twenty-day  period prior to
re-pricing.  Additionally,  the 1997 Stock  Incentive Plan was amended to reduce
the per share exercise  price of 30,000 stock options  granted to certain senior
management  officers to the lesser of either the original  grant price or $13.00
per share.  The  re-pricing of the stock options has been presented in the table
below as if the stock  options were  canceled and an equal number of new options
were granted.



<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>

     The following table summarizes the activity under the Plans during the year
ended December 31, 1999, 1998, and 1997.

                                                        1999                        1998                       1997

                                                             Weighted-                   Weighted-                   Weighted-
                                                             Average                     Average                     Average
                                             Number          Exercise     Number         Exercise      Number        Exercise
                                             of Shares       Price        of Shares      Price         of Shares     Price

<S>                                            <C>             <C>         <C>              <C>         <C>             <C>

Outstanding at the beginning of year           650,468       $ 7.70        376,482        $ 8.21        504,704      $  1.77

     Granted  .  .  . . . . . . . . . . .      145,541         8.39        585,901        11.06        241,412        11.67

     Exercised  .  .  . . . . . . . . . .     (51,986)         1.93             -           -         (369,634)         1.67

     Forfeited  . . . . . . . . . . . . .     (71,651)         7.20        (24,719)         9.69            -

     Canceled  .  . . . . . . . . . . . .                                 (287,196)        15.08            -
                                             ---------       -------      ---------      ---------      ---------     --------
Outstanding  at the  end of  year . . . .     672,372          8.35        650,468          7.70        376,482         8.21
                                             ---------       -------      ---------      ---------      --------      --------
Options  exercisable  at year-end . . . .     284,763         $8.47        202,981         $7.29            -            -
                                             ---------       -------      ---------      ---------      --------      --------
</TABLE>
     The following table summarizes  information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>

                                                       Options Outstanding                        Options Exercisable


                                           --------------------------------------------    -----------------------------------
                                                           Weighted-
                                                            Average        Weighted-                            Weighted-
                                              Number       Remaining        Average             Number           Average
                                                of        Contractual      Exercise               of            Exercise
Range of exercise prices                      Shares          Life           Price              Shares            Price
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>            <C>                <C>                <C>

$1.51 to 2.22........................          82,673         6.4           $2.19               51,073             $2.17

$2.69................................           7,808         7.5            2.69                    -                 -

$6.88 to 8.62........................         436,892         8.6            7.64              146,191              7.48

$13.00 ..............................         114,999         8.0           13.00               76,249             13.00

$19.25 ..............................          30,000         8.4           19.25               11,250             19.25

                                           -----------------------------------------------------------------------------------
                                              672,372         8.2         $  8.35              284,763            $ 8.47
</TABLE>




<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


     The Company  applies APB  Opinion  No. 25 and  related  Interpretations  in
accounting for its plans.  Accordingly,  compensation  cost for stock options is
measured as the  excess,  if any, of the quoted  market  price of the  Company's
stock at the date of the grant over the exercise price. During 1999, the Company
recognized  $56,000,  net of  compensation  cost  incurred,  in income  upon the
forfeiture  of options  granted in 1997.  During  1998,  and 1997,  the  Company
recognized  $47,000,  and  $50,000,  respectively,  in  compensation  cost.  Had
compensation cost for the Company's stock option plans been determined consisted
with FASB  Statement No. 123, the  Company's  net income (loss) from  continuing
operations  and  earnings  (loss) per share  would have been  reduced to the pro
forma amounts indicated below:

<TABLE>
<CAPTION>

                                                                          Years Ended December 31,
                                                              --------------------------------------------------
                                                                 1999               1998               1997
                                                              -----------        ------------       ------------

                                                                               (In thousands)
   <S>                                                          <C>                   <C>                <C>

   Net earnings (loss) from continuing operations
           As reported........................................ $(21,534)              $4,594             $2,458
           Pro forma .......................................    (22,006)               4,131              2,366
   Net earnings (loss) from continuing operations per
       common share as reported:
          Basic ..............................................   $(4.10)                $.89               $.73
          Diluted ............................................    (4.10)                 .86                .72
   Net earnings (loss) from continuing operations per
       common share pro forma:
          Basic ..............................................   $(4.19)                $.80               $.70
          Diluted ............................................    (4.19)                 .77                .70

</TABLE>

     For purposes of calculating  the  compensation  cost  consistent  with FASB
Statement  No. 123, the fair value of each grant is estimated on the date of the
grant. For options granted under the 1988 Plan and the 1994 Plan, the fair value
of each options grant was calculated using the minimum value method specified by
FASB Statement No. 123 with the following  assumptions:  risk-free interest rate
of 6.0%,  expected lives ranging from 3 to 9 years, and expected  volatility and
dividend rate of 0%. For options granted under the 1997 Plans, the fair value of
each  option  grant in 1999 and 1998,  respectively,  was  calculated  using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:  risk-free  interest rates of 4.6% and 5.3%,  expected lives of 5.0
and 4.7 years, expected volatility of 35%, and a dividend rate of 0%.


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     The weighted average fair value of options granted during 1999 and 1998 was
$3.72 and $4.18,  respectively,  per share.  During  1997,  31,234  options were
granted at an  exercise  price of $2.69 per share with a weighted  average  fair
value of $1.17 per share and 210,178  options were granted at an exercise  price
of $13.00 per share with a weighted average fair value of $4.93 per share.


(12)     Earnings per share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share from continuing operations.
<TABLE>
<CAPTION>


                                                                                Years ended December 31,
                                                              ---------------------------------------------------------
                                                                  1999                 1998                1997
                                                              -----------          ------------        ------------
                                                                        ( in thousands, except per share data)
<S>                                                            <C>                      <C>               <C>
Numerator for basic and diluted earnings per
    share from continuing operations--
    net earnings (loss) from continuing operations         $   (21,534)             $   4,594         $   2,458
                                                           --------------        -------------       --------------
Denominator for basic earnings per share--
    weighted average shares                                   5,254,357             5,171,359         3,371,527
Effect of dilutive stock options                                    -                 175,222            25,811
                                                           --------------        -------------       --------------
Denominator for diluted earnings per share--
    adjusted weighted average shares                          5,254,357             5,346,581         3,397,338
                                                           --------------        -------------       --------------
Net earnings (loss) from continuing operations:
    Basic earnings (loss) per share                        $     (4.10)            $      .89         $     .73
    Diluted earnings (loss) per share                            (4.10)                   .86               .72

<FN>
     Contingent  shares  issuable in connection  with the  acquisition  of Monex
Leasing, Ltd. and stock options that could potentially dilute basic earnings per
share in the  future,  that were not  included  in the  computation  of  diluted
earnings per share because to do so would have been antidilutive,  were 704,724,
78,528,  and  0,  for  the  year  ended  December  31,  1999,  1998,  and  1997,
respectively.
</FN>
</TABLE>


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(13)     Income Taxes

     The provisions for income tax expense  (benefit) for continuing  operations
were comprised of the following:
<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                                 ---------------------------------------------------
                                                                    1999               1998                1997
                                                                 ------------       ------------        ------------

      <S>                                                           <C>               <C>                      <C>
                                                                                   (In thousands)
      Current:

           Federal.....................................             $   564                 318              $  367


           State.......................................                 486                 437                  66

      Deferred:

           Federal.....................................              (1,677)              2,318                 852

           State.......................................                (680)               (49)                 342
                                                                 ------------       ------------        ------------

                 Total income tax expense (benefit)....          $   (1,307)        $     3,024         $     1,627
                                                                 ============       ============        ============


     Deferred tax expense (benefit) relates principally to the difference in the
method of recognizing revenue and expense on direct finance leases for financial
reporting  purposes versus tax purposes.  The provision for income taxes differs
from the  expected  income tax  provision  (computed by applying the Federal tax
rate of 35%) for the following reasons.
</TABLE>
<TABLE>
<CAPTION>

                                                                             Years Ended December 31,
                                                               --------------------------------------------------
                                                                  1999              1998                1997
                                                               ------------      ------------        ------------

                                                                                  (In thousands)
   <S>                                                         <C>                <C>              <C>

   Expected tax provision (benefit)...................         $   (7,995)       $    2,666          $ 1,434

   State taxes, net of Federal tax benefit............               (127)              252              265

   Adjustment to valuation allowance..................               6,806                -                -

   Other..............................................                   9              106              (72)
                                                                ------------      ------------       ------------



              Income tax expense (benefit)............          $  (1,307)            $3,024            1,627
                                                               ============      ============        ============

     For the year ending December 31, 1999, the Company  provided a deferred tax
benefit only to the extent of its previously recorded deferred tax liabilities.

</TABLE>

<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the deferred tax assets and deferred tax  liabilities  are presented
below.

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                 ---------------------------------------------------
                                                                    1999                 1998               1997
                                                                 ------------        -------------       ------------

                                                                                   (In thousands)
<S>                                                                   <C>              <C>              <C>
Deferred tax assets:

     Net operating loss carryforwards........................       $   -           $   1,350           $5,159


     Investment tax credit carryforwards.....................           -               2,409            2,741


     Alternative minimum tax credit carryforwards............          325                944              671


     Investment in leased equipment..........................        4,786                  -               -


     Goodwill  ..............................................        5,177                  -               -


     Deferred compensation...................................          623                  -               -
                                                                   ---------           ---------       ---------

         Total gross deferred tax assets.....................       10,911               4,703            8,571


     Less valuation allowance...............................       (10,438)             (3,632)         (4,319)
                                                                  ---------          -----------     -----------

         Net deferred tax assets.............................          473                1,071           4,252
                                                                 ----------          -----------     ----------

Deferred tax liabilities:

     Investment in leased equipment..........................           -               (2,955)          (3,873)


     Unrealized gain on securities...........................         (473)                (40)            (615)
                                                                    --------          ----------        ---------
         Total gross deferred tax liabilities................         (473)             (2,995)          (4,488)
                                                                    --------          ----------        ---------
         Net deferred tax asset (liability)..................        $  -             $ (1,924)         $  (236)
                                                                   =========          ==========        =========

<FN>
     The net  change  in the  total  valuation  allowance  for the  years  ended
December  31,  1999 and 1998 was an  increase  of  $6,806,000  and a decrease of
$687,000,  respectively.  At December 31, 1999,  the Company has  established  a
valuation  allowance on deferred tax assets as their  realization  are not "more
likely than not."
</FN>
</TABLE>


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14)     Other Commitments

     The  Company  leases  several  offices  and  a  warehouse   facility  under
noncancelable  operating  leases.  The future minimum rental  payments due under
these leases are as follows:

<TABLE>
<CAPTION>

                                                                                      Amount
                                                                                 ------------------

                                                                                  (In thousands)
         <S>                                                                           <C>
         Year Ending December 31,

                2000.....................................................              $2,113,000

                2001.....................................................               2,006,000

                2002.....................................................               1,712,000

                2003.....................................................               1,289,000

                2004 and thereafter......................................               3,138,000
                                                                                 ------------------


                  Total..................................................             $10,258,000
                                                                                 ==================

</TABLE>
[FN]

     The Company's  total  obligation for rent was $2,014,000,  $1,438,000,  and
$1,042,000 for 1999,  1998, and 1997,  respectively.  A portion of the Company's
obligation  for  rent,  set forth  above,  during  1999,  1998 and 1997 has been
allocated and charged to LFC Capital, Inc., a related party (note 16).

     The  Company's  corporate  headquarters  and  its  Select  Growth  Finance,
Portfolio  Finance,  and a substantial  portion of its Vendor Finance activities
are located in Chicago,  Illinois and occupy approximately 44,000 square feet of
office space.  This space is occupied  under a lease,  which expires on June 30,
2006. The Company's Rental & Distribution activities are located in Foster City,
California and Charlotte,  North Carolina and occupy approximately 23,500 square
feet and 1,600 square feet of office space, respectively. This space is occupied
under  leases,  which expire on May 31, 2002 and July 31, 2000. A portion of the
Company's  Vendor  Finance   activities   operate  out  of  offices  located  in
Minneapolis,  Minnesota,  and Houston,  Texas, which occupy approximately 15,000
and 9,000 square feet of office space and are leased under leases that expire on
February 28, 2003 and July 31, 2004, respectively.
</FN>

<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     An  unrelated  third party has  committed to sublease  approximately  8,000
square feet of the office space at the Company's corporate  headquarters through
June 30, 2006 at $150,000 per annum. The Company also subleases a portion of the
facility  of its  Rental  and  Distribution  activities  under a  month-to-month
sublease  agreement  and a portion of its other  office  space  under a sublease
agreement  that  expires in  October  2000.  Rent  received  under the  sublease
agreements  for  1999,  1998 and  1997 was  $273,000,  $204,000,  and  $191,000,
respectively.

(15)     Segment Information

     The Company has four reportable segments: Select Growth Finance,  Portfolio
Finance, Rental and Distribution,  and Vendor Finance. The Select Growth Finance
segment   directly   originates   leases  and  accounts   receivable  and  other
asset-backed  financing  to emerging  growth  companies,  primarily  serving the
telecommunications,  high-tech  manufacturing,  Internet-related and information
technology  industries ( Select Growth Finance ). The Portfolio  Finance segment
finances  leases  generated  by  smaller  equipment  lessors.   The  Rental  and
Distribution segment engages in rental,  leasing, and distribution of analytical
instruments  and related  equipment  to  companies  serving  the  environmental,
pharmaceutical and biotechnology  industries and the distribution and leasing of
telecommunications   and  networking  equipment.   The  Vendor  Finance  segment
establishes  leasing programs for manufacturers and distributors.  The Company's
reportable  segments are strategic  business units that serve different  markets
and offer different products and services, which complement each other. They are
managed  separately since each business requires different pricing and marketing
strategies.  Each segment primarily generates business in the U.S. The amount of
revenues  generated  and assets held  outside of the U.S. are  impracticable  to
disclose.   Each  segment's  customer  base  is  highly  diversified,   with  no
significant customer concentrations.

     The accounting  policies of the segments are the same as those described in
the  summary  of  significant  accounting  policies.  There are no  intersegment
transactions.  The  Company  evaluates  performance  of each  segment  based  on
earnings from continuing  operations before income taxes and minority  interest.
Additionally,  the  Company  evaluates  performance  of Select  Growth  Finance,
Portfolio Finance, and Vendor Finance based on lease fundings.

<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The  corporate  component of earnings  from  continuing  operations  before
income taxes and minority interest  represents  corporate  selling,  general and
administrative   expenses  for  activities  such  as  acquisition  searches  not
allocable to a segment.  Certain selling,  general and administrative  expenses,
including  depreciation  expense  on  corporate  property  and  equipment,   are
allocated to each segment based on employee  headcount or a combination of lease
and loan  receivables  and the number of contracts  serviced.  Corporate  assets
consist of cash, including  restricted cash; certain  investments,  property and
equipment, and other assets not identifiable with any particular segment.

<TABLE>
<CAPTION>
                                                Select                      Rental
                                                Growth      Portfolio        and         Vendor
             (Dollars in thousands)            Finance       Finance     Distribution    Finance    Corporate   Consolidated
------------------------------------------------------------------------------------------------------------------------------

<S>                                               <C>           <C>           <C>      <C>         <C>         <C>

Year end December 31, 1999
      Total revenues.....................      $12,623       $20,842        $43,306     $16,934     $-           $93,705
      Depreciation and
           amortization expense .........          439         2,684          4,806         772      -             8,701
      Interest expense...................        4,273        12,588          1,048       6,777      -            24,686
      Earnings (loss) from continuing
         operations before income taxes
         and minority interest                 (2,903)         1,394          2,163    (21,459)      (2,037)    (22,842)
      Total assets.......................       61,075       202,687         47,805     195,756        5,565     512,888
      Lease fundings.....................      $36,005      $119,376         $9,645    $168,101       $-        $333,127
                                             ---------------------------------------------------------------------------------

Year end December 31, 1998
     Total revenues.....................       $13,036       $11,059        $40,249      $8,698        $-        $73,042
     Depreciation and
       amortization expense.............           399         1,628          4,275         273         -          6,575
     Interest expense...................         3,207         2,265          1,041       2,443         -          8,956
     Earnings (loss) from continuing
       operations before income taxes
       and minority interest............         4,038         1,615          1,681       1,193       (909)        7,618
     Total assets.......................        72,757        82,911         30,725      56,622       5,869      248,884
     Lease fundings.....................       $52,405      $146,051         $6,916     $48,012         -       $253,384
                                             ---------------------------------------------------------------------------------

Year ended December 31, 1997
     Total revenues.....................        $8,450        $2,847        $30,380       $-          $-         $41,677
     Depreciation and
       amortization expense.............           407           420          3,679        -           -           4,506
      Interest expense...................        2,356           787          1,155        -           -           4,298
     Earnings (loss) from continuing
       operations before income taxes
       and minority interest............         2,547           466          1,461        -           (376)       4,098
     Total assets.......................        45,530        36,548         23,432                    3,467     108,977
     Lease fundings.....................       $32,568       $39,671         $7,001       $-           $-        $79,240
                                              ---------------------------------------------------------------------------------
</TABLE>



<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(16) Distributions to Certain Shareholders and Discontinued Operations

     In 1997,  the  Company  transferred  to its wholly  owned  subsidiary,  LFC
Capital, Inc. (formerly known as LINC Finance  Corporation),  certain assets and
related  liabilities  not used in the Company's  continuing  businesses  and the
preferred stock issued by the Company's subsidiary, LINC Quantum Analytics, Inc.
(the Subsidiary Preferred Stock ).

     Promptly  following  the  transfer,  the  stock of LFC  Capital,  Inc.  was
distributed  to certain of the Company's  shareholders  in redemption of 482,792
shares of the Common Stock of the Company.  Simultaneously with the distribution
of the stock of LFC  Capital,  Inc.,  (i) LFC  Capital,  Inc.  agreed to pay the
Company an  aggregate  of  $2,508,000  until  maturity  of the  Company's  8.25%
Subordinated Debentures due 2003 (the principal balance of such Debentures shown
in the Company's  financial  statements herein is net of such amount);  (ii) LFC
Capital,  Inc.  repaid a loan from the Company to it; and the Company caused the
Subsidiary Preferred Stock to be redeemed for $4,681,000 plus accrued dividends.
In connection with the distribution of the stock of LFC Capital,  Inc., retained
earnings was reduced by $7,037,000, the Company's net investment in LFC Capital,
Inc. at the date of  distribution.  No gain or loss was recognized in connection
with  such  distribution,  as the fair  market  value of the net  assets  of LFC
Capital, Inc. at such date was approximately equal to their net book value.

     As a result of the  distribution,  the results of operation of LFC Capital,
Inc. and certain related businesses, including those related businesses disposed
of in prior  years,  have been  classified  as  discontinued  operations  in the
accompanying financial statements.  Revenues of such discontinued operations for
the year ended  December  31,  1997 were  $7,405,000.  The  principal  assets of
discontinued  operations  consisted of a portfolio of leased diagnostic  medical
imaging equipment and an art collection.

     The  Company  has  agreed  to  provide   certain  limited  lease  servicing
activities to LFC Capital,  Inc.,  including billing,  collection and invoicing,
for the  remaining  portfolio of leases  owned by LFC Capital,  Inc. The Company
received  $156,000,  $270,000 and $83,000 for such  services  performed in 1999,
1998 and 1997, respectively.  The Company has agreed to provide such services to
LFC  Capital,  Inc.  in 2000 on a  month-to-month  basis for  $4,000  per month.
Additionally,  LFC Capital, Inc. subleased from the Company, approximately 1,000
square feet in 1999 and 2,500 square feet in 1998 and 1997 of space  adjacent to
the Company's executive offices for approximately $27,000 in 1999 and $68,000 in
1998 and 1997,  which was equal to the Company's  cost for such space.  In 2000,
LFC Capital,  Inc.  will sublease  from the Company on a  month-to-month  basis,
approximately  600 square feet for  approximately  $1,000 per month.  Thirty-day
notice is required to by either party to terminate these agreements.


<PAGE>

                       LINC CAPITAL, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


     The agreements  relating to the net assets of the  discontinued  operations
prohibit LFC Capital,  Inc.  from  competing  with the Company for the longer of
three years or the period of time during which certain  officers are employed by
the Company plus one year.  Such agreements  require LFC Capital,  Inc. to refer
all lease  origination  opportunities  that its  employees  may encounter to the
Company.

(17)     Related Party Transaction

     A member of the Company's Board of Directors,  who is also president of LFC
Capital,  Inc.  served as a  consultant  to the Company  with respect to various
aspects of the Company's business and strategic issues. Fees paid by the Company
for  such  services,  including  a  referral  fee  paid in  connection  with the
acquisition of Comstock Leasing, Inc., during the years ended December 31, 1999,
1998, and 1997 were $156,000, $188,000, and $119,000, respectively.

(18)     Fourth Quarter Results and Adjustments

     During  the  fourth  quarter of 1999,  the  Company  incurred a net loss of
$21,209,000.  The  operating  results were  adversely  effected by the following
items. As a result of the operating results of its Vendor Finance activities and
re-evaluation  of the  expected  future  cash flows from these  activities,  the
Company  recognized  an  impairment  of the  goodwill  related to certain of its
Vendor Finance companies and charged off $13,914,000. Also, the Company recorded
a  provision  for  credit  losses in the  amount of  $8,765,000  resulting  from
substantially  higher  rates of lease  defaults in the Select  Growth and Vendor
Finance companies.

[KPMG LLP Letterhead]


                          Independent Auditors' Report



The Board of Directors and Stockholders
LINC Capital, Inc.:

Under date of April 13, 2000 we reported on the  consolidated  balance sheets of
LINC Capital,  Inc. and  subsidiaries  as of December 31, 1999 and 1998, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the years in the three-year period ended December 31, 1999, as
contained  in the annual  report on Form 10-K for the year 1999.  In  connection
with our audits of the aforementioned consolidated financial statements, we also
audited  the related  financial  statement  schedule.  The  financial  statement
schedule is the responsibility of the Company's  management.  Our responsibility
is to  express  an  opinion on the  financial  statement  schedule  based on our
audits.

The audit report on the consolidated  financial statements of LINC Capital, Inc.
and subsidiaries referred to above contains an explanatory paragraph that states
the  Company  incurred a loss in 1999,  the  Company is not in  compliance  with
certain debt covenants of existing credit facilities,  and the Company's primary
group of lending banks has effectively  ceased advances under the revolving line
of credit and the Company has  substantially  curtailed new lease  originations.
These  circumstances  raise  substantial  doubt  about the  entity's  ability to
continue as a going concern.  The financial statement schedule included does not
include any adjustments that might result from the outcome of this uncertainty.

Because of the  significance  of the  uncertainty  discussed  in the  preceeding
paragraph,  we are unable to express,  and we do not express,  an opinion on the
financial statement schedule.


/s/ KPMG LLP

Chicago, Illinois
April 13, 2000

<PAGE>


Schedule II - Valuation and Qualifying
Accounts

For the Three Years Ended December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
                                                              Additions
                                             Balance at      charged to                                       Balance at
                                            beginning of      costs and       Recoveries                         end
              Description                      period         expenses        and other      Charge offs      of period
----------------------------------------   ---------------  --------------  --------------- --------------  ---------------

<S>                                             <C>             <C>             <C>           <C>                <C>
Allowance for Doubtful Accounts
     Year ended December 31, 1997               1,294           1,253             203            (198)            2,552
     Year ended December 31, 1998               2,552           5,280           1,079          (3,312)            5,599
     Year ended December 31, 1999               5,599          15,966           1,163         (10,732)           11,996

Inventory Reserve
     Year ended December 31, 1997                 552             123              -             (105)              570
     Year ended December 31, 1998                 570             106              -              (58)              618
     Year ended December 31, 1999                 618             126              -              (75)              669
</TABLE>