EXHIBIT  13

Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following  discussion is intended to assist the reader in understanding  and
evaluating  the  financial  condition  and  results  of  operations  of  Comdial
Corporation  and its  subsidiaries  ("Comdial").  This review  should be read in
conjunction with the financial  statements and accompanying notes. This analysis
attempts  to identify  trends and  material  changes  that  occurred  during the
periods  presented.  Prior years have been  reclassified  to conform to the 1999
reporting basis (see Note 1 to the Consolidated Financial Statements).

RESULTS OF OPERATIONS

Selected  consolidated  statements of operations for the last three years are as
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
In thousands                                      1999             1998              1997
-----------------------------------------------------------------------------------------
<S>                                            <C>              <C>               <C>
   Business Segment Sales:
      Digital Systems                          $88,479          $80,452           $70,181
      Solutions and Software                    48,713           36,194            31,625
      Analog and Other                          10,768           12,331            16,755
                                               -------          -------           -------
       Net Sales                               147,960          128,977           118,561
   Cost of sales                                82,353           75,597            71,218
                                               -------          -------           -------
   Gross profit                                 65,607           53,380            47,343
   Selling, general & administrative            40,229           34,034            29,069
   Engineering, research & development           9,735            7,342             6,497
   Goodwill amortization                         3,180            3,806             3,567
   Interest expense                              1,633            1,216             1,698
   Miscellaneous expense - net                     286              565               644
                                               -------          -------           -------
   Income before income taxes                   10,544            6,417             5,868
   Income tax expense/(benefit)                  2,690          (10,737)              149
                                               -------          -------           -------
   Net income applicable to common stock        $7,854          $17,154            $5,719
                                               =======          =======           =======
   Earnings per common share and common
     equivalent share:  basic                    $0.88            $1.94             $0.66
                                               =======          =======           =======
-----------------------------------------------------------------------------------------
</TABLE>

The following  table reflects the gross profit margins for the various  business
segments of Comdial.  See Note 12 to the Consolidated  Financial  Statements for
further clarification of business segments.

--------------------------------------------------------------------------------
 In thousands                       1999                1998                1997
--------------------------------------------------------------------------------
   Business Segment:
      Digital Systems            $34,666             $31,237             $25,175
      Solutions and Software      28,449              19,341              18,418
      Analog and Other             2,492               2,802               3,750
                                 -------             -------             -------
       Gross profit margin       $65,607             $53,380             $47,343
                                 =======             =======             =======
--------------------------------------------------------------------------------


1999 Compared with 1998
-----------------------

Net sales as reported for 1999 increased by 15% to $148.0 million, compared with
$129.0 million in 1998.  The continued  growth in net sales was primarily due to
(1) greater demand for Comdial's  Digital Systems  products,  (2) an increase in
Platinum   Preferred   Dealers   (Comdial's   highest  dealer  level)  in  major
metropolitan  cities,  (3) an  increase  in  national  account  sales,  and  (4)
continued growth in sales of Solutions and Software  products such as the senior
housing, hospitality and voice mail systems. The voice mail systems are produced
by a subsidiary of Comdial, Key Voice Technologies, Inc. ("KVT").

In 1999,  net sales of Digital System  products  increased 10% to $88.5 million,
compared  with $80.5  million  for 1998.  In 1999,  net sales of  Solutions  and
Software  products,  including voice processing,  increased 35% to $48.7 million
compared  with $36.2  million for 1998.  Management  expects  sales of these two


                                       45
<PAGE>

business  segments to continue to grow in 2000  primarily  due to (1)  continued
growth in Digital  Systems and Solutions and Software  products sold directly to
end users through  national  accounts,  (2)  development of new products and new
distribution channels offering integrated computer solutions,  and (3) continued
growth of  Comdial's  dealer base by  recruiting  larger and more  sophisticated
Platinum Preferred Dealers.

In 1999,  net sales of the Analog and Other  segment  products  decreased 13% to
$10.8 million, compared with $12.3 million for 1998. Management expects sales of
such products to continue to decrease in 2000. The decline in sales of Comdial's
Analog and Other  products began in the early 1990s and can be attributed to the
market's  transition to and development of digital products.  Comdial expects to
continue selling analog products for the foreseeable future primarily due to the
installed base of analog systems that will require  replacements  and up-grades,
but over the past  several  years has  reduced  and will  continue to reduce the
number of models offered.

Comdial provides reserves to cover product obsolescence for all its products and
changes to those  reserves  impact gross profit.  For the years 1999,  1998, and
1997,  provisions for obsolescence totaled $0.5 million,  $2.3 million, and $1.5
million,  respectively.  The reserve for  obsolescence for 1999 was lower due to
less raw material and finished goods  obsolescence usage than in previous years.
Future   reserves   will  be   dependent  on   management's   estimates  of  the
recoverability of inventory costs. Raw material obsolescence is mitigated by the
commonality  of component  parts of digital and other  products.  Finished goods
obsolescence is mitigated by the low level of inventory relative to sales.

The  transition  to digital and  software  solutions  from analog  products  has
positively  affected  Comdial's gross margin as features and functionality  have
grown in importance as compared to price.  Gross margins have improved each year
from 31% in 1993 to 44% in 1999.

In 1999, international sales decreased by 35% to $2.6 million compared with $4.0
million for 1998. Due to the international  climate,  distribution problems, and
homologation  issues  dealing  with the sale of digital  products,  Comdial  has
basically suspended its efforts in developing further  international  markets on
its own. Homologation is the process of securing regulatory, safety, and network
compliance  approvals  for the sale of  telecommunications  equipment in foreign
countries.  As many countries  have different  standards than the United States,
this typically  involves  additional  engineering  modifications  and compliance
testing.  Array Telecom Inc. ("Array") which was acquired in 1998,  continues to
pursue the  international  market selling its Internet  Protocol ("IP") software
products.

Gross profit,  as a percentage of sales for 1999,  was 44% compared with 41% for
1998.  In 1999,  gross profit  increased by 23% to $65.6  million  compared with
$53.4 million for 1998.  This increase was primarily  attributable  to increased
sales of higher margin business segment products, such as Impact FX, Impact DXP,
and  solution  products  such as senior  housing,  hospitality  and  voice  mail
systems.

In 1999,  gross  profit for Digital  System  products  increased by 11% to $34.7
million compared with $31.2 million for 1998. Digital Systems gross profit, as a
percentage  of sales for 1999,  was 23% compared to 24% for 1998.  This decrease
was due to the  special  promotion  on FX  products  at the  beginning  of 1999.
Comdial  expects the gross margin for this segment to increase  gradually in the
coming years  primarily due to higher sales volume of its newer  products  along
with cost reduction improvements.

In 1999,  gross profit for Solutions and Software  products  increased by 47% to
$28.4  million  compared  with $19.3  million for 1998.  This increase is due to
higher sales volume  primarily of voice mail systems  along with the increase in
sales associated with national accounts. Solutions and Software gross profit, as
a  percentage  of sales  for 1999,  was 58%  compared  with 53% for  1998.  This
increase  was  primarily  due to higher sales of voice mail systems and software
solutions that generate higher margins.  Comdial expects volume in this business
segment to continue to increase.

In 1999,  gross  profit for Analog and Other  products  decreased by 11% to $2.5
million  compared  with $2.8  million  for 1998.  This  decrease is due to lower
volume of sales,  primarily of analog  products which are being replaced by more
technologically  advanced products.  The Analog and Other segments gross profit,
as a percentage of sales, was 23% for 1999 and 1998.



                                       46
<PAGE>

Other  costs  including  operating  expenses,  goodwill  amortization,  interest
expense,  other  miscellaneous  expenses,  and income tax  expenses  or benefits
cannot be allocated to the three segments. Comdial does not maintain information
that would allow these costs to be broken into the various product  segments and
most of the costs are universal in nature.

Selling,  general and administrative  expenses ("SG&A") increased in 1999 by 18%
to $40.2  million  compared  with $34.0 million for 1998.  SG&A  expenses,  as a
percentage of sales for 1999,  increased to 27% compared with 26% for 1998.  The
primary  reasons for the  increase  were (1) an increase in sales  personnel  to
support  the  growth  in  national  accounts  and  expanding  computer-telephony
integration ("CTI") markets,  (2) higher promotional  allowance costs associated
with  increased  sales through  Platinum and Preferred  Dealers,  and (3) higher
marketing costs  associated with advertising  Comdial's  products as well as the
efforts to increase Comdial's name recognition in the various business markets.

Engineering,  research and development expenses increased in 1999 by 33% to $9.7
million  compared  with  $7.3  million  for  1998.  Engineering  expenses,  as a
percentage of sales for 1999,  increased to 7% compared  with 6% for 1998.  This
increase was due to additional  engineering  personnel  throughout Comdial along
with the additional support costs.

Goodwill amortization expense decreased in 1999 by 16% to $3.2 million, compared
with $3.8 million for 1998. This decrease is due primarily to the elimination of
goodwill  amortization expense associated with Comdial's  acquisition in 1996 of
Aurora Systems, Inc. ("Aurora").  Aurora at this time is non-operational and all
goodwill associated with this acquisition has been written off.

Interest  expense  increased in 1999 by 34% to $1.6 million  compared  with $1.2
million for 1998.  This increase is due to higher  average debt levels with Bank
of America,  N.A.  ("Bank of America"),  formerly  known as  NationsBank,  N.A.,
coupled  with  higher  interest  rates when  compared to 1998 (see Note 6 to the
Consolidated Financial Statements). The higher debt is primarily attributable to
higher material purchases which correlated with higher sales.

Miscellaneous  expense decreased by 49% for 1999 to $0.3 million,  compared with
$0.6  million for 1998.  This  decrease was  primarily  due to decreases in cash
discounts allowed by Comdial to its customers.

Net income before income taxes, as a result of the foregoing,  increased in 1999
by 64% to $10.5  million  compared  with $6.4  million  in 1998.  Major  factors
contributing  to the increase in income for 1999 were increased sales of Digital
Systems and Solutions and Software  segment  products that have higher  margins.
Management  anticipates,  assuming the continued  strength in the economy,  that
these factors,  which have led to significant  increases in sales for 1999, will
continue to have a positive influence on Comdial's performance in 2000.

Income tax expense  (benefit)  reflected  an expense  for 1999 of $2.7  million,
compared  with a tax  benefit  of  $10.7  million  for  1998.  The  tax  expense
recognized in 1999 was primarily due to the utilization of deferred tax benefits
of $2.1  million  that were  generated  from net  operating  losses  ("NOLs") in
previous years (see Note 7 to the Consolidated  Financial  Statements).  Comdial
will  continue  to pay taxes at the  alternative  minimum  tax rate  ("AMT") for
future periods with the additional tax expense reducing  Comdial's  deferred tax


                                       47
<PAGE>

asset  generated by the  recognition  of its NOLs.  This benefit  recognition is
primarily due to  management's  belief that the limitations set forth in Section
382 of the Internal Revenue Code are less likely to impair the Company's ability
to utilize their NOLs.

1998 Compared with 1997
-----------------------

Net sales as reported for 1998 increased by 9% to $129.0 million,  compared with
$118.6  million in 1997. The increase in net sales for 1998 was primarily due to
greater  demand for Comdial's  Digital  Systems  segment  products and continued
growth in sales of Solutions and Software products.

In 1998,  net sales of Digital System  products  increased 15% to $80.5 million,
compared  with $70.2  million  for 1997.  In 1998,  net sales of  Solutions  and
Software  products,  including voice processing,  increased 14% to $36.2 million
compared with $31.6 million for 1997.

In 1998,  net sales of the Analog and Other  segment  products  decreased 26% to
$12.3  million,  compared with $16.8  million for 1997.  The decline in sales of
Comdial's  Analog and Other  products  was due to the market's  transition  from
analog products to digital which began in the early 1990s.

In 1998,  international sales decreased by 4% to $4.0 million compared with $4.2
million for 1997.

Gross profit,  as a percentage of sales for 1998,  was 41% compared with 40% for
1997.  In 1998,  gross profit  increased by 13% to $53.4  million  compared with
$47.3 million for 1997.  This increase was primarily  attributable  to increased
sales of higher margin business segment  products,  such as Impact,  Impact DXP,
and solution products.

In 1998,  gross  profit for Digital  System  products  increased by 24% to $31.2
million compared with $25.2 million for 1997. Digital Systems gross profit, as a
percentage of sales for 1998, was 39% compared with 36% for 1997.

In 1998,  gross profit for  Solutions and Software  products  increased by 5% to
$19.3 million  compared  with $18.4 million for 1997.  This increase is due to a
higher sales  volume  primarily of voice mail  systems.  Solutions  and Software
gross profit,  as a percentage of sales for 1998,  was 54% compared with 58% for
1997.  This decrease was primarily due to  installation  costs  associated  with
national accounts that generate lower margins.

In 1998,  gross  profit for Analog and Other  products  decreased by 25% to $2.8
million  compared  with $3.8  million  for 1997.  This  decrease is due to lower
sales,   primarily  of  analog   products  which  are  being  replaced  by  more
technologically  advanced products.  The Analog and Other segments gross profit,
as a percentage of sales for 1998, was 23% compared with 22% for 1997.

Selling,  general and administrative  expenses increased in 1998 by 17% to $34.0
million compared with $29.1 million for 1997. SG&A expenses,  as a percentage of
sales for 1998, increased to 26% compared with 25% for 1997. The primary reasons
for the increase  were (1) an increase in sales  personnel to support the growth
in national accounts and expanding CTI markets, (2) higher promotional allowance
costs  associated with increased sales through  Platinum and Preferred  Dealers,
and (3) the additional  costs  associated  with the  acquisition of Array in the
third quarter of 1998.

Engineering,  research and development expenses increased in 1998 by 13% to $7.3
million  compared  with  $6.5  million  for  1997.  Engineering  expenses,  as a
percentage  of sales  for 1998 and  1997,  was 6%.  This  expense  increase  was
primarily due to increased  expenses  associated with the Array acquisition (see
Note 2 to the Consolidated Financial Statements).

Goodwill amortization expense increased in 1998 by 7% to $3.8 million,  compared
with $3.6 million for 1997.  This  increase is due  primarily to the  additional
amortization of goodwill associated with the Array acquisition.

Interest  expense  decreased in 1998 by 28% to $1.2 million  compared  with $1.7
million  for 1997.  This  decrease is due to lower  average  debt levels for the


                                       48
<PAGE>

first six months of 1998 along with lower  interest  rates when compared to 1997
(see Note 6 to the Consolidated Financial  Statements).  In the first quarter of
1998,  Comdial paid down an additional  $3.5 million towards its debt with Fleet
Capital  Corporation  ("Fleet").  Interest expense  increased by 22% in the last
half of 1998 when compared with the first half  primarily due to the  additional
borrowings required for the Array acquisition.

Net income before income taxes, as a result of the foregoing,  increased in 1998
by 9% to $6.4  million  compared  with  $5.9  million  in  1997.  Major  factors
contributing  to the  increase  in income and  earnings  per share for 1998 were
increased sales of Digital Systems and Solutions and Software  segment  products
that have higher margins.

Income  tax  expense  (benefit)  reflects  a  benefit  in 1998 of $10.7  million
compared  with an  expense  of $0.1  million  for 1997.  This  change was due to
recognition  of a deferred tax benefit of $11.5 million for 1998 compared with a
benefit of $0.2 million for 1997. The tax benefits, recognized in 1998 and 1997,
were a result of a reduction in the  valuation  allowance  relating to Comdial's
NOLs.

LIQUIDITY AND CAPITAL SOURCES

Comdial's  financial  position  continues to improve  when  compared to previous
years. In 1999,  Comdial entered into a new financing  arrangement  with Bank of
America that  provides a line of credit up to $50 million.  Comdial's  continual
improvement in its financial  position along with the additional  line of credit
allows Comdial to finance  working capital to accommodate the expected growth in
the business.

The following  table sets forth  Comdial's  cash and cash  equivalents,  current
maturities on debt, and working capital at the dates indicated:

--------------------------------------------------------------------------
December 31,
In thousands                       1999             1998              1997
--------------------------------------------------------------------------
    Cash and cash equivalents    $1,917           $1,599            $3,131
    Current maturities of debt      471                6             3,701
    Working capital              49,244           31,649            16,676
--------------------------------------------------------------------------

All  operating  cash needs were funded for 1999 through a $50 million  revolving
credit  facility  provided by Bank of America.  As of October 1998,  Comdial and
Bank of America signed a Credit  Agreement (the "Credit  Agreement") that is now
funding all operational  requirements  as needed.  Comdial reports the revolving
credit facility  activity on a net basis on the Consolidated  Statements of Cash
Flows.  Comdial  considers  outstanding  checks  to be a bank  overdraft.  As of
December 31, 1999, Comdial's cash and cash equivalents were higher than December
31, 1998 by $0.3 million, due primarily to the timing of deposits at year end.

Accounts  Receivable at December 31, 1999,  increased by $16.7 million  compared
with December 31, 1998, primarily due to (1) record breaking sales in the fourth
quarter of 1999, (2) a majority of those sales occurring in the latter stages of
that quarter, and (3) the addition of two new Value Added Resellers ("VAR") that
tend historically to have payment cycles longer than 30 days.

Prepaid  expenses and other  current  assets at December 31, 1999,  increased by
$2.8  million  compared  with  December  31,  1998,  due to the  recognition  of
additional  deferred tax assets of $2.6 million that are projected to be used in
2000. The net deferred tax asset at December 31, 1999, decreased by $5.3 million
compared  with  December 31, 1998.  This decrease was due to the use of NOL's in
1999 and the reclass to current  mentioned above (see Note 7 to the Consolidated
Financial  Statements).  Other assets increased by $9.6 million primarily due to
software development costs associated with new products,  new software purchased
for operations, and the additional asset relating to a new non qualified pension
plan that was initiated in 1999.



                                       49
<PAGE>

Capital  additions  for 1999  were  approximately  $4.7  million.  Such  capital
additions  helped Comdial  introduce new products as well as improve quality and
reduce costs associated with new and existing  products.  Capital additions were
funded by cash generated from  operations and borrowing from the revolver.  Cash
expenditures  for capital  additions for 1999,  1998,  and 1997 amounted to $3.9
million, $4.8 million, and $3.6 million,  respectively.  Management  anticipates
that  approximately  $6 million will be spent on capital  additions during 2000.
These  additions  will help Comdial  meet its  commitments  to its  customers by
developing new products as well as increasing its capacity to produce  high-tech
products for the future.  Comdial plans to fund all additions  primarily through
cash generated by operations.

Accounts  payable at December 31, 1999,  increased by $4.1 million when compared
to December 31, 1998.  This increase was primarily due to the timing of incoming
material receipts for production.

Working  capital at December 31, 1999,  increased by $17.6 million when compared
to 1998.  This increase was primarily due to the additional  sales in the latter
half of the fourth quarter of 1999 which increased accounts receivable by 73%.

Comdial has a  commitment  from Bank of America  for the  issuance of letters of
credit in an  aggregate  amount  not to exceed $5  million  at any one time.  At
December 31, 1999, there were no commitments under the letter of credit facility
with Bank of America.

Long-term Debt, Including Current Maturities

Since  October  1998,  Bank  of  America  held  substantially  all of  Comdial's
indebtedness.  Prior to October 1998, Fleet held  substantially all of Comdial's
indebtedness.  Comdial  and  Fleet  in 1994  entered  into a loan  and  security
agreement (the "Loan  Agreement")  which was amended from time to time. The Loan
Agreement   provided  Comdial  with  a  $10.0  million   acquisition  loan  (the
"Acquisition Loan"), a $3.5 million equipment loan (the "Equipment Loan"), and a
$12.5 million revolving credit loan facility (the "Revolver").

On  October  22,  1998,  Comdial  and  Bank of  America  entered  into a  Credit
Agreement.  Bank  of  America  agreed  to  provide  Comdial  with a $50  million
revolving credit facility and a $5 million letter of credit subfacility. Comdial
used $15.8 million under the revolving  credit facility (the  "Revolving  Credit
Facility")  to pay off (1) all its  remaining  indebtedness  to  Fleet  of $10.8
million,  (2) amounts owed under Comdial's promissory note including interest to
the former owners of KVT of $4.4 million,  and (3) mortgages owed by KVT of $0.6
million.

The Revolving Credit Facility does not require a principal  payment until August
31, 2003 with the option of possible credit extensions.  See Note 6 to Comdial's
Consolidated  Financial  Statements for additional  information  with respect to
Comdial's loan agreements, long-term debt and available short-term credit lines.

Comdial  believes that income from  operations  combined with amounts  available
from Comdial's  current credit  facilities  will be sufficient to meet Comdial's
needs for the foreseeable future.

Other Financial Information

During fiscal years 1999, 1998, and 1997,  primarily all of Comdial's sales, net
income, and identifiable net assets were attributable to the  telecommunications
industry.



                                       50
<PAGE>

Year 2000

In early 1998,  Comdial  established a team (the "Year 2000 Team"),  to evaluate
whether, and to what extent, Comdial's products, information technology systems,
facilities and production and distribution infrastructure may be affected by the
Year 2000 and potential  problems  caused by the inability of certain  computers
and  microprocessors  to distinguish  between the year 2000 and year 1900.  This
team reported to management as well as the audit  committee on a quarterly basis
as to events and items of interest that related to Year 2000 issues.  The latest
Year 2000 report was  presented to both the audit  committee  and  management in
February 2000.  Management believes that Comdial has properly addressed the Year
2000  issue  in  order  to  mitigate  any  adverse   operational   or  financial
consequences.  At this time,  there have not been any material effects or issues
specifically dealing with the Year 2000. Comdial continues to monitor and review
any new issues that may arise concerning Year 2000.

During 1999,  Comdial  implemented a requirement that its suppliers certify that
all products,  supplier's  purchased products,  and services provided to Comdial
will not be adversely  affected by the Year 2000.  Comdial divided its suppliers
into three  categories with respect to Year 2000  compliance:  (1)  non-critical
component  suppliers,  (2)  critical  component  suppliers,  and (3) sole source
critical component suppliers.  Comdial had received written confirmation of Year
2000  compliance  for all three  categories.  Comdial also during 1999 performed
on-site  audits  of some of the  sole  source  suppliers  that are  critical  to
Comdial's operations.

Costs:  As  of  December  31,  1999,   cumulative   costs  incurred  by  Comdial
specifically  for the Year 2000 in  aggregate  totaled $0.6  million.  This cost
includes  testing,   new  software,   maintenance  of  existing   software,   PC
replacements,  and consultants.  Comdial management believes that all issues and
associated costs have been addressed.

Risk:  There  were  various  potential  risks  associated  with the  failure  of
Comdial's  business or the  business of  significant  third-party  suppliers  of
Comdial to be Year 2000 ready.  The  possible  failure of  internal  information
systems  to be Year 2000 ready  could have  resulted  in some  interruptions  or
disruptions of business. The possible failure of manufacturing  facilities to be
Year 2000 ready could have  resulted in impaired  manufacturing  processes  with
delays in delivery of products until non-compliant  components or conditions can
be remedied or replaced.  While Comdial  believes that none of these  situations
has or will take place,  there can be no assurance that there will not be a Year
2000 issue that may surface at a later date.

Contingency  Plans:  Comdial had various  contingency  plans in place to provide
solutions for several possible Year 2000 issues. Based on management's knowledge
to date, none of the contingency plans will be necessary.

Current Pronouncements

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  Per
Share." The new standard  requires dual  presentation  of both basic and diluted
earnings per share ("EPS") on the face of the earnings  statement and requires a
reconciliation of both basic and diluted EPS  calculations.  Comdial has adopted
this statement.

Also, in February 1997, FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related  Information." The new standard requires  presentation
disclosures about reportable  operating segments of a company.  The segments are
based on how  management is currently  viewing  operations.  Comdial has adopted
this statement.



                                       51
<PAGE>

In June 1997, FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income." The
new  standard  requires  businesses  to  disclose  comprehensive  income and its
components in their general-purpose financial statements. This standard does not
have an impact on Comdial's financial statements or disclosures.

In April 1998, FASB issued SFAS No. 132, "Employers'  Disclosures about Pensions
and Other  Postretirement  Benefits."  The new  standard  revises  the  required
disclosures for pension and other postretirement  benefit plans, but it does not
change the  measurement or  recognition  of such plans.  This statement has been
adopted by Comdial.

In 1998, FASB issued SFAS No. 133,  "Accounting  for Derivative  Instruments and
Hedging Activities."  Comdial does not participate in any financial  instruments
that meet the definition of a derivative or hedging activity, and therefore,  it
is not expected that this statement will have any affect on Comdial's  financial
statements.

"SAFE HABOR"  STATEMENT UNDER THE PRIVATE  SECURITIES  LIGITATION  REFORM ACT OF
1995

Comdial's Annual Report contains forward-looking  statements that are subject to
risks  and  uncertainties,   including,  but  not  limited  to,  the  impact  of
competitive  products,  product demand and market acceptance risks,  reliance on
key  strategic   alliances,   fluctuations  in  operating  results,   delays  in
development  of highly complex  products,  and other risks detailed from time to
time in Comdial's  filings with the  Securities and Exchange  Commission.  These
risks  could  cause  Comdial's  actual  results  for 2000 and  beyond  to differ
materially from those expressed in any forward-looking  statement made by, or on
behalf of, Comdial.


                                       52
<PAGE>

-------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
-------------------------------------------------------------------------------



To the Board of Directors and Stockholders of
  Comdial Corporation
  Charlottesville, Virginia

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Comdial
Corporation and its  subsidiaries  ("Comdial") as of December 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 1999.
These financial statements are the responsibility of Comdial's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material   respects,   the  financial   position  of  Comdial   Corporation  and
subsidiaries as of December 31, 1999 and 1998, and the results of its operations
and their cash flows for each of the three  years in the period  ended  December
31, 1999 in conformity with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Richmond, Virginia
January 28, 2000




                                       53
<PAGE>

------------------------------------------------------------------------------
REPORT OF MANAGEMENT
------------------------------------------------------------------------------

Comdial   Corporation's   management  is  responsible   for  the  integrity  and
objectivity  of  all  financial  data  included  in  this  Annual  Report.   The
consolidated   financial  statements  have  been  prepared  in  accordance  with
generally accepted accounting principles.  Such principles are consistent in all
material  respects  with  accounting   principles   prescribed  by  the  various
regulatory  commissions.  The financial data includes  amounts that are based on
the best estimates and judgments of management.

Comdial maintains an accounting system and related internal  accounting controls
designed to provide  reasonable  assurance that assets are  safeguarded  against
loss or unauthorized use and that the financial  records are adequate and can be
relied  upon to  produce  financial  statements  in  accordance  with  generally
accepted  accounting  principles.   Deloitte  &  Touche  LLP,  Certified  Public
Accountants ("Independent Auditors"),  have audited these consolidated financial
statements, and have expressed herein their unqualified opinion.

Comdial diligently  strives to select qualified  managers,  provide  appropriate
division of  responsibility,  and assure that its  policies  and  standards  are
understood  throughout the  organization.  Comdial's Code of Conduct serves as a
guide for all  employees  with  respect to  business  conduct and  conflicts  of
interest.

The Audit  Committee of the Board of  Directors,  comprised of Directors who are
not employees,  meets periodically with management and the Independent  Auditors
to review matters relating to Comdial's annual  financial  statements,  internal
accounting  controls,  and other accounting services provided by the Independent
Auditors.

/s/ William G. Mustain                               /s/ Tara Y. Harrison
William G. Mustain                                   Tara Y. Harrison

Chairman, President and                              Controller
Chief Executive Officer


                                       54
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
-------------------------------------------------------------------------------------------------
                                                                         December 31,
In thousands except par value                                     1999                    1998
-------------------------------------------------------------------------------------------------
<S>                                                             <C>                     <C>
Assets

     Current assets
        Cash and cash equivalents                                 $1,917                  $1,599
        Accounts receivable - net (less allowance for             39,700                  23,006
            doubtful accounts:  1999 - $302; 1998 - $198)
        Inventories                                               22,827                  21,434
        Prepaid expenses and other current assets                  7,633                   4,815
-------------------------------------------------------------------------------------------------
            Total current assets                                  72,077                  50,854
-------------------------------------------------------------------------------------------------

     Property - net                                               19,458                  18,023
     Net deferred tax asset                                       11,980                  17,257
     Goodwill                                                     11,207                  14,079
     Other assets                                                 18,352                   8,777
-------------------------------------------------------------------------------------------------
            Total assets                                        $133,074                $108,990
=================================================================================================

Liabilities and Stockholders' Equity
     Current liabilities
        Accounts payable                                         $15,135                 $11,034
        Accrued payroll and related expenses                       2,652                   2,942
        Accrued promotional allowances                             2,322                   1,877
        Other accrued liabilities                                  2,253                   3,346
        Current maturities of debt                                   471                       6
-------------------------------------------------------------------------------------------------
            Total current liabilities                             22,833                  19,205
-------------------------------------------------------------------------------------------------

     Long-term debt                                               31,795                  22,140
     Net deferred tax liability                                    2,622                   3,123
     Long-term employee benefit obligations                        4,216                   1,361
     Commitments and contingent liabilities (see Note 13)              -                       -
-------------------------------------------------------------------------------------------------
            Total liabilities                                     61,466                  45,829
-------------------------------------------------------------------------------------------------

     Stockholders' equity
        Common stock ($0.01 par value) and paid-in capital
            (Authorized 30,000 shares; issued shares
             outstanding: 1999 = 8,940; 1998 = 8,850)            116,626                 116,039
        Other                                                     (1,237)                 (1,243)
        Accumulated deficit                                      (43,781)                (51,635)
-------------------------------------------------------------------------------------------------
            Total stockholders' equity                            71,608                  63,161
-------------------------------------------------------------------------------------------------
            Total liabilities and stockholders' equity          $133,074                $108,990
=================================================================================================

           The  accompanying  notes  are an  integral  part of  these  financial statements.
</TABLE>

                                       55
<PAGE>
<TABLE>
Consolidated Statements of Operations
<CAPTION>
---------------------------------------------------------------------------------------------------
                                                                  Years Ended December 31,
In thousands except per share amounts                        1999            1998           1997
------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>            <C>
Net sales                                                  $147,960        $128,977       $118,561
Cost of goods sold                                           82,353          75,597         71,218
---------------------------------------------------------------------------------------------------
        Gross profit                                         65,607          53,380         47,343
---------------------------------------------------------------------------------------------------

Operating expenses
     Selling, general & administrative                       40,229          34,034         29,069
     Engineering, research & development                      9,735           7,342          6,497
     Goodwill amortization                                    3,180           3,806          3,567
---------------------------------------------------------------------------------------------------
        Operating income                                     12,463           8,198          8,210
---------------------------------------------------------------------------------------------------

Other expense
     Interest expense                                         1,633           1,216          1,698
     Miscellaneous expense - net                                286             565            644
---------------------------------------------------------------------------------------------------
Income before income taxes                                   10,544           6,417          5,868
Income tax expense (benefit)                                  2,690         (10,737)           149
---------------------------------------------------------------------------------------------------
        Net income applicable to common stock                $7,854         $17,154         $5,719
===================================================================================================

Earnings per common share and common equivalent share:
        Basic                                                 $0.88           $1.94          $0.66
===================================================================================================
        Diluted                                               $0.87           $1.89          $0.65
===================================================================================================

Weighted average common shares outstanding:
        Basic                                                 8,948           8,843          8,684
        Diluted                                               8,989           9,081          8,767

                    The  accompanying  notes  are  an  integral  part  of  these financial statements.
</TABLE>

                                       56
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity
----------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                             Deferred Stock
                                                -----------------------------------------
                                                Common Stock             Incentive                 Paid-in
In thousands                                     Shares     Amount    Shares       Amount          Capital
----------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>         <C>         <C>         <C>
 Balance at January 1, 1997                       8,678        $87         -           $-          $114,031
      Proceeds from sale of
         Common Stock:
         Notes receivable
         Stock options exercised                     32                                                 165
      Stock offering cost                                                                                (9)
      Deferred stock compensation                                                                         4
      Incentive stock issued                         12                                                  97
      Common stock issued for acquisitions:
         Key Voice Tech., Inc. ("KVT")               72          1                                      291
         Aurora Systems, Inc. ("Aurora")                                                                 (4)
 Net income
----------------------------------------------------------------------------------------------------------------
 Balance at December 31, 1997                     8,794         88         -            -           114,575
      Proceeds from sale of
         Common Stock:
         Notes receivable
         Stock options exercised                     97          1                                      706
      Treasury Stock Purchased
      Deferred stock compensation                                                                        48
      Incentive stock issued                          3                    8           84                39
      Contingency stock issued for
         KVT acquisition                             72                                                 498
 Net income
----------------------------------------------------------------------------------------------------------------
 Balance at December 31, 1998                     8,966         89         8           84           115,866
      Proceeds from sale of
         Common Stock:
         Notes receivable
         Stock options exercised                     10                                                  20
      Deferred stock compensation                                          7            6
      Incentive stock issued                          8          1                                       53
      Contingency stock issued for :
         KVT acquisition                             72          1                                      303
         Array acquisition                                                                              203
 Net income
 Balance at December 31, 1999                     9,056        $91        15           90          $116,445
================================================================================================================





                                                                          Notes
                                                Treasury Stock          Receivable
                                            ----------------------       on Sale         Retained
In thousands                                 Shares         Amount       of Stock        Earnings           Total
-------------------------------------------------------------------------------------------------------------------
 Balance at January 1, 1997                    (97)          ($878)        ($168)         ($74,508)        $38,564
      Proceeds from sale of
         Common Stock:
         Notes receivable                                                      7                                 7
         Stock options exercised                                                                               165
      Stock offering cost                                                                                       (9)
      Deferred stock compensation                                                                                4
      Incentive stock issued                                                                                    97
      Common stock issued for acquisitions:
         Key Voice Tech., Inc. ("KVT")                                                                         292
         Aurora Systems, Inc. ("Aurora")                                                                        (4)
 Net income                                                                                  5,719           5,719
-------------------------------------------------------------------------------------------------------------------
 Balance at December 31, 1997                  (97)           (878)         (161)          (68,789)         44,835
      Proceeds from sale of
         Common Stock:
         Notes receivable                                                      5                                 5
         Stock options exercised                                                                               707
      Treasury Stock Purchased                 (19)           (209)                                           (209)
      Deferred stock compensation                                                                               48
      Incentive stock issued                                                                                   123
      Contingency stock issued for
         KVT acquisition                                                                                       498
 Net income                                                                                 17,154          17,154
-------------------------------------------------------------------------------------------------------------------
 Balance at December 31, 1998                 (116)         (1,087)         (156)          (51,635)         63,161
      Proceeds from sale of
         Common Stock:
         Notes receivable                                                      6                                 6
         Stock options exercised                                                                                20
      Deferred stock compensation                                                                                6
      Incentive stock issued                                                                                    54
      Contingency stock issued for :
         KVT acquisition                                                                                       304
         Array acquisition                                                                                     203
 Net income                                                                                  7,854           7,854
 Balance at December 31, 1999                 (116)        ($1,087)        ($150)         ($43,781)        $71,608
===================================================================================================================

The accompanying notes are an integral part of these financial statements.
</TABLE>

                                       57
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                      Years Ended December 31,
In thousands                                                     1999            1998           1997
--------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>             <C>
Cash flows from operating activities:
    Cash received from customers                               $134,502        $120,967        $118,657
    Other cash received                                           1,286           2,398           1,219
    Interest received                                                58              30              19
    Cash paid to suppliers and employees                       (136,836)       (121,217)       (108,304)
    Interest paid on debt                                        (1,579)         (1,376)         (1,565)
    Interest paid under capital lease obligations                   (54)            (11)            (18)
    Income taxes paid                                              (503)           (824)           (310)
--------------------------------------------------------------------------------------------------------
       Net cash provided (used) by operating activities          (3,126)            (33)          9,698
--------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
    Purchase of Array Telecom Corp. ("Array")                         -          (5,880)              -
    Acquisition cost for Key Voice Technologies                       -               -              (4)
    Acquisition cost for Array                                       (5)           (246)              -
    Proceeds received from the sale of FastCall                       -             290               -
    Proceeds from the sale of equipment                               1             158              22
    Capital expenditures                                         (3,935)         (4,842)         (3,609)
--------------------------------------------------------------------------------------------------------
       Net cash used by investing activities                     (3,939)        (10,520)         (3,591)
--------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
    Proceeds from borrowings                                          -               -           2,216
    Net borrowings under revolver agreement                       7,464          22,132          (1,749)
    Proceeds from issuance of common stock                           20             498             162
    Principal payments on debt                                        -         (13,546)         (3,693)
    Principal payments under capital lease obligations             (101)            (63)            (92)
--------------------------------------------------------------------------------------------------------
       Net cash provided (used) by financing activities           7,383           9,021          (3,156)
--------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                318          (1,532)          2,951
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                    1,599           3,131             180
--------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                         $1,917          $1,599          $3,131
========================================================================================================
Reconciliation of net income to net cash provided by
  operating activities:

 Net Income                                                      $7,854         $17,154          $5,719
--------------------------------------------------------------------------------------------------------
    Depreciation and amortization                                 9,642           8,829           8,634
    Change in assets and liabilities (for 1998, net of
       effect from the purchase of Array)
    Increase in accounts receivable                             (16,694)         (9,186)         (4,160)
    Inventory provision                                             487           2,286           1,509
    Increase in inventory                                        (1,880)         (5,219)           (410)
    Increase in other assets                                    (11,278)         (5,431)         (2,956)
    Decrease (increase) in net deferred tax assets                2,147         (11,496)           (220)
    Increase in accounts payable and bank overdrafts              4,101           1,805           1,085
    Increase (decrease) in other liabilities                      1,917             654             399
    Array asset value at acquisition                                  -            (103)              -
    Increase in other equity                                        578             674              98
--------------------------------------------------------------------------------------------------------
       Total adjustments                                        (10,980)        (17,187)          3,979
--------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities                ($3,126)           $(33)         $9,698
========================================================================================================

                           The accompanying  notes are an integral part of these financial statements.
</TABLE>

                                       58
<PAGE>

Notes to Consolidated Financial Statements
For the Years Ended December 31, 1999, 1998, and 1997

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The  consolidated   financial   statements   include  the  accounts  of  Comdial
Corporation  and its  subsidiaries  ("Comdial").  All  significant  intercompany
accounts and transactions have been eliminated.

Nature of Operations

Comdial is a United States ("U.S.") based manufacturer of business communication
systems.  Comdial's  principal  customers  are small to medium sized  businesses
throughout the U.S. and certain international  markets. The distribution network
consists of four major distributors,  other supply houses, dealers, other direct
channels, and independent interconnects.  The dynamic,  high-technology industry
in which Comdial participates is very competitive.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial  statements in conformity  with Generally  Accepted
Accounting Principles ("GAAP") requires management to make certain estimates and
assumptions  that  affect  reported  amounts of assets,  liabilities,  revenues,
expenses,  and disclosure of contingent  assets and  liabilities at December 31,
1999. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents are defined as short-term  liquid  investments with maturities,
when  purchased,  of less than 90 days that are readily  convertible  into cash.
Under Comdial's  current cash management  policy,  borrowings from the revolving
credit facility are used for general  operating  purposes.  The revolving credit
facility is reduced by cash receipts  that are not needed for daily  operations.
Bank  overdrafts  of $2.2  million  and $3.3  million  are  included in accounts
payable  at  December  31,  1999 and 1998,  respectively.  Bank  overdrafts  are
outstanding  checks that have not (1) cleared the bank or (2) been funded by the
revolving credit facility. The revolving credit facility activity is reported on
a net basis on the Consolidated Statements of Cash Flows.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.

Property/Depreciation

Property is recorded at cost.  Depreciation is computed using the  straight-line
method for all  buildings,  land  improvements,  machinery  and  equipment,  and
capitalized  lease property over their estimated useful lives.  Expenditures for
maintenance  and repairs of property  are charged to expense.  Improvements  and
repairs, which extend economic lives, are capitalized. In 1999 and 1998, Comdial
expensed  certain  computer  hardware  and  software  due to the rapid change in
technology that has effected a need for continual replacements. In 1999, some of
the major  expenditures  for computer  hardware  and software  have been through
operating or capital leases. Prior to 1998, all computer and software costs were
capitalized or acquired through operating leases.

The estimated useful lives are as follows:

Buildings                                                 30 years
Land Improvements                                         15 years
Machinery and Equipment                                    7 years
Computer Hardware Equipment and Tooling                    5 years


                                       59
<PAGE>

Other Long-lived Assets

Long-lived  assets are amortized based on the assets' useful lives.  The cost in
excess of net assets of consolidated business acquired is amortized over periods
ranging from 5 to 8 years.  Long-lived  assets are reviewed  for  impairment  as
circumstances  change that might effect  those  assets.  Impairment  loss is not
recognized  unless a  portion  of the  carrying  amount of an asset is no longer
recoverable  using a test of  recoverability  which  is the net of the  expected
future undiscounted cash flows.

Capitalized Software Development Costs

In 1999, 1998, and 1997, Comdial incurred costs associated with the develop-ment
of software  related to Comdial's  various  products.  The  accounting  for such
software costs is in accordance with SFAS No. 86  ("Accounting  for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed").  The amortization
period is over three years which is the short end of the product life cycle. The
three year straight line method for software amortization causes greater expense
for each period versus using the revenue method. The total amount of unamortized
software  development  cost  included in other  assets is $5.5  million and $4.5
million at December  31, 1999 and 1998,  respectively.  The amounts  capitalized
were $2.9 million,  $2.8 million, and $2.0 million, of which $1.8 million,  $1.4
million, and $1.0 million were amortized in 1999, 1998, and 1997,  respectively.
Comdial also  capitalizes  costs  associated with product  software  development
performed by outside contract engineers. The total amount of unamortized outside
contract  development  cost  included in other  assets is $3.3  million and $2.1
million at December 31, 1999 and 1998, respectively.  The amount capitalized was
$1.8 million,  $1.5  million,  and $0.5  million,  of which $0.6  million,  $0.4
million, and $0.6 million was amortized in 1999, 1998 and 1997, respectively.

Postretirement Benefits Other Than Pension

Comdial  accrues  estimated  costs  relating to health  care and life  insurance
benefits.  In 1999, 1998, and 1997,  Comdial  expensed  $137,000,  $87,000,  and
$64,000, respectively.

Revenue Recognition

Comdial  recognizes  revenue as products  are  shipped.  Returned  products  are
credited against revenues as they are received back from the customer.  The only
exceptions  to this policy are  revenues  from E911  systems  and from  embedded
software.  E911 revenues are  recognized  when projects have been  completed and
embedded software revenues are not recognized until the customer requests a code
from Comdial enabling the software to be used.  Comdial's  reporting of software
revenue  meets the  requirements  as set forth by  Statement  of  Position  97-2
"Software Revenue Recognition."

Expensing of Costs

All production  start-up,  research and development,  and engineering  costs are
charged to expense,  except for that  portion of costs  which  relate to product
software development and outside contract development (see "Capitalized Software
Development Costs").

Accounting for Stock-Based Compensation

Comdial accounts for stock-based  compensation under Accounting Principles Board
Opinion  ("APB") No. 25.  Comdial has  disclosed  in a note to the  consolidated
financial  statements pro forma net income and earnings per share, as if Comdial
had applied the fair value method  (Black-Scholes) for stock options and similar
equity instruments (see Note 11).



                                       60
<PAGE>

Income Taxes

Comdial uses the deferred tax liability or asset approach, which is based on the
difference  between  the  financial  statement  and  tax  basis  of  assets  and
liabilities  as  measured  by the enacted tax rates which will be in effect when
the  differences  reverse.  Deferred tax expense is the result of changes in the
liability for deferred taxes. The measurement of deferred tax assets is impacted
by the  amount of any tax  benefits  where,  based on  available  evidence,  the
likelihood  of  realization  can be  established.  Comdial  incurred  cumulative
operating losses through 1991 for financial statement and tax reporting purposes
and has adjusted its valuation  allowance  account to recognize the net deferred
tax asset for future  periods  (see Note 7). Tax  credits  will be  utilized  to
reduce current and future income tax expense and payments.

Earnings per Common Share and Common Equivalent Share

For 1999,  1998,  and 1997,  earnings per common share ("EPS") were computed for
both basic and diluted EPS based on Statement of Financial  Accounting Standards
("SFAS") No. 128.  Basic EPS for all years  presented  were computed by dividing
net income  applicable to common shares by the weighted average number of common
shares   outstanding  and  common   equivalent  shares  including  any  possible
contingent  shares.  For 1999,  1998,  and 1997,  diluted  EPS were  computed by
dividing  income  attributable to common  shareholders  by the weighted  average
number of common and common equivalent shares outstanding during the period plus
(in  periods in which they had a dilutive  effect)  the effect of common  shares
contingently issuable, primarily from stock options.

Reclassifications

Amounts  in the  1998 and  1997  consolidated  financial  statements  have  been
reclassified to conform to the 1999 presentation. These reclassifications had no
effect on previously reported consolidated net income.

NOTE 2.  ACQUISITIONS & DISPOSALS

On December 31, 1997,  Aurora  Systems Inc.  ("Aurora")  sold all of its rights,
title and interest in the FastCall product,  Aurora's primary asset, to Spanlink
Communications,  Inc.  Aurora may receive,  over a five year  period,  royalties
totaling up to $1.1 million with a minimum  guarantee of $0.6 million at the end
of that period.

On July 14,  1998,  Comdial  acquired  the internet  telephony  gateway  product
VOIPgate.com  and the related  assets and business of Array Telecom  Corporation
("Array")  from Array  Systems  Computing  Inc.  ("ASCI").  ASCI was  located in
Toronto, Ontario, Canada. The purchase price was approximately $5.9 million. The
funds used for the  acquisition  came from cash  generated by  operations  and a
revolving  credit  facility.  The principal asset purchased was the intellectual
property associated with VOIPgate software, an internet protocol based telephony
software platform.

NOTE 3.  INVENTORIES

Inventory consists of the following:

-----------------------------------------------------------------------------
December 31,
In thousands                                       1999                  1998
-----------------------------------------------------------------------------
     Finished goods                              $8,763                $8,507
     Work-in-process                              4,556                 3,568
     Materials and supplies                       9,508                 9,359
                                                  -----                 -----
       Total                                    $22,827               $21,434
                                                =======               =======

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

Comdial  provides  reserves to cover  product  obsolescence  and those  reserves
impact gross margin. Future reserves will be dependent on management's estimates
of the  recoverability  of costs from  inventory.  Raw material  obsolescence is
mitigated by the  commonality  of component  parts and finished goods by the low
level of inventory relative to sales.

                                       61
<PAGE>

NOTE 4.  PROPERTY

Property consists of the following:

------------------------------------------------------------------------------
December 31,
In thousands                                          1999               1998
------------------------------------------------------------------------------
 Land                                                 $656               $656
Buildings and improvements                          15,035             14,582
Machinery and equipment                             37,517             33,514
Less accumulated depreciation                      (33,750)           (30,729)
                                                   -------            -------
  Property - Net                                   $19,458            $18,023
                                                   =======            =======
------------------------------------------------------------------------------

Depreciation  expense charged to operations for the years 1999,  1998, and 1997,
was $3.3 million, $2.8 million, and $2.8 million, respectively.

NOTE 5.  LEASE OBLIGATIONS

Comdial  and  its   subsidiaries   have  various  capital  and  operating  lease
obligations.  Future  minimum  lease  commitments  for  capitalized  leases  and
aggregate minimum rental  commitments under operating lease agreements that have
initial non-cancelable lease terms in excess of one year are as follows:

------------------------------------------------------------------------------
Year Ending December 31,                            Capital          Operating
In thousands                                         Leases            Leases
------------------------------------------------------------------------------
 2000                                                 $689             $3,445
   2001                                                689              2,211
   2002                                                685              1,716
   2003                                                685              1,250
   2004 and thereafter                                 538              3,858
                                                    ------            -------
     Total minimum lease commitments                 3,286            $12,480
                                                                      =======
  Less amounts representing interest
    and other costs                                   (616)
                                                    ------
  Principal portion of minimum lease
    commitments at December 31, 1999                $2,670
                                                    ======
------------------------------------------------------------------------------

Assets recorded under capital leases  (included in property in the  accompanying
Consolidated Balance Sheets) are as follows:


------------------------------------------------------------------------------
December 31,
In thousands                                        1999                1998
------------------------------------------------------------------------------
     Machinery and equipment                          $-                 $41
     Less accumulated depreciation                    (-)                (24)
                                                      --                 ---
        Property - Net                                $-                 $17
                                                      ==                 ===

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

For 1999 and 1997,  Comdial  entered into new capital  lease  obligations  which
amounted to approximately  $2.8 million and $18,000,  respectively.  During 1998
Comdial did not enter into any new capital leases. All capital lease balances as
of December 31, 1999, are for intangible assets such as software.

Operating  leases  and  rentals  are for  office  space and  factory  and office
equipment.  Total rent expense for operating leases, including rentals which are
cancelable on short-term  notice,  for the years ended December 31, 1999,  1998,
and 1997, were $2.6 million, $2.2 million, and $1.9 million, respectively.

NOTE 6.  DEBT

Prior  to  October   1998,   Fleet  Capital   Corporation   ("Fleet")  had  held
substantially  all of Comdial's  indebtedness.  Comdial and Fleet entered into a
loan and security  agreement (the "Loan  Agreement") which was amended from time
to time. The Loan Agreement  provided  Comdial with a $10.0 million  acquisition


                                       62
<PAGE>

loan (the  "Acquisition  Loan"),  a $3.5 million  equipment loan (the "Equipment
Loan"), and a $12.5 million revolving credit loan facility (the "Revolver"). The
Loan  Agreement was  effective  until  February 1, 2001 and the agreement  would
automatically renew itself for one-year periods thereafter.

On October  22,  1998,  Comdial and Bank of America,  N.A.  ("Bank of  America")
formerly  NationsBank,  N.A.,  entered  into a  credit  agreement  (the  "Credit
Agreement").  The Credit Agreement provides Comdial with a $50 million revolving
credit  facility  and a $5 million  letter of credit  subfacility.  Comdial used
$15.8  million  under the  revolving  credit  facility  (the  "Revolving  Credit
Facility") to pay off (1) all its  indebtedness  of $10.8 million to Fleet,  (2)
$4.4 million representing amounts owed under Comdial's promissory note including
interest to the former owners of KVT, and (3) $606,000 of mortgages owed by KVT.

Long-term debt consists of the following:

------------------------------------------------------------------------------
December 31,
In thousands                                          1999             1998
------------------------------------------------------------------------------
   Revolving credit facility (1)                    $29,596           $22,132
   Capitalized leases (2)                             2,670                14
                                                     ------            ------
     Total debt                                      32,266            22,146
   Less current maturities on debt                      471                 6
                                                    -------           -------
     Total long-term debt                           $31,795           $22,140
                                                    =======           =======
------------------------------------------------------------------------------

     (1) On October 22, 1998, Comdial borrowed $15.8 million under the Revolving
Credit  Facility from Bank of America  which was used to pay off other  existing
loans.  The loan made  pursuant  to the  Credit  Agreement  with Bank of America
carries  an  interest  rate based on the LIBOR  daily  rate plus the  applicable
margin and does not require monthly principal payments. The interest rate can be
adjusted  quarterly  based on Comdial's  ratio of funded debt to earnings before
interest,  taxes,  depreciation  and amortization  ("EBITDA"),  which allows the
rates to vary  from  plus  0.75% to 1.50%  above the  LIBOR  daily  rate.  As of
December  31,  1999 and 1998,  Comdial's  borrowing  LIBOR  rates were 6.58% and
6.30%, which includes an additional applicable margin of 0.75% for both years.

This Revolving  Credit  Facility with Bank of America can be used by Comdial for
working capital, equipment purchases, to finance permitted acquisitions, and for
other general corporate purposes.  The Bank of America Revolving Credit Facility
(as defined in the Credit  Agreement)  does not require payment until August 31,
2003 with the option of possible credit extensions.

     (2) Capital  leases are with  various  financing  entities  and are payable
based on the terms of each individual lease (see Note 5).

The Bank of  America  Credit  Agreement  also  gives  Comdial a letter of credit
subfacility of $5.0 million,  which is part of the Revolving Credit Facility, as
commitments  occur.  At December  31, 1999 and 1998,  the amount of  commitments
under the letter of credit  facility  with Bank of America  was $0 and  $52,000,
respectively.

Debt Covenants

Prior to October 1998,  Comdial's  indebtedness to Fleet was secured by liens on
Comdial's accounts  receivable,  inventories,  intangibles,  land, and all other
property. Among other restrictions, the amended Loan Agreement contained certain
financial  covenants that require specified levels of consolidated  tangible net
worth,  profitability,  and other certain financial ratios.  The Fleet agreement
was amended from time to time.

Effective October 1998,  Comdial's  indebtedness with Bank of America is secured
by liens on all Comdial's  properties and assets. The Credit Agreement with Bank
of America contains certain financial  covenants that relate to specified levels
of consolidated net worth and other financial  ratios.  As of December 31, 1999,
Comdial was in compliance  with all the covenants and terms of Bank of America's
Credit Agreement.



                                       63
<PAGE>

NOTE 7.  INCOME TAXES

The  components of the income tax expense for the years ended December 31 are as
follows:

-------------------------------------------------------------------------------
In thousands                              1999              1998          1997
-------------------------------------------------------------------------------
     Current -  Federal                   $410              $393          $200
                State                      133               369           168
     Deferred - Federal                  1,573            (9,730)         (214)
                State                      574            (1,769)           (5)
                                        ------            ------            --
       Total provision (benefit)        $2,690          ($10,737)         $149
                                        ======           =======          ====
-------------------------------------------------------------------------------

The income tax provision  reconciled to the tax computed at statutory  rates for
the years ended December 31, is summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
In thousands                                      1999              1998             1997
-----------------------------------------------------------------------------------------
<S>                                             <C>              <C>                 <C>
    Federal tax at statutory rate
    (35% in 1999, 1998, and 1997)               $3,691            $2,246           $2,054
    State income taxes (net of federal tax
    benefit)                                       764              (924)             109
    Nondeductible charges                          707               411              544
    Other adjustments                             (124)              519              200
    Utilization of operating loss carryover         -                 -            (2,539)
    Expiring business credits                      504                -                -
  Adjustment of valuation allowance             (2,852)          (12,989)            (219)
                                                ------           -------             ----
      Income tax provision (benefit)            $2,690          ($10,737)            $149
                                                ======           =======             ====
-----------------------------------------------------------------------------------------
</TABLE>

Net deferred tax assets of $14.8 million and $17.0 million have been  recognized
in the accompanying  Consolidated  Balance Sheets at December 31, 1999 and 1998,
respectively. The components of the net deferred tax assets are as follows:

------------------------------------------------------------------------------
December 31,
In thousands                                          1999            1998
------------------------------------------------------------------------------
    Total deferred tax assets                       $17,545         $23,045
    Total valuation allowance                          (114)         (2,966)
                                                       ----          ------
     Total deferred tax assets - net                 17,431          20,079
    Total deferred tax liabilities                   (2,622)         (3,123)
                                                     ------          ------
     Total                                          $14,809         $16,956
                                                    =======         =======
------------------------------------------------------------------------------

The valuation  allowance  decreased  $2.9 million during the year ended December
31, 1999.  The decrease was primarily  related to (1) the  re-evaluation  of the
future  utilization of net operating losses ("NOLs"),  and (2) the expiration of
tax  credits.  Comdial  periodically  reviews the  requirements  for a valuation
allowance and makes  adjustments to such allowance when changes in circumstances
result in changes in  management's  judgment  about the  future  realization  of
deferred  tax  assets.  Section  382 of the  Internal  Revenue  Code  limits  an
organization's ability to utilize tax benefits in the event that there is change
in ownership of 50% or more of the organizations  during any three-year  period.
Since Comdial's  stock offering in August 1995,  which resulted in a significant
change in  ownership,  management  was  concerned  that  cumulative  changes  in
ownership of Comdial could trigger the  limitations set forth in Section 382 and
adversely  affect  Comdial's  ability to utilize certain tax benefits.  With the
passage of the third fiscal quarter of 1998, the ownership changes occasioned by
the stock offerings will no longer be included in the time period measured under
Section 382.  Accordingly,  management  believes that it is more likely than not
that Comdial will realize its tax benefits.  However,  the tax benefits could be
reduced  in the near term if  estimates  of future  taxable  income  during  the
carryforward  periods  are reduced or a  limitation  based on section 382 occurs
before NOLs are utilized.



                                       64
<PAGE>

Comdial has net  operating  loss and credit  carryovers of  approximately  $13.8
million and $1.5 million,  respectively,  which, if not utilized, will expire as
follows:

------------------------------------------------------------------------------
In thousands                             Net Operating
  Expiration Dates                         Losses                 Tax Credits
------------------------------------------------------------------------------
  2000                                        $-                   $66
    2001                                   2,107                     -
    2002                                   6,486                     -
    2003                                       7                     -
    2004                                   2,200                     -
    After 2004                             2,970                 1,447
                                          ------                ------
       Total                             $13,770                $1,513
                                         =======                ======
-----------------------------------------------------------------------------

The components of the net deferred tax assets (liabilities) at December 31, 1999
and 1998 are as follows:

-------------------------------------------------------------------------------
Deferred Assets (Liabilities)                              Deceember 31,
In thousands                                        1999                  1998
--------------------------------------------------------------------------------
     Net loss carryforwards                        $4,984               $12,781
     Tax credit carryforwards                       1,513                 1,608
     Inventory write downs and capitalization       1,937                 1,794
     Pension                                           26                   246
     Postretirement                                   280                   297
     Compensation and benefits                        409                   357
     Capitalized software development costs         1,033                   438
     Contingencies                                   (359)                  589
     Other deferred tax assets                         99                    82
Fixed asset depreciation                           (2,216)               (2,522)
     Goodwill amortization                          2,405                 1,692
     Research and development expenditures          5,218                 3,161
     State taxes                                     (406)                 (601)
     Other deferred tax liabilities                    -                      -
                                                  -------               -------
     Net deferred tax asset                        14,923                19,922
     Less:  Valuation allowance                      (114)               (2,966)
                                                  -------               -------
        Total                                     $14,809               $16,956
                                                  =======               =======
-------------------------------------------------------------------------------

NOTE 8:  EARNINGS PER SHARE

For the three years ending December 31, 1999, 1998 and 1997, earnings per common
share  ("EPS")  were  computed  for both  basic and  diluted  EPS to  conform to
Statement of Financial  Accounting Standards ("SFAS") No. 128. Basic EPS for the
three years presented were computed by dividing net income  applicable to common
shares by the weighted  average number of common shares  outstanding  and common
equivalent shares including any possible contingent shares. For the three years,
diluted EPS were computed by dividing income attributable to common shareholders
by  the  weighted  average  number  of  common  and  common   equivalent  shares
outstanding  during  the  period  plus (in  periods in which they had a dilutive
effect) the effect of common shares contingently issuable,  primarily from stock
options. The following table discloses the annual information.

-------------------------------------------------------------------------------
   Year                            Numerator         Denominator          EPS
-------------------------------------------------------------------------------
    1999  Basic EPS                 $7,854,000         8,947,559          $0.88
           Diluted                  $7,854,000         8,989,080          $0.87

    1998  Basic EPS                $17,154,000         8,843,357          $1.94
           Diluted                 $17,154,000         9,081,070          $1.89

    1997  Basic EPS                 $5,719,000         8,683,790          $0.66
           Diluted                  $5,719,000         8,767,353          $0.65

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


NOTE 9.  PENSION AND SAVINGS PLANS

Comdial  currently has two pension plans that provide benefits based on years of
service and an employee's compensation during the employment period. One plan is


                                       65
<PAGE>

a  qualified  plan for all the  employees  of Comdial  and the other,  which was
initiated  in  April of  1999,  is a  non-qualified  plan  ("Retirement  Benefit
Restoration  Plan").  The non-qualified  plan is strictly for executive officers
and/or highly  compensated  employees who are designated as a participant of the
plan by the Compensation  Committee of Comdial.  The  non-qualified  plan is not
funded.

The calculation of pension benefits prior to 1993 was based on provisions of two
previous  pension plans.  One plan provided  pension  benefits based on years of
service and an employee's  compensation  during the employment period. The other
plan provided  benefits  based on years of service only.  The funding policy for
the plans was to make the minimum  annual  contributions  required by applicable
regulations.  Assets of the plans are  generally  invested in equities and fixed
income instruments.

The  following  table  sets  forth the  change  in  benefit  obligations  of the
qualified pension plans and amounts recognized in Comdial's Consolidated Balance
Sheets at December 31, 1999 and 1998.


------------------------------------------------------------------------------
In thousands                                      1999              1998

    Benefit obligation at beginning of year      $22,432           $18,541
    Service cost                                   1,758             1,575
    Interest cost                                  1,692             1,334
    Actuarial loss (gain)                         (3,101)            1,435
    Benefits paid                                   (543)             (453)
    Amendments                                     3,548                 -
                                                 -------           -------
       Benefit obligation at December 31         $25,786           $22,432
                                                 =======           =======

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

The  following  tables sets forth the change in plan assets of the pension plans
and amounts recognized in Comdial's  Consolidated Balance Sheets at December 31,
1999 and 1998.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
In thousands                                                 1999              1998
-----------------------------------------------------------------------------------
<S>                                                       <C>               <C>
    Fair value of plan assets at beginning of year        $21,402           $19,025
    Actual return on plan assets                            1,704             1,400
    Employer contribution                                   1,517             1,430
    Benefits paid                                            (543)             (453)
                                                          -------           -------
       Fair value of plan assets at December 31           $24,080           $21,402
                                                          =======           =======

Funded status                                             ($1,706)          ($1,030)
Unrecognized transition obligation (asset)                      -               (29)
Unrecognized actuarial (gain) or loss                      (2,507)              590
Unrecognized prior service cost                             3,210              (185)
                                                            -----              ----
Net amount recognized                                     ($1,003)            ($654)
                                                          =======             =====

Amounts recognized in the Consolidated Balance Sheets
  consist of:

    Prepaid benefit cost                                    ($654)            ($668)
    Intangible asset                                        2,400                 -
    Accrued benefit liability                              (4,265)           (1,417)
    Contributions during fiscal year                        1,516             1,431
                                                          -------             -----
       Net amount recognized                              ($1,003)            ($654)
                                                          =======             =====
-----------------------------------------------------------------------------------
</TABLE>
Assumptions  used  in  accounting  for  the  plans  as of  December  31  were as
follows:

                                            1999          1998         1997
----------------------------------------------------------------------------
    Discount rate                          8.00%          7.00%        7.00%
    Expected return on plan assets         9.00%          9.00%        9.00%
    Rate of compensation increase          4.50%          4.50%        4.00%
----------------------------------------------------------------------------

                                       66
<PAGE>

Net  periodic  pension cost for 1999,  1998,  and 1997  included  the  following
components:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
In thousands                                  1999             1998              1997
-------------------------------------------------------------------------------------
<S>                                         <C>              <C>               <C>
Change in benefit obligation:
    Service cost                            $1,758           $1,575            $1,226
    Interest cost                            1,692            1,334             1,047
    Expected return on plan assets          (1,777)          (1,490)           (1,247)
    Amortization of prior service cost         124              (63)              (63)
    Recognized actuarial loss                   68               61                 -
                                            ------           ------              ----
       Net periodic pension cost            $1,865           $1,417              $963
                                            ======           ======              ====
-------------------------------------------------------------------------------------
</TABLE>

In addition to providing pension benefits, Comdial contributes to a 401(k) plan,
based on an  employee's  contributions.  Effective  for 1998,  participants  can
contribute  from 1% to 17% of their salary and Comdial will match  contributions
equal to 50% of the  participant's  contribution  up to the first  6%.  Prior to
1998,  Participants could contribute from 2% to 12.5% of their salary as defined
in the terms of the plan and Comdial would match  contributions  equal to 25% of
the participant's contributions up to the first 10%. Comdial's total expense for
the  matching  portion  to the  401(k)  plan for 1999,  1998,  and 1997 was $0.6
million, $0.4 million, and $0.4 million, respectively.

NOTE 10.  POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The effect of SFAS No. 106, "Employers'  Accounting for Postretirement  Benefits
Other Than Pensions," on income from continuing  operations for 1999,  1998, and
1997 was an expense of $137,000,  $87,000,  and $64,000,  respectively.  Comdial
provides certain health care coverage (until age 65), which is subsidized by the
retiree through insurance premiums paid to Comdial,  and life insurance benefits
for  substantially  all of its retired  employees.  The  postretirement  benefit
obligation  is not funded and does not include any  provisions  for  securities,
settlement, curtailment, or special termination benefits. In 1993, when SFAS No.
106 went into effect,  Comdial elected to amortize the cumulative effect of this
obligation  over  20  years  (see  unrecognized  transition  obligation  in  the
following table).

The following table sets forth the change in postretirement  benefit obligations
and amounts recognized in Comdial's  Consolidated Balance Sheets at December 31,
1999 and 1998.


------------------------------------------------------------------------------
In thousands                                           1999               1998

    Benefit obligation at beginning of year           $1,011              $840
    Service cost                                          37                19
    Interest cost                                         74                68
    Plan participants' contributions                      16                58
    Actuarial loss/(gain)                                (16)              186
    Benefits paid                                        (48)             (160)
    Amendments                                             -                 -
                                                      ------            ------
Benefit obligation at December 31                     $1,074            $1,011
                                                      ======            ======

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

The following  tables set forth the change in plan assets of the  postretirement
benefits and amounts  recognized  in Comdial's  Consolidated  Balance  Sheets at
December 31, 1999 and 1998.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
In thousands                                                  1999              1998
------------------------------------------------------------------------------------
<S>                                                        <C>               <C>
    Fair value of plan assets at beginning of year            $  -              $  -
    Actual return on plan assets                                 -                 -
    Employer contribution                                       32               102
    Plan participants' contributions                            16                58
    Benefits paid                                              (48)             (160)
                                                              ----              ----
        Fair value of plan assets at December 31              $  -              $  -
                                                              ====              ====



                                       67
<PAGE>

Funded status                                              ($1,074)          ($1,011)
    Unrecognized transition obligation                       1,182             1,267
    Unrecognized actuarial gain                               (902)             (944)
    Unrecognized prior service cost                              -                 -
                                                             -----             -----
        Net amount recognized                                ($794)            ($688)
                                                             =====             =====

Amounts recognized in the Consolidated Balance Sheets:
    Prepaid benefit cost                                     ($688)            ($703)
    Accrued benefit liability                                 (137)              (87)
    Contributions during fiscal year                            31               102
                                                             -----             -----
        Net amount recognized                                ($794)            ($688)
                                                             =====             =====
------------------------------------------------------------------------------------
</TABLE>

Assumptions used in accounting for the plans as of December 31 were as follows:


-------------------------------------------------------------------
                        1999              1998             1997
-------------------------------------------------------------------
  Discount rate         8.00%             7.00%            7.50%
-------------------------------------------------------------------


For  measurement  purposes,  an 7.50%  annual rate of increase in the per capita
cost of covered  health care benefits was assumed for 1999. The rate was assumed
to decrease gradually to 5.25% for 2005 and remain at that level thereafter.

Net  periodic  pension cost for 1999,  1998,  and 1997  included  the  following
components:

------------------------------------------------------------------------------
In thousands                               1999             1998        1997
------------------------------------------------------------------------------
Change in benefit obligation:
    Service cost                            $37              $19         $22
    Interest cost                            74               68          60
    Expected return on plan assets            -                -           -
    Amortization of prior service cost       91               91          91
    Recognized actuarial gain               (65)             (91)       (109)
                                           ----              ---        ----
        Net periodic pension cost          $137              $87         $64
                                           ====              ===         ===
------------------------------------------------------------------------------

Assumed  health  care cost trend rates  could have a  significant  effect on the
amounts reported for the health care plans. A  one-percentage  change in assumed
health care cost trend rates would have the following effects:

------------------------------------------------------------------------------
                                             One-percentage-  One-percentage-
In thousands                                  Point Increase   Point Decrease
------------------------------------------------------------------------------
  Effect on total of service and interest
    cost components                                 $ 9              ($7)
  Effect on postretirement benefit obligation       $58             ($51)
------------------------------------------------------------------------------


NOTE 11.  STOCK-BASED COMPENSATION PLANS

As of December 31, 1999, Comdial had two basic stock-based  compensation  plans.
The 1992 Stock  Incentive Plan (the "Stock  Incentive  Plan") provides for stock
options to purchase  shares of Common  Stock  which may be granted to  officers,
directors, and certain key employees as additional compensation. Pursuant to the
terms of the 1992  Non-employee  Directors  Stock Incentive Plan (the "Directors
Stock Incentive Plan"), each non-employee director shall be awarded 3,333 shares
of  Comdial's  Common  Stock for each fiscal year  Comdial  reports  income.  In
January  1997, in accordance  with the terms of the  Directors  Stock  Incentive
Plan,  the Board of Directors  adopted a resolution  suspending 833 of the 3,333
shares of Comdial's common stock automatically awarded to non-employee directors
under such circumstances.  In 1999, each non-employee director was awarded 2,500
shares  related to income earned by Comdial for fiscal year 1998.  The plans are
composed of stock options,  restricted stock,  nonstatutory stock, and incentive
stock.  Comdial's incentive plans are administered by the Compensation Committee
of Comdial's Board of Directors.



                                       68
<PAGE>

As of December 31, 1999, there were 1.6 million shares of Comdial's Common Stock
reserved for issuance under  Comdial's  1992 Stock  Incentive Plan that had been
approved by the  stockholders  in 1996.  Comdial has  previously  accepted notes
relating to the non-qualified stock options exercised by officers and employees.
These  notes  receivable  relating  to stock  purchases  amounted  to  $150,000,
$156,000, and $161,000 at December 31, 1999, 1998, and 1997,  respectively,  and
have been deducted from Stockholders' Equity.

Options  granted  for years  1999 and 1998 have a maximum  term of ten years and
vest over a three-year period. Options become exercisable in installments of 33%
per year on each of the first through the third anniversaries of the grant date.
All options  granted through the Stock Incentive Plan are granted at an exercise
price equal to the market price of Comdial's  Common Stock on the grant date. In
1998,  Comdial  granted  120,000  shares of  nonstatutory  stock  options at the
current fair market value at grant date.  These  options were issued  outside of
the 1992  Stock  Incentive  Plan.  These  options  vest  over a four to six year
period.

Comdial  applies APB No. 25 and related  interpretations  in accounting  for its
plans. Accordingly, no compensation cost has been recognized for its fixed stock
option plan other than the performance based option that is part of the plan for
its  directors.  Common  Stock has been issued by Comdial to its  directors  for
years that show positive net income. The compensation cost that has been charged
against income for its director's performance-based stock was $85,000, $148,000,
and $97,000 for 1999, 1998, and 1997, respectively.

Information regarding stock options is summarized below:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                        1999        (1)         1998        (1)       1997         (1)
----------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>        <C>          <C>       <C>          <C>
Options outstanding,
    January 1;                     1,104,213      $8.93      859,729      $8.08     659,524      $7.95
    Granted                          220,433       7.51      405,316      10.42     298,450       8.25
    Exercised                         (8,228)      2.34      (96,602)      7.17     (32,216)      5.43
    Terminated                      (236,630)      9.08      (64,230)      9.61     (66,029)      8.79
                                   ---------               ---------                -------
       Options outstanding,
       December 31;                1,079,788       8.66    1,104,213       8.93     859,729      8.08
                                   =========               =========                =======
    Options exercisable,
    December 31;                     598,468       8.57      474,175       8.05     342,880       7.46
    Per share ranges of options outstanding
       at December 31                    $1.41-$13.50            $1.41-$13.50           $1.41-$11.75
    Dates through which options outstanding
      at December 31,
       were exercisable                1/2000-12/2009            1/99-12/2008           1/98-12/2007

 (1)  Fair value weighted-average exercise price at grant date.
--------------------------------------------------------------------------------------------------------------------

The following table summarizes  information concerning currently outstanding and
exercisable options at December 31, 1999:

---------------------------------------------------------------------------------------------------
                                 Options Outstanding                       Options Exercisable
                               -----------------------                   -----------------------
                                             Weighted-
                                Number        Average     Weighted-         Number        Weighted-
 Range of                    Outstanding     Remaining    Average        Exercisable       Average
 Exercise                         at        Contractual   Exercise            at           Exercise
 Prices                        12/31/99         Life        Price          12/31/99          Price
---------------------------------------------------------------------------------------------------
    $1.41   to    3.00          42,436           2.0        $1.78            42,436           $1.78
     5.73   to    7.77         339,259           6.8         7.41           142,357            7.31
     8.12   to    9.38         433,304           6.6         8.83           284,235            9.06
    10.50   to   13.50         264,789           6.7        11.07           129,440           11.09
                             ---------                                      -------
     1.41   to   13.50       1,079,788           6.5         8.66           598,468            8.57
                             =========                                      =======
---------------------------------------------------------------------------------------------------
</TABLE>



                                       69
<PAGE>

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

------------------------------------------------------------------------------
                                       1999           1998           1997
------------------------------------------------------------------------------
  Risk-free interest rate              5.15%          4.72%          5.51%
  Expected life                        6.50           7.78           3.65
  Expected volatility                    65%            68%            73%
  Expected dividends                   none           none           none
------------------------------------------------------------------------------

If  compensation  cost for Comdial's  Stock  Incentive Plans had been determined
based on the fair value at the grant dates for awards under the plan, consistent
with the method of Statement of Financial Accounting Standards ("SFAS") No. 123,
Comdial's  net income and  earnings per share would have been reduced to the pro
forma amounts indicated below:

-----------------------------------------------------------------------------
 In thousands except per share amounts             1999      1998       1997
-----------------------------------------------------------------------------
  Net income:           As reported              $7,854    $17,154     $5,719
                        Compensation expense        139      1,233        525
                        Pro forma                $7,715    $15,921     $5,194

  Basic earnings per share:
                        As reported               $0.88      $1.94      $0.66
                        Pro forma                 $0.86      $1.80      $0.60

  Diluted earnings per share:
                        As reported               $0.87      $1.89      $0.65
                        Pro forma                 $0.86      $1.75      $0.59
-----------------------------------------------------------------------------

NOTE 12.  SEGMENT INFORMATION

Effective  December  31,  1998,  Comdial  has  adopted  Statement  of  Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related Information."

During 1999, 1998, and 1997,  substantially  all of Comdial's sales, net income,
and identifiable net assets were attributable to the telecommunications industry
with over 98% of the sales occurring in the United States.

Comdial is organized into several product segments that comprise the majority of
its sales to the  telecommunications  market.  Comdial has three  basic  product
categories that  contribute ten percent or more, to net sales.  The segments are
Digital  Systems,  Solutions and Software,  and Analog and Other (which includes
other  miscellaneous  products).  Each of  these  categories  are  considered  a
business  segment,  and with respect to their financial  performance,  the costs
associated  with these  segments can only be  quantified  and  identified to the
gross profit level for each segment.

The Digital Systems segment is comprised of products such as Impact,  Impression
series telecommunication systems, Impact Digital Expandable Systems ("DXP"), DXP
Plus and the open digital switching  platforms known as the "FX Series." Digital
Systems generally offer customers more features with superior quality platforms.
The distinguishing characteristic of this segment is that it is designed for the
small office up to 500 end users.

The  Solutions and Software  segment is comprised of all Comdial's  software and
software  application  products.  The  products  included  are all of  Comdial's
vertical market products such as Impact  Concierge,  QuickQ,  Avalon,  and voice
processing  systems.  These  products  are sold to specific  industries  such as
hospitality, call centers, and assisted living centers.

The Analog and Other  segment is comprised of  Comdial's  older analog  products
(such as the Executech,  Unisyn, and Inntouch), and other products such as Voice
Express, ATC Terminals, and Custom Manufacturing.  The Analog products are aimed
at the small office market,  which supports only a few users. This market places
more emphasis on price than features or software functionality.

The information in the following  tables is derived  directly from the segments'
internal  financial  reporting  used  for  corporate  management  purposes.  The


                                       70
<PAGE>

expenses,  assets and  liabilities  attributable  to corporate  activity are not
allocated  to the  operating  segments.  There are no operating  assets  located
outside the United States.

Unallocated costs include operating expenses,  goodwill  amortization,  interest
expense,  other  miscellaneous  expenses,  and income tax  expenses or benefits.
Comdial does not maintain  information that would allow these costs to be broken
down into the various  product  segments and most of the costs are  universal in
nature.

Unallocated  assets  include  such items as cash,  deferred  tax  assets,  other
miscellaneous  assets,  and  goodwill.   Unallocated  capital  expenditures  and
depreciation relate primarily to shared services assets. Unallocated liabilities
include such items as accounts payable, debt, leases,  deferred tax liabilities,
and most other liabilities that do not relate to sales.

The following tables show segment information for years ended December 31.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Business Segment Net Revenues
(In thousands)                            1999             1998              1997
---------------------------------------------------------------------------------
<S>                                    <C>              <C>               <C>
  Digital Systems                      $88,479          $80,452           $70,181
  Solutions and Software                48,713           36,194            31,625
  Analog and Other                      10,768           12,331            16,755
                                      --------         --------          --------
    Net sales                         $147,960         $128,977          $118,561
                                      ========         ========          ========
---------------------------------------------------------------------------------
Business Segment Profit
(In thousands)                            1999             1998              1997
---------------------------------------------------------------------------------
  Digital Systems                      $34,666          $31,237           $25,175
  Solutions and Software                28,449           19,341            18,418
  Analog and Other                       2,492            2,802             3,750
                                       -------           ------            ------
    Gross profit                        65,607           53,380            47,343
  Operating expenses                    53,144           45,182            39,133
  Interest expense                       1,633            1,216             1,698
  Miscellaneous expense - net              286              565               644
                                       -------           ------            ------
    Income before income taxes         $10,544           $6,417            $5,868
                                       =======           ======            ======
---------------------------------------------------------------------------------
December 31,
 (In thousands)                           1999             1998              1997
---------------------------------------------------------------------------------
Business Segment Assets
  Digital Systems                      $54,443          $43,286           $32,245
  Solutions and Software                27,307           18,124            12,978
  Analog and Other                       5,335            6,432             6,989
  Unallocated                           45,989           41,148            27,052
                                      --------         --------           -------
      Total                           $133,074         $108,990           $79,264
                                      ========         ========           =======

Business Segment Liabilities
  Digital Systems                       $1,875           $1,397            $1,389
  Solutions and Software                 2,904            1,750             2,306
  Analog and Other                         202              203               267
  Unallocated                           56,485           42,479            30,467
                                       -------          -------           -------
      Total                            $61,466          $45,829           $34,429
                                       =======          =======           =======
---------------------------------------------------------------------------------
Business Segment Property, Plant
  and Equipment
December 31,

(In thousands)                            1999             1998              1997
---------------------------------------------------------------------------------
 Depreciation

  Digital Systems                       $1,920           $1,727            $1,721
  Solutions and Software                   363              264               196
  Analog and Other                         144              148               206
  Unallocated                              880              665               628
                                        ------           ------            ------
      Total                             $3,307           $2,804            $2,751
                                        ======           ======            ======


                                       71

<PAGE>

 Additions
  Digital Systems                       $1,584           $2,146            $2,230
  Solutions and Software                   883              499               843
  Analog and Other                          73              194               154
  Unallocated                            2,172            1,659               695
                                        ------           ------            -- ---
      Total                             $4,712           $4,498            $3,922
                                        ======           ======            ======
---------------------------------------------------------------------------------

Comdial had sales in excess of 10% of net sales to three customers as follows:

---------------------------------------------------------------------------------
In thousands                              1999             1998              1997
---------------------------------------------------------------------------------
 Sales:
    ALLTEL Supply, Inc.                $24,393          $19,301           $21,537
    Graybar Electric Company, Inc.      34,750           30,415            33,342
    Sprint/North Supply , Inc.          25,323           24,902            26,445

 Percentage of net sales:
    ALLTEL Supply, Inc.                    16%              15%               18%
    Graybar Electric Company, Inc.         24%              24%               28%
    Sprint/North Supply , Inc.             17%              19%               22%

Net sales of all three:
  Digital Systems                      $64,389          $54,372           $56,831
  Solutions and Software                12,595           12,189            11,835
  Analog and Other                       7,482            8,057            12,658
                                       -------          -------           -------
    Net sales                          $84,466          $74,618           $81,324
                                       =======          =======           =======

---------------------------------------------------------------------------------
</TABLE>


NOTE 13.  COMMITMENTS AND CONTINGENT LIABILITIES

Comdial  maintains its  operations in material  compliance  with all  applicable
environmental, health and safety laws and regulations, including those regarding
permits. Comdial began conducting annual environmental audits of the facility in
1995 to assure  continued  compliance.  Comdial's  facility in  Charlottesville,
Virginia  has two  permits.  The  first  is a  connection  permit  to  discharge
wastewater  to the  Rivanna  Water  and Sewer  Authority,  a  publicly  operated
treatment  works. The second is an air permit exemption letter from the Virginia
Department of Environmental Quality ("DEQ").

In  1988,  Comdial  voluntarily  discontinued  use  of  a  concrete  underground
hydraulic oil and chlorinated  solvent  storage tank. In conjunction  therewith,
nearby  soil and  groundwater  contamination  was  noted.  As a result,  Comdial
developed a plan of remediation  that was approved by the Virginia Water Control
Board and later by the DEQ. DEQ has also  required some  assessment  work of the
chlorinated solvents under the underground storage tank ("UST") Program, however
Comdial  determined  that it could  expedite  matters by entering  the site into
Virginia's Voluntary Remediation Program (the "VRP").

In 1999,  Comdial was accepted into the VRP to start the final  closure  process
for the  clean up of  leakage  of the  petroleum  and  chlorinated  solvents.  A
Voluntary   Remediation   Report  was   required  to  be   completed  to  assess
contamination  along  with a risk  assessment  and  remedial  action  plan.  The
completion of the VRP will require  several new wells at an approximate  cost of
$164,000.

In 1994, Comdial installed all the required equipment and started the process of
pumping  hydraulic  oil residue from the  underground  water.  In 1999,  Comdial
started the process of removing  chlorinated solvents which will be completed by
outside  consultants  hired by Comdial.  The oil and solvents are deposited into
approved  containers and taken to a hazardous  waste site in accordance with the
corrective  action plan.  As of December 31,  1999,  Comdial has incurred  total
costs of  approximately  $106,000  and  expects  the  pumping  process  for both
projects to be completed in 2000.



                                       72
<PAGE>

At this time,  management does not believe that  contingent  losses or potential
claims  arising  from Year 2000 issues will have any effect on Comdial.  Comdial
cannot predict whether there will be any future  litigation  against Comdial due
to non-compliance relating to Year 2000 issues.

NOTE 14.  QUARTERLY FINANCIAL DATA (UNAUDITED)

------------------------------------------------------------------------------
In thousands except           First        Second         Third        Fourth
  per share amounts          Quarter       Quarter       Quarter       Quarter
------------------------------------------------------------------------------
1999
    Sales                    $31,864       $35,743       $37,423       $42,930
    Gross profit              12,701        15,655        16,320        20,931
    Goodwill amortization        784           799            798          799
    Interest expense             382           377           399           475
    Net income                   388         1,291         1,834         4,341
    Net earnings per
    common share: Basic         0.04          0.14           0.20         0.48
------------------------------------------------------------------------------
1998

    Sales                    $29,281       $31,317       $32,031       $36,348
    Gross profit              11,887        12,216        13,387        15,890
    Goodwill amortization        663           683          1,678          782
    Interest expense             275           273           321           347
    Net income                 1,839         1,858        11,854         1,603
    Net earnings per
    common share: Basic         0.21          0.21           1.34         0.18
------------------------------------------------------------------------------

Previously  reported  quarterly  information has been revised to reflect certain
reclassifications.  These reclassifications had no effect on previously reported
consolidated net income.

Comdial recognizes costs based on estimates  throughout the fiscal year relating
to  inventory.  The results of the physical  inventory  and the fiscal  year-end
close reflected a favorable adjustment with respect to such estimates, resulting
in approximately  $0.6 million and $0.1 million of additional  income,  which is
reflected in the fourth quarters of 1999 and 1998, respectively.

In the first quarter of 1998, Comdial  reevaluated the future utilization of its
deferred  tax  assets  for  future  periods.  Based on the  reevaluation  of the
realizability  of the deferred tax assets,  the valuation  allowance was reduced
and a tax benefit of $0.3 million was recognized.

In the  third  quarter  of 1998,  Comdial  acquired  Array.  The  effect  of the
acquisition  was a small  increase in  interest  expense,  goodwill,  in-process
research  and  development,  and  additional  costs  associated  with the  Array
operations  amounting  to  approximately  $1.6  million for the third and fourth
quarters.  In addition,  Comdial  recognized  additional  costs  associated with
Aurora of $0.9 million and write-off of excess  inventory of $0.7 million.  Also
in the third quarter, Comdial reevaluated the future utilization of its deferred
tax assets for future periods. Based on the reevaluation of the realizability of
the deferred tax assets,  the valuation  allowance was reduced and a tax benefit
of $11.7 million was recognized (see Note 7).

NOTE 15.  SUBSEQUENT EVENT

On March 16, 2000, Comdial and ePhone Telecom, Inc. ("ePhone") entered into
a Memorandum of Understanding regarding a Strategic Alliance pursuant to
which Array,  a wholly owned  subsidiary,  would sell its fixed assets to ePhone
and license its technology to ePhone,  and Comdial would allow ePhone to utilize
the  name  "Array"  and  provide  ePhone  with  access  through  Comdial  to its
distribution  channels,  and the  companies  would agree on the terms of a joint
development effort. In addition to an initial payment to Array, ePhone would pay
royalties  based on  certain  gross  sales.  The  transaction  is subject to the
parties negotiating a mutually satisfactory definitive agreement extending for a
five year term.

On  March  17,   2000,   Comdial  and  Lucent   Technologies   GRL   Corporation
("Lucent-GRL")  entered  into a  Patent  License  Agreement  pursuant  to  which
Lucent-GRL granted to Comdial licenses under  Lucent-GRL's  patents for Licensed

                                       73
<PAGE>
Products (as defined in the agreement),  and Comdial granted Lucent-GRL licenses
under  Comdial's  patents for Licensed  Products (as defined in the  agreement).
Pursuant to the agreement, Comdial paid Lucent-GRL an initial payment and agreed
to pay Lucent-GRL a royalty based on Comdial's consolidated sales. The agreement
extends for a period of five years. The costs associated with this agreement are
future period costs. Such agreements are done in the normal course of business.


------------------------------------------------------------------------------
FIVE YEAR FINANCIAL DATA

Selected Consolidated Statements of Operations Data
<TABLE>
<CAPTION>
In thousands except
  per share amounts                    1999           1998         1997         1996         1995
-------------------------------------------------------------------------------------------------
<S>                                <C>            <C>          <C>          <C>           <C>
Net Sales                          $147,960       $128,977     $118,561     $102,182      $94,729
Income before income taxes
  and extraordinary item             10,544          6,417        5,868        1,291        5,535
Net income                            7,854         17,154        5,719        1,809        9,869
Earnings per common share
  and common equivalent share:
    Basic (1)                          0.88           1.94         0.66         0.21         1.27
-------------------------------------------------------------------------------------------------
(1)  Earnings  per share  prior to 1995 have been  restated  to reflect the one-
     for-three reverse stock split.

Selected Consolidated Balance Sheet Data
December 31,
<CAPTION>
In thousands                  1999           1998            1997           1996           1995
-----------------------------------------------------------------------------------------------

Current assets             $72,077        $50,854         $37,107        $30,767        $33,740
Total assets               133,074        108,990          79,264         74,352         56,692
Current liabilities         22,833         19,205          20,431         20,159         15,469
Long-term debt and other
  long-term liabilities     38,633         26,624          13,998         15,629          6,929
Stockholders' equity        71,608         63,161          44,835         38,564         34,294

-----------------------------------------------------------------------------------------------
</TABLE>

RELATED STOCKHOLDERS MATTERS

Quarterly Common Stock Information

The  following  table  sets  forth,  for the  periods  shown,  the  high and low
quarterly  closing  sales prices in the  over-the-counter  market for  Comdial's
Common  Stock,  as  reported by the  National  Association  of Security  Dealers
Automated  Quotation System ("Nasdaq").  Comdial's Common Stock is traded in the
Nasdaq National Market(R) under Comdial's symbol, CMDL.

----------------------------------------------------------------------------
                              1999                               1998
Fiscal Quarters         High          Low                  High          Low
----------------------------------------------------------------------------
First Quarter          8.750        5.938                11.688         9.25
Second Quarter         7.938        5.750                13.875       10.250
Third Quarter          9.000        6.375                14.000        7.000
Fourth Quarter        10.125        6.750                 9.563        7.375
----------------------------------------------------------------------------

Comdial has never paid a dividend on its Common Stock and its Board of Directors
currently  intends  to  continue  for the  foreseeable  future the policy of not
paying cash  dividends on Common Stock.  Prior to 1998,  Comdial was  prohibited
from paying dividends due to the Loan Agreement with Fleet.


                                       74
<PAGE>

OFFICERS

William G. Mustain
------------------
Chairman, President and Chief Executive Officer

Mr. Mustain is Chairman,  President and Chief Executive  Officer of Comdial.  He
joined Comdial as Vice  President in June 1987 and assumed his current  position
in May 1989. He has served as a director of Comdial since 1989.

Leigh Alexander
---------------
Senior Vice President

Ms.  Alexander  was elected  Senior  Vice  President  in  December  1998 and was
responsible  for  marketing.  In  January  2000,  Ms.  Alexander  was  appointed
President of Comdial Enterprise Solutions,  Inc., a subsidiary of Comdial. Prior
to her appointment, Ms. Alexander was a Senior Vice President of Paging Network,
Inc., a wireless messaging and paging company.

William C. Grover
-----------------
Senior Vice President

Mr. Grover was elected a Vice  President in September  1995 and was  responsible
for Sales and Services.  In January 2000, Mr. Grover was appointed  President of
Comdial Convergent Communications, a subsidiary of Comdial. He joined Comdial in
1993 as President of Comdial Enterprise Systems, Inc., a subsidiary of Comdial.

Ove Villadsen
-------------
Senior Vice President

Mr.  Villadsen  was elected  Vice  President  in May 1989 and in May of 1998 was
elected  Senior  Vice  President.  He  joined  Comdial  Business  Communications
Corporation  (CBCC), a subsidiary of Comdial, in November 1982, and between 1982
and 1989 served as Vice President of CBCC. Mr. Villadsen retired from Comdial on
January 3, 2000.

John Baird
----------
Vice President and Chief Technology Officer

Mr. Baird was elected Vice President on November 30, 1999. He is responsible for
new product  research.  Between  February  1999 and December  1999, he served as
Director of Business Planning and prior to that was Managing Director of Comdial
Enterprise Systems, Inc.

Joe D. Ford
-----------
Vice President

Mr. Ford was elected  Vice  President in May 1995 and is  responsible  for Human
Resources.  Between 1982 and May 1995, he served as Comdial's  Director of Human
Resources.

Keith J. Johnstone
------------------
Vice President

Mr.  Johnstone  was elected Vice  President in May 1990 and is  responsible  for
Manufacturing  Operations.  Between 1980, when he joined Comdial,  and 1990, Mr.
Johnstone held a number of management positions, including Director of Materials
and Director of Customer Service.

Lawrence K. Tate
----------------
Vice President

Mr. Tate was elected Vice  President  in November  1982 and is  responsible  for
Quality. Between 1969 and 1982, he held various management positions,  including
Vice President of Manufacturing Operations.


                                       75
<PAGE>

BOARD MEMBERS

William G. Mustain
------------------
Chairman
See previous page.

Robert P. Collins
-----------------
Mr.  Collins is the Chairman of the Board of  Directors  of Scott  Technologies,
Inc.,  a designer  and  manufacturer  of air  breathing  and oxygen  systems and
instrument products for health,  safety and aircraft  applications.  Mr. Collins
retired  in May  1998 as  President  and  Chief  Executive  Officer  of GE Fanuc
Automation, a joint venture between General Electric Co. and FANUC LTD of Japan.
He joined  Comdial's  Board of  Directors  in April  1998 and is a member of the
Audit Committee of the Board of Directors.

Barbara J. Dreyer
-----------------
Ms.  Dreyer is the  Chief  Operating  Officer  of  SpeakOut.com,  a web site for
Internet  activism  providing  news and feedback tools on hot issues of the day.
From 1996 to 1999, she was Senior Vice President and Chief Financial  Officer of
Communications Systems Technology,  Inc. She joined Comdial's Board of Directors
in April  1998 and is a member  of the  Compensation  Committee  of the Board of
Directors.

A.M. Gleason
------------
Mr. Gleason retired in May 1995 from PacifiCorp,  a diversified  public utility,
after having  served as President,  CEO, Vice Chairman and as a Director.  He is
also a director of  Tektronix,  Inc. and Rite Aid.  Mr.  Gleason has served as a
director of Comdial  since 1981 and as Vice  Chairman of the Board of  Directors
since April 1995 and is a member of the Compensation  and Nominating  Committees
of the Board of Directors.

John W. Rosenblum
-----------------
Mr.  Rosenblum  is  Dean of the  Jepson  School  of  Leadership  Studies  at the
University  of Richmond.  Prior to serving at the  University  of Richmond,  Mr.
Rosenblum was a Tayloe Murphy Professor of Business Administration at the Darden
Graduate School of Business  Administration at the University of Virginia. He is
also a director of Chesapeake  Corporation,  Cadmus Communications  Corporation,
Cone Mills Corporation,  and Grantham,  Mayo, Van Otterloo and Company, LLC. Mr.
Rosenblum  has served as a director of Comdial since 1992 and is a member of the
Audit and Nominating Committees of the Board of Directors.

Robert E. Spekman
-----------------
Mr.  Spekman is a Tayloe  Murphy  Professor  of Business  Administration  at the
Darden Graduate School at the University of Virginia.  Mr. Spekman has taught at
the  Darden  School  since  1992 and has held  positions  at the  University  of
Southern  California.  He is also an  active  consultant  to  many  Fortune  500
companies. Mr. Spekman has served as a director of Comdial since April 1999, and
is a member of the Compensation Committee of the Board of Directors.

Dianne C. Walker
----------------
Ms.  Walker is an  independent  consultant.  Prior to  January  1995,  she was a
consultant to Bear Stearns & Co. Inc., an investment banking firm. She is also a
director of MicroAge, Inc., Arizona Public Service Company, and Microtest,  Inc.
Ms. Walker has served as a director of Comdial since 1986 and is a member of the
Audit and Nominating Committees of the Board of Directors.


                                       76
<PAGE>
Transfer Agent and Registrar
----------------------------
 ChaseMellon Shareholder Services
 New York, New York
 Phone:  (800) 851-9677
 World Wide Web:  http://www.chasemellon.com

Independent Auditors
--------------------
 Deloitte & Touche LLP
 Richmond, Virginia

Investor Relations
------------------
 Phone:  (804) 978-2200
 Fax:    (804) 978-2438
 E-Mail:  invest@comdial.com

World Wide Web
--------------
 http://www.comdial.com

Form 10-K
---------
 On written request, Comdial Corporation
 will furnish to stockholders a copy of
 its Form 10-K for the most recent year.
 Address your request to Investor Relations,
 Comdial Corporation, P.O. Box 7266,
 Charlottesville, Virginia  22906-7266

                                       77