<PAGE>   1
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-K
                                 ANNUAL REPORT
                            ------------------------
 
(MARK ONE)
      [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
 
                                       OR
 
      [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934
 
                         FOR THE TRANSITION PERIOD FROM
                         ______________ TO ____________ 
                         COMMISSION FILE NUMBER 0-11350
 
                    INTERNATIONAL LEASE FINANCE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                           <C>
                  CALIFORNIA                                    22-3059110
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
 
    1999 AVENUE OF THE STARS, LOS ANGELES,                        90067
                  CALIFORNIA
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 788-1999
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE
                                (TITLE OF CLASS)
 
     INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X]  NO [ ]
 
     INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SEC. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE
PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS
FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
 
     AS OF FEBRUARY 28, 1997, THERE WERE 35,818,122 SHARES OF COMMON STOCK, NO
PAR VALUE, OUTSTANDING.
 
     REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
 
================================================================================
<PAGE>   2
 
                    INTERNATIONAL LEASE FINANCE CORPORATION
 
                          1996 FORM 10-K ANNUAL REPORT
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
                                     PART I
 
<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>         <C>                                                                           <C>
Item  1.    Business....................................................................    1
Item  2.    Properties..................................................................    5
Item  3.    Legal Proceedings...........................................................    8
 
                                           PART II
Item  5.    Market for Registrant's Common Equity and Related Stockholder Matters.......    8
Item  6.    Selected Financial Data.....................................................    9
Item  7.    Management's Discussion and Analysis of Financial Condition and Results of
              Operations................................................................   10
Item  8.    Financial Statements and Supplementary Data.................................   12
Item  9.    Changes in and Disagreements with Accountants on Accounting and Financial
              Disclosure................................................................   12
 
                                           PART IV
Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.............   12
</TABLE>
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     International Lease Finance Corporation (the "Company") is primarily
engaged in the acquisition of new and used commercial jet aircraft and the
leasing and sale of such aircraft to domestic and foreign airlines. The Company,
in terms of the number and value of transactions concluded, is a major
owner-lessor of commercial jet aircraft. In addition, the Company is engaged in
the remarketing of commercial jets for its own account, for airlines and for
financial institutions.
 
     As of December 31, 1996, the Company owned 296 aircraft and managed an
additional 18 aircraft. See "Item 2. Properties -- Flight Equipment." At
December 31, 1996, the Company had committed to purchase 243 aircraft
deliverable through 2004 at an estimated aggregate purchase price of $13.3
billion. It also had options to purchase an additional 35 aircraft deliverable
through 2005 at an estimated aggregate purchase price of $2.8 billion. See "Item
2. Properties -- Commitments."
 
     The Company maintains the mix of flight equipment to meet its customers'
needs by purchasing those models of new and used aircraft which it believes will
have the greatest airline demand and operational longevity and minimize the time
that its aircraft are not leased to customers.
 
     The Company purchases, and finances the purchase of, aircraft on terms
intended to permit the Company to lease or resell such aircraft at a profit. The
Company typically finances the purchase of aircraft with borrowed funds and
internally generated cash flow. The Company accesses the capital markets for
such funds at times and on terms and conditions it considers appropriate. The
Company may, but does not necessarily, engage in financing transactions for
specific aircraft. The Company relies significantly on short- and medium-term
financing, and thereby attempts to manage interest rate exposure. To date, the
Company has been able to purchase aircraft on terms which have permitted it to
lease the aircraft at a profit and has not experienced any difficulty in
obtaining financing.
 
     The Company's aircraft are usually leased on terms under which the Company
does not fully recover the acquisition cost of such aircraft. Thus, at the
termination of a lease, the Company bears the risk of selling or releasing the
aircraft on terms which will cover its remaining cost.
 
     The airlines are in a cyclical, economically sensitive and highly
competitive business. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Company's revenue and income
may be affected by political instability abroad, changes in national policy,
competitive pressures on certain air carriers, fuel shortages, labor stoppages,
recessions, and other political or economic events adversely affecting world or
regional trading markets or impacting a particular customer. The Company's
continued success is partly dependent on management's ability in the future to
develop customer relationships for leasing, sales and remarketing with those
airlines best able to maintain their economic viability and survive in a
deregulated environment.
 
     The Company is incorporated in the State of California and its principal
executive offices are located at 1999 Avenue of the Stars, Los Angeles,
California 90067. The Company's telephone, telecopier and telex numbers are
(310) 788-1999, (310) 788-1990 and 69-1400, respectively. The Company is an
indirect wholly owned subsidiary of American International Group, Inc. ("AIG").
AIG is a holding company which through its subsidiaries is primarily engaged in
a broad range of insurance and insurance-related activities in the United States
and abroad. The Common Stock of AIG is listed on, among others, the New York
Stock Exchange.
 
AIRCRAFT LEASING
 
     The initial term of the Company's current leases range in length from one
year to 15 years. See "Item 2. Properties -- Flight Equipment" for information
regarding scheduled lease terminations. Most of the Company's leases are
operating leases under which the Company does not fully recover its aircraft
cost and retains the benefit and assumes the risk of the residual value of the
aircraft. The Company on occasion also
 
                                        1
<PAGE>   4
 
enters into finance-type and sales-type leases where the full cost of the
aircraft is substantially recovered over the term of the lease. At December 31,
1996, four of the Company's leases were accounted for as finance leases. The
aircraft under operating leases are included as assets on the Company's balance
sheet and depreciation is charged to income over the estimated useful lives of
the aircraft. In accordance with generally accepted accounting principles,
rentals are reported as revenue over the lease term as they become due and are
earned. The Company attempts to maintain a mix of short- and medium-term leases
to balance the benefits and risks associated with different lease terms. Varying
lease terms mitigate the effects of changes in prevailing market conditions at
the time aircraft become eligible for re-lease or sale and the uncertainty
associated with estimating residual value of the aircraft at the termination of
the lease.
 
     All leases are on a "net" basis with the lessee responsible for all
operating expenses, which customarily include fuel, crews, airport and
navigation charges, taxes, licenses, registration and insurance. Normal
maintenance and repairs; airframe and engine overhauls; and compliance with
return conditions of flight equipment on lease are provided by and paid for by
the lessee. Under the provisions of most leases, for certain airframe and engine
overhauls, the lessee is reimbursed by the Company for costs incurred up to but
not exceeding contingent rentals paid to the Company by the lessee. The Company
provides a charge to operations for such reimbursements based primarily upon the
hours utilized during the period and the expected reimbursement during the life
of the lease. The leases contain specific provisions regarding the condition of
the aircraft upon redelivery to the Company. The lessee is responsible for
compliance with all applicable laws and regulations with respect to the
aircraft. The Company requires its lessees to comply with the most restrictive
standards of either the Federal Aviation Administration (the "FAA") or its
foreign equivalent. The Company makes periodic inspections of the condition of
its leased aircraft. Generally, the Company requires a deposit which is security
for the condition of aircraft upon return to the Company, the rental payment by
the lessee and the performance of other obligations by the lessee under the
lease. In addition, the leases contain extensive provisions regarding the
remedies and rights of the Company in the event of a default thereunder by the
lessee. The lessee is required to continue lease payments under all
circumstances, including periods during which the aircraft is not in operation
for maintenance, grounding or any other reason whatsoever.
 
     The Company obtains and reviews relevant business materials from all
prospective lessees and purchasers before entering into a lease or extending
credit. Under certain circumstances, the Company may require the lessee to
obtain guarantees or other financial support from an acceptable financial
institution or other third party.
 
FLIGHT EQUIPMENT MARKETING
 
     The Company also regularly disposes of its leased aircraft at or before the
expiration of their leases. The buyers include the aircraft's lessee, another
airline or a third party lessor. Any gain or loss on disposition of leased
aircraft is reflected as revenues from flight equipment marketing.
 
     From time to time, the Company also engages in transactions to buy aircraft
for resale. In some cases, the Company assists its customers through consulting
services and procurement of financing from third parties.
 
     In addition to its leasing and sales operations, the Company is engaged,
from time to time, as an agent for airlines in the disposition of their surplus
aircraft. The Company generally acts as an agent under an exclusive remarketing
contract whereby it agrees to sell aircraft on a "best efforts" basis within a
fixed time period. These activities generally augment the Company's primary
activities and also serve to promote relationships with prospective sellers and
buyers of aircraft.
 
     The Company plans to continue its remarketing services on a selected basis
involving specific situations where these activities will not conflict or
compete with, but rather will be complementary to, its leasing and selling
activities.
 
     The Company also has guaranteed the loans of certain buyers of aircraft,
which guarantees aggregate approximately $87,081,000. See Note K of Notes to
Consolidated Financial Statements.
 
                                        2
<PAGE>   5
 
FINANCING/SOURCE OF FUNDS
 
     The Company purchases new aircraft directly from manufacturers and used
aircraft from airlines for lease or sale to other airlines. The Company finances
the purchase price of flight equipment from internally generated funds, secured
and unsecured commercial bank financings and the issuance of commercial paper,
public and private debt and preferred stock. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
CUSTOMERS
 
     At December 31, 1996, lessees of the Company included: (domestic) Alaska
Airlines, American Trans Air, Carnival Air Lines, Continental Airlines, Millon
Air, North American Airlines, Southwest Airlines, Tower Air, Trans World
Airlines (TWA), Western Pacific and World Airways; (foreign) Aer Lingus, Aero
Lloyd Flugreisen, Aeromexico, Aeroperu, Air 2000, Air Afrique, Air Belgium, Air
Canada, Air Espana, Air Europe SpA, Air Liberte, Air Macau, Air Madagascar, Air
Mauritius, Air New Zealand, Air Pacific, Air Seychelles, Air Transat, Air UK,
Asiana, Avianca, Braathens S.A.F.E., Britannia Airways, British Airways, British
Midland Airways, BWIA International, Canada 3000, Cathay Pacific, China
Airlines, China Hainan Airlines, China Southern Airlines, China Southwest
Airlines, Compagnie Air France Europe, Emirates, Estonian Air, EVA Airways, Far
Eastern Air Transport, Garuda Indonesia, GB Airways, Guyana Airways, Hapag-Lloyd
Flug, Hong Kong Dragon Airlines (Dragonair), Icelandair, Kenya Airways, KLM
Royal Dutch Airlines, Korean Airlines, L'Aeropostale, LACSA, Lineas Aereas
Privadas Argentinas, S.A. (LAPA), Lloyd Aero Boliviano (LAB), LAN Chile, LTU
Luftransport-Unternehmen, Lufthansa, Lufthansa Cargo, Malaysian Airline System,
Malev Hungarian Airlines, Martinair Holland, Mexicana, Middle East Airlines
Airliban, Monarch Airways, National Jet Systems, Nordic East, ONUR Air, Pegasus,
Polynesian Airways, QANTAS Airways, Rio Sul, SAETA, Sahara India Airlines,
Shenzhen, Sichuan Airlines, Sunquest Vacations Limited, Surinam, Swissair, TACA
International Airlines, TACV Cabo Verde, TAP Air Portugal, TEA Basel, THY,
Transaero Airlines, Transavia, Transbrasil, Translift Airways, Varig, Virgin
Atlantic Airways, VIVA Airways, Wuhan Airlines and Xiamen. No single customer
accounted for more than 10% of total revenues in any of the last three years.
 
     Revenues include rentals of flight equipment to foreign airlines of
$1,202,651,000 (1996), $1,002,251,000 (1995) and $798,619,000 (1994) comprising
83.3%, 80.0% and 80.4%, respectively, of total rentals of flight equipment. See
Note J of Notes to Consolidated Financial Statements.
 
     The following table sets forth the dollar amount and percentage of total
rental revenues attributable to the indicated geographic areas for the years
indicated:
 
<TABLE>
<CAPTION>
                                              1996                   1995                  1994
                                       ------------------     ------------------     ----------------
                                         AMOUNT       %         AMOUNT       %        AMOUNT      %
                                       ----------   -----     ----------   -----     --------   -----
                                                           (DOLLARS IN THOUSANDS)
<S>                                    <C>          <C>       <C>          <C>       <C>        <C>
Europe...............................  $  551,703    38.2%    $  462,252    36.9%    $353,009    35.5%
Asia/Pacific.........................     332,159    23.0        255,163    20.4      180,215    18.2
United States and Canada.............     304,801    21.1        304,784    24.3      230,856    23.2
Central, South America and Mexico....     165,819    11.5        166,443    13.2      199,041    20.0
Africa and the Middle East...........      89,957     6.2         65,378     5.2       30,475     3.1
                                       ----------   -----     ----------   -----     --------   -----
                                       $1,444,439   100.0%    $1,254,020   100.0%    $993,596   100.0%
                                        =========   =====      =========   =====     ========   =====
</TABLE>
 
     Many foreign countries have currency and exchange laws regulating the
international transfer of currencies. The Company attempts to minimize its
currency and exchange risks by negotiating substantially all of its aircraft
lease and sales transactions in U.S. dollars and all guarantees obtained to
support various lease agreements are denominated for payment in U.S. dollars.
The Company requires, as a condition to any foreign transaction, that the lessee
or purchaser in a foreign country first obtain, if required, written approval of
the appropriate government agency, finance ministry or central bank for the
remittance of all funds
 
                                        3
<PAGE>   6
 
contractually owed to the Company in U.S. dollars. As a result, foreign currency
risk is immaterial to the Company.
 
     The Company has restructured leases with both foreign and domestic lessees.
Such restructurings have involved the voluntary termination of leases prior to
lease expiration, the replacement of leased aircraft with smaller, less
expensive leased aircraft, the arrangement of subleases from the primary lessee
to another airline and the rescheduling of lease payments. No aircraft were
repossessed in 1994. In 1995, the Company repossessed one A320 from a lessee and
terminated early the lease of one A320. Both aircraft were promptly released to
other customers. In 1996, the Company repossessed a total of five aircraft from
two airlines. In one case, one aircraft was repossessed and was quickly
released. In the other case, of the four repossessed aircraft, two have been
sold and the other two have been promptly released.
 
     In some situations where the Company repossesses an aircraft, it may decide
to export the aircraft from the lessee's jurisdiction. To date, the Company has
been able to export all repossessed aircraft which it desired to export. In
addition, in connection with the repossession of an aircraft, the Company may be
required to pay outstanding mechanic's, airport and other operating liens on the
repossessed aircraft, which could include charges relating to other aircraft
operated by the lessee.
 
     The Company's revenues and income may be affected by political instability
abroad, changes in national policy, competitive pressures on certain air
carriers, fuel shortages, labor stoppages, recessions and other political or
economic events adversely affecting world or regional trading markets or
impacting a particular customer.
 
COMPETITION
 
     The leasing and sale of jet aircraft is highly competitive. Aircraft
manufacturers and the airlines sell new and used jet aircraft. Furthermore, the
Company faces competition in leasing aircraft from aircraft manufacturers,
banks, other financial institutions and leasing companies. There is also
competition with respect to its remarketing activities from many sources,
including, but not limited to, aircraft brokers.
 
GOVERNMENT REGULATION
 
     The FAA, the Department of Transportation and the Department of State
exercise regulatory authority over the air transportation industry. The FAA has
regulatory jurisdiction over registration and flight operations of aircraft
operating in the United States, including equipment use, ground facilities,
maintenance, communications and other matters.
 
     The FAA can suspend or revoke the authority of air carriers or their
licensed personnel for failure to comply with its regulations and ground
aircraft if their airworthiness is in question. The Company believes it holds
all airworthiness and FAA registration certificates which are required for the
aircraft owned by the Company, although the certificates may be suspended or
revoked for cause.
 
     The Department of State and the Department of Transportation, in general,
have jurisdiction over economic regulation of air transportation, but since the
Company does not itself operate its aircraft for public transportation of
passengers and property, it is not directly subject to their regulatory
jurisdiction.
 
     To export aircraft from the U.S. to a foreign destination, the Company is
required to obtain an export license from the United States Department of
Commerce. To date, the Company has not experienced any difficulty in obtaining
required certificates either from the FAA, the Department of Commerce or any
other regulatory agency or their foreign counterparts.
 
EMPLOYEES
 
     The Company is in a capital intensive rather than a labor intensive
business. As of December 31, 1996, the Company had 75 full-time employees, which
it considered adequate for its business operations. The Company will expand its
management and administrative personnel, as necessary, to meet future growth.
None of the Company's employees is covered by a collective bargaining agreement
and the Company believes
 
                                        4
<PAGE>   7
 
that it has maintained excellent employee relations. The Company provides
certain employee benefits, including retirement plans and health, life,
disability and accident insurance.
 
INSURANCE
 
     The Company requires its lessees to carry those types of insurance which
are customary in the air transportation industry, including comprehensive
liability insurance and aircraft hull insurance. In general, the Company is an
additional insured on liability policies carried by the lessees. All policies
contain a breach of warranty endorsement so that the interests of the Company
are not prejudiced by any act or omission of the operator-lessee.
 
     Insurance premiums are prepaid by the lessee, with payment acknowledged by
the insurance carrier. The territorial coverage is, in each case, suitable for
the lessee's area of operations and the policies contain, among other
provisions, a "no co-insurance" clause and a provision prohibiting cancellation
or material change without at least 30 days advance written notice to the
Company. Furthermore, the insurance is primary and not contributory and all
insurance carriers are required to waive rights of subrogation against the
Company.
 
     The stipulated loss value schedule under aircraft hull insurance policies
is on an agreed value basis acceptable to the Company, which usually exceeds the
book value of the aircraft. In cases where the Company believes that the agreed
value stated in the lease is not sufficient, the Company purchases additional
Total Loss Only coverage for the deficiency. Additionally, all aircraft in the
Company's fleet are covered by Contingent Liability insurance. Aircraft hull
policies contain standard clauses covering aircraft engines with deductibles
required to be paid by the lessee. Furthermore, the aircraft hull policies
contain full war risk endorsements, including, but not limited to, confiscation,
seizure, hijacking and similar forms of retention or terrorist acts. All losses
under such policies are payable in U.S. dollars.
 
     The comprehensive liability insurance policies include provisions for
bodily injury, property damage, passenger liability, cargo liability and such
other provisions reasonably necessary in commercial passenger and cargo airline
operations with minimal deductibles. Such policies generally have combined
comprehensive single liability limits of not less than $250 million and all
losses are payable in U.S. dollars, U.K. pounds or German marks.
 
     The Company also maintains other insurance covering the specific needs of
its business operations. Insurance policies are generally placed or reinsured
through AIG subsidiaries, with costs allocated back to the Company. The Company
believes that its insurance is adequate both as to coverage and amount.
 
ITEM 2. PROPERTIES
 
FLIGHT EQUIPMENT
 
     The Company's management frequently reviews opportunities to acquire
suitable commercial jet aircraft based not only on market demand and customer
airline requirements, but also on the Company's fleet portfolio mix criteria and
planning strategies for leasing. Before committing to purchase specific
aircraft, the Company takes into consideration factors such as estimates of
future values, potential for remarketing, trends in supply and demand for the
particular type, make and model of aircraft and engines and anticipated
obsolescence. As a result, certain types and vintages of aircraft do not
necessarily fit the profile for inclusion in the Company's portfolio of aircraft
owned and used in its leasing operations.
 
     At December 31, 1996, all of the aircraft were Stage III, which are
aircraft that hold or are capable of holding a noise certificate issued under
Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago Convention or have
been shown to comply with the Stage III noise levels set out in Section 36.5 of
Appendix C of Part 36 of the Federal Aviation Regulations of the United States.
At December 31, 1996, the average age of the Company's flight equipment was 3.98
years.
 
                                        5
<PAGE>   8
 
     The following table shows the scheduled lease terminations (for the minimum
noncancelable period) by aircraft type for the Company's lease portfolio at
December 31, 1996:
 
<TABLE>
<CAPTION>
          AIRCRAFT TYPE             1997   1998   1999   2000   2001   2002   2003   2004   2005   2006   TOTAL
----------------------------------  ----   ----   ----   ----   ----   ----   ----   ----   ----   ----   -----
<S>                                 <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
737-300...........................    4     13      6      5      8      6      4      2      2      1      51
737-400...........................    4      9      7     10      7      6      9      6             1      59
737-500...........................           2      3      2      3      1      4      1                    16
757-200...........................    2     11      4      5      4      3      3      2      4      3      41
767-200...........................           2      2             1                                          5
767-300...........................           4      2      4      9      2      4      1                    26
747-200...........................    1             1                                                        2
747-300...........................                                              3                            3
747-400...........................           2             1             3      1             1              8
MD-82.............................           1                                                               1
MD-83.............................    1      3      1      3                                         1       9
MD-87.............................                  1                                                        1
MD-11.............................           3      1      2                                                 6
F-70..............................                                              1      2                     3
A300-600R.........................           1      1      2                    1      1      1              7
A310-200(a).......................    3                                                                      3
A310-300(a).......................                  5                                                        5
A319..............................                                                                   2       2
A320..............................    1     11      2      7      1      3      6                    1      32
A321..............................                  2      2                           2      1              7
A330..............................           7             1      2                                         10
A340..............................    1             2      2                                                 5
L-1011(a).........................                  1      2      1                                          4
                                     --     --     --     --     --     --     --     --      -      -     ---
Total.............................   17     69     41     48     36     24     36     17      9      9     306
</TABLE>
 
---------------
 
(a) All A310-200, one A310-300 and three L-1011 aircraft are committed for sale
    in 1997.
 
     This schedule does not include two A310-200 aircraft committed for sale in
1997 yet unleased at December 31, 1996. In addition, the schedule does not
include an A310-300 and an A300-600R, off lease at December 31, 1996, yet
subsequently leased. This schedule includes 14 aircraft leased by the Company
and subleased to others.
 
                                        6
<PAGE>   9
 
COMMITMENTS
 
     At December 31, 1996, the Company had committed to purchase the following
aircraft at an estimated aggregate purchase price (including adjustment for
anticipated inflation) of approximately $13.3 billion for delivery as shown:
 
<TABLE>
<CAPTION>
               AIRCRAFT TYPE              1997   1998   1999   2000   2001   2002   2003   2004   TOTAL
    ------------------------------------  ----   ----   ----   ----   ----   ----   ----   ----   -----
    <S>                                   <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
    737-300/400/500(a)..................    9      4                                                13
    737-600/700/800(a)..................    2      8      9      9      9      9      7      2      55
    757-200.............................   13      5      4                                         22
    767-300.............................    5      7      2                                         14
    777-200/300(a)......................    2      3      3      4      3      3      3      3      24
    747-400.............................    1      1      1                                          3
    A310-200............................    2                                                        2
    A310-300............................    6                                                        6
    A319................................    3      3      4      3             1                    14
    A320-200............................   10      9      5      4      2                           30
    A321-100/200(a).....................    7      7      9      6      2      1      1             33
    A330-200/300(a).....................    1      4      8             1      2      1             17
    A340................................    3      2      1      1      1      2                    10
                                           --     --     --     --     --     --     --      -     ---
              Total.....................   64     53     46     27     18     18     12      5     243
</TABLE>
 
---------------
 
(a) The Company has the right to designate the size of the aircraft within the
    specific model type at specific dates prior to contractual delivery.
 
     At December 31, 1996, the Company had options to purchase the following
aircraft at an estimated aggregate purchase price (including adjustment for
anticipated inflation) of approximately $2.8 billion for delivery as shown:
 
<TABLE>
<CAPTION>
                  AIRCRAFT TYPE                 1999   2000   2001   2002   2003   2004   2005   TOTAL
    ------------------------------------------  ----   ----   ----   ----   ----   ----   ----   -----
    <S>                                         <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
    757-200...................................    2      1                                          3
    767-300...................................    2      1                                          3
    777-200/300...............................                                              2       2
    A319......................................                  3             1      1              5
    A320-200..................................                  3      1      1      2              7
    A321-100..................................    1                    1             1              3
    A330-200/300..............................           1             1             3              5
    A340......................................           1      1      1      2      2              7
                                                 --     --     --     --     --     --     --      --
              Total...........................    5      4      7      4      4      9      2      35
</TABLE>
 
     If all 278 aircraft were to be acquired, the estimated aggregate purchase
price (including adjustment for anticipated inflation) would be approximately
$16.1 billion. Management anticipates that a significant portion of such
aggregate purchase price will be funded by incurring additional debt. The exact
amount of the indebtedness to be incurred will depend upon the actual purchase
price of the aircraft, which can vary due to a number of factors, including
inflation, and the percentage of the purchase price of the aircraft which must
be financed.
 
     Most of the purchase commitments and options set forth above are based upon
master arrangements with each of The Boeing Company ("Boeing") and AVSA,
S.A.R.L., the sales subsidiary of Airbus Industrie ("Airbus").
 
     The aircraft listed above are either being purchased, or the options to
purchase have been granted, pursuant to purchase agreements executed by the
Company and Boeing or Airbus. These agreements establish the pricing formulas
(which include certain price adjustments based upon inflation and other factors)
and
 
                                        7
<PAGE>   10
 
various other terms with respect to the purchase of aircraft. Under certain
circumstances, the Company has the right to alter the mix of aircraft type
ultimately acquired. As of December 31, 1996, the Company had made
non-refundable deposits (exclusive of capitalized interest) with respect to the
aircraft which the Company has committed to purchase of approximately
$450,849,000 and $329,390,000 with Boeing and Airbus, respectively.
 
     As of March 11, 1997, the Company had entered into contracts for the lease
of all of the 64 aircraft to be delivered in 1997, 21 of the 53 aircraft to be
delivered in 1998, 15 of the 46 aircraft to be delivered in 1999, 5 of the 27
aircraft to be delivered in 2000 and 3 of the 53 aircraft to be delivered
subsequent to 2000. The Company will need to find customers for aircraft
presently on order and any new aircraft ordered and arrange financing for
portions of the purchase price of such equipment. Although the Company has been
successful to date in placing its new aircraft on lease or sales contracts, and
has obtained adequate financing in the past, there can be no assurance as to the
future continued availability of lessees or purchasers, or of sufficient amounts
of financing on terms acceptable to the Company.
 
FACILITIES
 
     The Company's principal offices are located at 1999 Avenue of the Stars,
Los Angeles, California. The Company occupies space under leases which expire in
2000. The leases cover approximately 30,000 square feet of office space, provide
for annual rentals of approximately $1,627,000, and the rental payments
thereunder are subject to certain indexed escalation provisions.
 
ITEM 3. LEGAL PROCEEDINGS
 
     The Company is not a party to any material legal proceedings.
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company is indirectly wholly owned by AIG and the Company's Common
Stock is not listed on any national exchange or traded in any established
market. During the years ended December 31, 1994, 1995 and 1996, the Company
paid cash dividends to its parent company of $13,462,000, $21,150,000 and
$20,600,000, respectively. It is the intent of the Company to pay its parent
company an annual dividend of at least 7% of net income subject to the dividend
preference of any preferred stock outstanding. Under the most restrictive
provisions of the Company's borrowing arrangements, consolidated retained
earnings at December 31, 1996 in the amount of $311,775,000 were unrestricted as
to the payment of dividends.
 
                                        8
<PAGE>   11
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following table summarizes selected consolidated financial data and
operating information of the Company. The selected consolidated financial data
should be read in conjunction with the Consolidated Financial Statements and
notes thereto and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K.
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                 --------------------------------------------------------------------
                                    1992          1993          1994          1995           1996
                                 ----------    ----------    ----------    -----------    -----------
                                                    (DOLLAR AMOUNTS IN THOUSANDS)
<S>                              <C>           <C>           <C>           <C>            <C>
OPERATING DATA:
Rentals of flight equipment....  $  628,600    $  795,437    $  993,596    $ 1,254,020    $ 1,444,439
Flight equipment marketing.....      46,845        53,680        76,193        119,078        136,099
Interest and other income......      55,072        62,515        40,267         49,390         51,976
Total revenues.................     730,517       911,632     1,110,056      1,422,488      1,632,514
Expenses.......................     484,277       633,992       798,049      1,084,142      1,237,575
Income before income taxes.....     246,240       277,640       312,007        338,346        394,939
Net income.....................     157,749       168,565       201,943        196,437        251,774
RATIO OF EARNINGS TO FIXED
  CHARGES AND PREFERRED STOCK
  DIVIDENDS(1):                       1.75x         1.68x         1.59x          1.43x          1.47x
BALANCE SHEET DATA:
Flight equipment under
  operating leases (net of
  accumulated depreciation)....  $4,759,899    $6,515,837    $8,851,079    $10,762,870    $12,182,774
Net investment in finance and
  sales-type leases............     242,445       290,269        92,233         86,237        103,629
Total assets...................   6,079,765     8,139,821    10,386,256     12,329,182     13,725,596
Total debt.....................   4,242,288     5,819,481     7,583,006      8,892,634      9,794,260
Shareholders' equity...........   1,156,195     1,409,181     1,640,772      2,000,107      2,214,552
OTHER DATA:
Aircraft owned at period
  end(2).......................         176           230           270            278            296
Aircraft sold or remarketed
  during the period............           7             9            24             41             37
</TABLE>
 
---------------
 
(1) See Exhibit 12.
 
(2) See "Item 2. Properties -- Flight Equipment."
 
                                        9
<PAGE>   12
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
GENERAL
 
INDUSTRY CONDITION
 
     In recent years, several of the Company's customers have experienced
economic difficulties resulting in the Company's participation in customer
restructurings. Such restructurings have involved the voluntary early
termination of leases and the rescheduling of payments. In addition, in certain
circumstances, the Company has been required to repossess aircraft. In 1996, the
Company repossessed five aircraft from two airlines. As of February 28, 1997,
three of the aircraft were released to other airlines and the remaining two
aircraft were sold. See "Item 1. Business -- Customers."
 
FINANCIAL CONDITION
 
     The Company borrows funds to purchase flight equipment, including to make
progress payments during the construction phase, principally on an unsecured
basis from various sources. At December 31, 1996, 1995 and 1994, the Company's
debt financing and capital lease obligations were comprised of the following:
 
<TABLE>
<CAPTION>
                                                    1996           1995           1994
                                                 ----------     ----------     ----------
                                                 (DOLLARS IN THOUSANDS)
        <S>                                      <C>            <C>            <C>
        Public term debt with single
          maturities...........................  $3,500,000     $3,550,000     $2,950,000
        Public medium-term notes with varying
          maturities...........................   2,563,720      2,403,770      2,011,770
        Capital lease obligations..............     995,872      1,088,424        305,400
        Bank and other term debt...............          --         22,502         43,503
                                                 ----------     ----------     ----------
                  Total term debt..............   7,059,592      7,064,696      5,310,673
        Commercial paper.......................   2,757,417      1,843,630      1,972,361
        Bank lines of credit and revolvers.....          --             --        319,000
        Less: Deferred debt discount...........     (22,749)       (15,692)       (19,028)
                                                 ----------     ----------     ----------
                  Debt financing and capital
                    lease obligations..........  $9,794,260     $8,892,634     $7,583,006
                                                  =========      =========      =========
        Composite interest rate................       6.23%          6.47%          6.41%
        Percentage of total debt at fixed
          rate.................................      68.95%         75.59%         66.98%
        Composite interest rate on fixed
          debt.................................       6.58%          6.66%          6.65%
        Bank prime rate........................       8.25%          8.50%          8.50%
</TABLE>
 
     The interest on substantially all the public debt (exclusive of the
commercial paper) is fixed for the term of the note. As of December 31, 1996,
the Company had committed revolving loans and lines of credit with 46 banks
aggregating $2.40 billion and uncommitted lines of credit with three banks
aggregating $200 million. Bank debt principally provides for interest rates that
vary according to the pricing option then in effect and range from prime, .25%
to .30% over LIBOR or .395% over CD rates, at the Company's option. Bank
financings are subject to facility fees of up to .10% of amounts available.
 
     On January 17, 1997, the Company replaced $2.25 billion of the committed
revolving loans and lines of credit with a new, expanded facility for $2.50
billion. The facility consists of a $1.25 billion, 364 day tranche with a 5.5
basis point annual facility fee and a $1.25 billion, 5 year tranche with an 8
basis point annual facility fee. The pricing options range from prime to .20%
over LIBOR.
 
     As of December 31, 1996, the Company had an effective shelf registration
with respect to $2.111 billion of debt securities, under which $800 million of
notes were sold through 1996. Additionally, a $750 million Medium-Term Note
program was implemented under the shelf registration, under which $675 million
was sold through 1996. In February 1997, the Company increased the Medium-Term
Note program by $160.6 million to $910.6 million. Through February 1997, the
Company sold an additional $400 million of notes and $146 million of Medium-Term
Notes.
 
                                       10
<PAGE>   13
 
     In February 1997, a new registration statement of the Company with respect
to $2.09 billion of debt securities was declared effective. A new $500 million
Medium-Term Note program has been implemented under the shelf registration.
 
     The Company has Export Credit Lease financings which provide ten year,
amortizing loans in the form of capital lease obligations. The interest rate on
62.5% of the original financing available is 6.55% and the interest rate on
22.5% of the original financing available varies between 6.18% and 6.89%. The
remaining 15% of the original financing available provides for LIBOR based
pricing.
 
     In 1995 and 1996, the Company, through unrestricted subsidiaries, entered
into sale-leaseback transactions in the amounts of $413 million and $507.6
million, respectively, each relating to seven aircraft. The transactions result
in the sale and leaseback of these aircraft for one year operating leases, each
with six one year extension options for a total of seven years for each
aircraft. The Company has the option to either buy back the aircraft or
redeliver the aircraft for a fee to the lessor at the end of any lease period.
The lease rates equate to fixed principal amortization and floating interest
payments based on LIBOR or commercial paper pricing.
 
     In each of February and November 1995, the Company sold $100 million of
Market Auction Preferred Stock.
 
     The Company believes that the combination of internally generated funds and
debt financing currently available to the Company will allow the Company to meet
its capital requirements for at least the next 12 months.
 
     In the normal course of business, the Company employs a variety of
off-balance sheet financial instruments and other derivative products to manage
its exposure to interest rates and the resulting impact of changes in interest
rates on earnings, with the objective to lower its overall borrowing cost and to
maintain its optimal mix of variable and fixed rate interest obligations. The
Company only enters into derivative transactions to hedge interest rate risk and
not to speculate on interest rates. These derivative products include interest
rate swap agreements, interest rate spreadlocks, interest rate swaptions and
interest rate floors.
 
     The counterparties to the Company's derivative instruments are all
recognized U.S. derivative dealers. The counterparties to the majority of the
notional amounts of the Company's derivative instruments are "AAA" rated and all
have at least an "A" credit rating. The derivatives are subject to a bilateral
security agreement which, in certain circumstances, may allow one party to the
agreement to require the second party to the agreement to establish a cash
collateral account. Any failure of the instruments or counterparties to perform
under the derivative contracts would have an immaterial impact on the Company's
earnings.
 
RESULTS OF OPERATIONS
 
     The increase in revenues from rentals of flight equipment from $993.6
million in 1994 to $1,254.0 million in 1995 to $1,444.4 million in 1996 is due
to the increase in both the size and relative cost of the fleet of the aircraft
subject to operating lease from 262 in 1994 to 282 in 1995 and 308 in 1996.
 
     In addition to its leasing operations, the Company engages in the marketing
of flight equipment on a principal and commission basis as well as the
disposition of flight equipment at the end of, or during, the lease term.
Revenue from such flight equipment marketing increased from $76.2 million in
1994 to $119.1 million in 1995 to $136.1 million in 1996 as a result of the type
of the related flight equipment marketed in each period:
 
<TABLE>
<CAPTION>
                                                                  1996   1995   1994
                                                                  ----   ----   ----
            <S>                                                   <C>    <C>    <C>
            Sales of flight equipment...........................    1      0      3
            Commissions.........................................   10      6     10
            Disposition of leased aircraft......................   36     41     21
</TABLE>
 
     In addition, the Company sold seven engines (1996), 19 engines (1995) and
eight engines (1994).
 
                                       11
<PAGE>   14
 
     Expenses as a percentage of total revenues were 71.9% for 1994, 76.2% for
1995 and 75.8% for 1996. Interest expense increased from $376.6 million in 1994
to $541.4 million in 1995 to $573.6 million in 1996, primarily as a result of an
increase in debt outstanding, excluding the effect of debt discount, from $7.602
billion in 1994 to $8.908 billion in 1995 to $9.817 billion in 1996, to finance
aircraft acquisitions, as affected by changes in interest rates during the
periods. These interest rate changes caused the Company's composite borrowing
rate to fluctuate as follows:
 
<TABLE>
            <S>                                                             <C>
            December 31, 1993.............................................  5.89%
            March 31, 1994................................................  5.79
            June 30, 1994.................................................  5.87
            September 30, 1994............................................  6.09
            December 31, 1994.............................................  6.41
            March 31, 1995................................................  6.69
            June 30, 1995.................................................  6.59
            September 30, 1995............................................  6.50
            December 31, 1995.............................................  6.47
            March 31, 1996................................................  6.31
            June 30, 1996.................................................  6.22
            September 30, 1996............................................  6.28
            December 31, 1996.............................................  6.23
</TABLE>
 
     Depreciation of flight equipment increased from $334.6 million in 1994 to
$431.9 million in 1995 to $485.1 million in 1996 due to the addition of
aircraft. Provisions for overhauls also increased from $57.6 million in 1994 to
$71.1 million in 1995 to $85.1 million in 1996 due to an increase in the number
of aircraft on which the Company collects overhaul reserves and therefore an
increase in the number of hours flown for which an overhaul reserve is provided.
 
     Rent expense of $51.8 million in 1996 is due to the sale-leaseback
transactions entered into for 14 aircraft in December of 1995 and September of
1996.
 
     The provision for income taxes as a percentage of income before income
taxes increased from 35.3% in 1994 to 41.9% in 1995 and decreased to 36.2% in
1996. The increase in 1995 was due principally to the impact of losses of
subsidiaries for which the Company did not receive a current or future tax
benefit. During the fourth quarter of 1995, two of these corporations were
restructured.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The response to this Item is submitted as a separate section of this
report.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     During the two fiscal periods prior to the date of the Company's most
recent financial statements, the Company has not reported a change in
accountants nor have there been any disagreements reported on any matter of
accounting principles or practices or financial statement disclosure.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a)(1) and (2): Financial Statements and Financial Schedule: The response
to this portion of Item 14 is submitted as a separate section of this report
beginning on page 17.
 
     (a)(3) and (c): Exhibits: The response to this portion of Item 14 is
submitted as a separate section on this report beginning on page 14.
 
                                       12
<PAGE>   15
 
     (b) Reports on Form 8-K: Current Reports on Form 8-K, event dates October
4, 1996 and October 18, 1996. All Current Reports reported under Item 7.
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                                   FORM 10-K
                           ITEMS 8, 14(a), AND 14(c)
 
            INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 
     The following consolidated financial statements of the Company and its
subsidiaries required to be included in Item 8 are listed below:
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Auditors........................................................   15
Consolidated Financial Statements:
  Balance Sheets at December 31, 1995 and 1996........................................   16
  Statements of Income for the years ended December 31, 1994, 1995 and 1996...........   17
  Statements of Shareholders' Equity for the years ended December 31, 1994, 1995 and
     1996.............................................................................   18
  Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996.......   19
  Notes to Consolidated Financial Statements..........................................   21
</TABLE>
 
     The following financial statement schedule of the Company and its
subsidiaries is included in Item 14(a)(2):
 
<TABLE>
<CAPTION>
SCHEDULE NUMBER                                 DESCRIPTION                                 PAGE
---------------   ------------------------------------------------------------------------  ----
<C>               <S>                                                                       <C>
       II         Valuation and Qualifying Accounts.......................................   34
</TABLE>
 
     All other financial statements and schedules not listed have been omitted
since the required information is included in the consolidated financial
statements or the notes thereto, or is not applicable or required.
 
     The following exhibits of the Company and its subsidiaries are included in
Item 14(c):
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                        DESCRIPTION
------     ---------------------------------------------------------------------------------
<C>        <S>
  3.1      Restated Articles of Incorporation of the Company, as amended through December 9,
           1992, filed November 3, 1993 (filed as an exhibit to Registration Statement No.
           33-50913 and incorporated herein by reference).
  3.2      Certificate of Determination of Preferences of Series C Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and
           incorporated herein by reference).
  3.3      Certificate of Determination of Preferences of Series D Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and
           incorporated herein by reference).
  3.4      Certificate of Determination of Preferences of Series E Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and
           incorporated herein by reference).
  3.5      Certificate of Determination of Preferences of Series F Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and
           incorporated herein by reference).
  3.6      Certificate of Determination of Preferences of Series G Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and
           incorporated herein by reference).
</TABLE>
 
                                       13
<PAGE>   16
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                        DESCRIPTION
------     ---------------------------------------------------------------------------------
<C>        <S>
  3.7      Certificate of Determination of Preferences of Series H Market Auction Preferred
           Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and
           incorporated herein by reference).
  3.8      By-Laws of the Company, including amendment thereto dated August 31, 1990 (filed
           as an exhibit to Registration Statement No. 33-37600 and incorporated herein by
           reference).
  4.1      Indenture dated as of November 1, 1991, between the Company and First Trust
           National Association (successor to Continental Bank, National Association), as
           Trustee (filed as an exhibit to Registration Statement No. 33-43698 and
           incorporated herein by reference).
  4.2      The Company agrees to furnish to the Commission upon request a copy of each
           instrument with respect to issues of long-term debt of the Company and its
           subsidiaries, the authorized principal amount of which does not exceed 10% of the
           consolidated assets of the Company and its subsidiaries.
 10.1      Purchase Agreement No. 1916, dated as of June 24, 1996, between the Company and
           The Boeing Company, including Letter Agreements relating thereto (filed as an
           exhibit to Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated
           herein by reference).
 10.2      Revolving Credit Agreement, dated as of January 17, 1997, among the Company,
           Union Bank of Switzerland, New York Branch, and the other banks listed therein
           providing up to $1,250,000,000 (five year facility).
 10.3      Revolving Credit Agreement, dated as of January 17, 1997, among the Company,
           Union Bank of Switzerland, New York Branch, and the other banks listed therein
           providing up to $1,250,000,000 (364 day facility).
  12.      Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
  23.      Consent of Ernst & Young LLP.
  27.      Financial Data Schedule.
</TABLE>
 
                                       14
<PAGE>   17
 
                         REPORT OF INDEPENDENT AUDITORS
 
Shareholders and Board of Directors
International Lease Finance Corporation
Los Angeles, California
 
     We have audited the accompanying consolidated balance sheets of
International Lease Finance Corporation and subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
International Lease Finance Corporation and subsidiaries at December 31, 1996
and 1995, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
 
                                          ERNST & YOUNG LLP
 
Century City,
Los Angeles, California
February 19, 1997
 
                                       15
<PAGE>   18
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
           (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                    ---------------------------
                                                                       1996            1995
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
Cash, including interest bearing accounts of $31,704 (1996)
  and $59,624 (1995)..............................................  $    36,558     $    87,097
Current income taxes..............................................       16,420          30,803
Notes receivable..................................................      429,146         423,799
Net investment in finance and sales-type leases...................      103,629          86,237
Flight equipment under operating leases...........................   13,674,996      12,015,308
  Less accumulated depreciation...................................    1,492,222       1,252,438
                                                                    -----------     -----------
                                                                     12,182,774      10,762,870
Deposits on flight equipment purchases............................      861,355         805,570
Accrued interest, other receivables and other assets..............       50,895          87,991
Investments.......................................................       18,099          17,311
Deferred debt issue costs -- less accumulated amortization
  of $43,537 (1996) and $30,778 (1995)............................       26,720          27,504
                                                                    -----------     -----------
                                                                    $13,725,596     $12,329,182
                                                                    ===========     ===========
 
                             LIABILITIES AND SHAREHOLDERS' EQUITY
 
Accrued interest and other payables...............................  $   219,111     $   196,676
Debt financing, net of deferred debt discount of $22,749 (1996)
  and $15,692 (1995)..............................................    8,798,388       7,804,210
Capital lease obligations.........................................      995,872       1,088,424
Security and other deposits on flight equipment...................      611,272         498,016
Rentals received in advance.......................................       77,107          80,811
Deferred income taxes.............................................      809,294         660,938
Commitments and contingencies -- Note K
 
SHAREHOLDERS' EQUITY
  Preferred stock -- no par value; 20,000,000 authorized shares;
  Market Auction Preferred Stock, $100,000 per share liquidation
     value; Series A, B, C, D, E, F, G and H (1996 and 1995), each
     having 500 shares issued and outstanding.....................      400,000         400,000
  Common stock -- no par value; 100,000,000 authorized shares,
     35,818,122 (1996 and 1995) issued and outstanding............        3,582           3,582
  Paid-in capital.................................................      579,955         580,085
  Retained earnings...............................................    1,231,015       1,016,440
                                                                    -----------     -----------
                                                                      2,214,552       2,000,107
                                                                    -----------     -----------
                                                                    $13,725,596     $12,329,182
                                                                    ===========     ===========
</TABLE>
 
                            See accompanying notes.
 
                                       16
<PAGE>   19
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                             ------------------------------------
                                                                1996         1995         1994
                                                             ----------   ----------   ----------
<S>                                                          <C>          <C>          <C>
Revenues:
  Rental of flight equipment...............................  $1,444,439   $1,254,020   $  993,596
  Flight equipment marketing...............................     136,099      119,078       76,193
  Interest and other.......................................      51,976       49,390       40,267
                                                             ----------   ----------   ----------
                                                              1,632,514    1,422,488    1,110,056
Expenses:
  Interest.................................................     573,599      541,428      376,560
  Depreciation.............................................     485,102      431,947      334,587
  Provision for overhaul...................................      85,083       71,113       57,619
  Rent expense.............................................      51,809
  Selling, general and administrative......................      41,982       39,654       29,283
                                                             ----------   ----------   ----------
                                                              1,237,575    1,084,142      798,049
                                                             ----------   ----------   ----------
     INCOME BEFORE INCOME TAXES............................     394,939      338,346      312,007
Provision for income taxes.................................     143,165      141,909      110,064
                                                             ----------   ----------   ----------
     NET INCOME............................................  $  251,774   $  196,437   $  201,943
                                                             ==========   ==========   ==========
</TABLE>
 
                            See accompanying notes.
 
                                       17
<PAGE>   20
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                          MARKET AUCTION
                          PREFERRED STOCK            COMMON STOCK
                      -----------------------    ---------------------
                      NUMBER OF                   NUMBER OF                PAID-IN       RETAINED
                       SHARES        AMOUNT        SHARES       AMOUNT     CAPITAL       EARNINGS        TOTAL
                      ---------     ---------    -----------    ------     --------     ----------     ----------
<S>                   <C>           <C>          <C>            <C>        <C>          <C>            <C>
Balance at December
  31, 1993..........      2,000     $ 200,000     35,818,122    $3,582     $532,941     $  672,658     $1,409,181
  Capital
    contribution....                                                         50,000                        50,000
  Dividend to AIG...                                                                       (13,462)       (13,462)
  Preferred stock
    dividends.......                                                                        (6,890)        (6,890)
  Net income........                                                                       201,943        201,943
                          -----      --------     ----------    ------     --------     ----------     ----------
Balance at December
  31, 1994..........      2,000     $ 200,000     35,818,122    $3,582     $582,941     $  854,249     $1,640,772
  Sale of MAPS
    preferred.......      2,000       200,000                                (2,856)                      197,144
  Dividend to AIG...                                                                       (21,150)       (21,150)
  Preferred stock
    dividends.......                                                                       (13,096)       (13,096)
  Net income........                                                                       196,437        196,437
                          -----      --------     ----------    ------     --------     ----------     ----------
Balance at December
  31, 1995..........      4,000     $ 400,000     35,818,122    $3,582     $580,085     $1,016,440     $2,000,107
  Sale of MAPS
    preferred.......                                                           (130)                         (130)
  Dividend to AIG...                                                                       (20,600)       (20,600)
  Preferred stock
    dividends.......                                                                       (16,599)       (16,599)
  Net income........                                                                       251,774        251,774
                          -----      --------     ----------    ------     --------     ----------     ----------
Balance at December
  31, 1996..........      4,000     $ 400,000     35,818,122    $3,582     $579,955     $1,231,015     $2,214,552
                          =====      ========     ==========    ======     ========     ==========     ==========
</TABLE>
 
                            See accompanying notes.
 
                                       18
<PAGE>   21
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                                -------------------------------------------
                                                                   1996            1995            1994
                                                                -----------     -----------     -----------
<S>                                                             <C>             <C>             <C>
OPERATING ACTIVITIES:
  Net income..................................................  $   251,774     $   196,437     $   201,943
  Adjustments to reconcile net income to net cash provided by
    operating activities:
    Depreciation of flight equipment..........................      485,102         431,947         334,587
    Deferred income taxes.....................................      148,356         173,528         147,657
    Amortization of deferred debt issue costs.................        8,841          11,554           5,956
    Gain on sale of flight equipment included in amount
      financed................................................      (16,063)        (46,260)        (53,627)
    Increase in notes receivable..............................      (66,721)         (9,053)        (36,608)
    Equity in net (income) loss of affiliates.................         (788)            517          (2,022)
  Changes in operating assets and liabilities:
    Decrease (increase) in accrued interest, other receivables
      and other assets........................................       37,096         (16,753)         10,006
    Increase in accrued interest and other payables...........       22,435          72,651          31,796
    (Increase) decrease in current income taxes receivable....       14,383           2,321         (33,346)
    (Decrease) increase in rentals received in advance........       (3,704)          8,254          30,606
                                                                -----------     -----------        --------
Net cash provided by operating activities.....................      880,711         825,143         636,948
                                                                -----------     -----------        --------
INVESTING ACTIVITIES:
  Acquisition of flight equipment:
    For operating leases......................................   (3,210,986)     (3,364,496)     (2,621,669)
    For finance leases........................................                                       (4,790)
  (Increase) decrease in deposits and progress payments.......      (55,785)         85,141         (70,663)
  Proceeds from disposal of flight equipment -- net of gain...    1,194,946         862,935         119,799
  Advances on notes receivable................................                       (5,606)        (16,227)
  Collections on notes receivable.............................      163,298         150,093         114,141
  Collections on finance and sales-type leases................        7,781           5,996           9,891
  Purchase of investments.....................................                         (845)           (850)
  Sale of investments -- net of gain..........................                        2,000           1,727
                                                                -----------     -----------        --------
Net cash used in investing activities.........................   (1,900,746)     (2,264,782)     (2,468,641)
                                                                -----------     -----------        --------
FINANCING ACTIVITIES:
  Proceeds from debt financing and capital lease
    obligations...............................................    5,042,064       6,309,304       4,746,500
  Payments in reduction of debt financing and capital lease
    obligations...............................................   (4,133,381)     (5,003,012)     (2,974,141)
  Proceeds from sale of MAPS preferred stock (net of issue
    costs)....................................................         (130)        197,144
  Cash contributions to capital by AIG........................                                       50,000
  Debt issue costs............................................       (8,057)        (18,211)        (11,637)
  Change in unamortized debt discount.........................       (7,057)          3,336          (8,834)
  Payment of common and preferred dividends...................      (37,199)        (34,246)        (20,352)
  Increase in customer deposits...............................      113,256          19,530          41,482
                                                                -----------     -----------        --------
Net cash provided by financing activities.....................      969,496       1,473,845       1,823,018
                                                                -----------     -----------        --------
Net increase (decrease) in cash...............................      (50,539)         34,206          (8,675)
Cash at beginning of year.....................................       87,097          52,891          61,566
                                                                -----------     -----------        --------
    Cash at end of year.......................................  $    36,558     $    87,097     $    52,891
                                                                ===========     ===========        ========
 
(Table continued on next page)
</TABLE>
 
                                       19
<PAGE>   22
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                         YEARS ENDED DECEMBER 31,
                                                                   1996            1995            1994
                                                                -----------     -----------      --------
<S>                                                             <C>             <C>             <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid (received) during the year for:
    Interest (net of amount capitalized $50,368 (1996),
      $51,091 (1995) and $44,610 (1994))......................  $   559,437     $   503,023     $   352,805
    Income taxes..............................................      (19,574)        (33,940)         (4,247)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
  ACTIVITIES:
  1996
    Notes and finance and sale-type leases in the amount of $173,404 were received as partial payment in
     exchange for flight equipment sold with a book value of $157,340.
    Flight equipment was received in exchange for notes receivable in the amount of $46,307.
  1995
    Notes in the amount of $268,660 were received as partial payments in exchange for flight equipment sold
     with a book value of $222,400.
    Flight equipment was received in exchange for notes receivable in the amount of $64,576.
  1994
    Flight equipment with a net book value of $222,873 was transferred from finance and sales-type leases
     to operating leases.
    Flight equipment was received in exchange for notes receivable in the amount of $69,317.
    Notes and finance and sales-type leases in the amount of $177,857 were received as partial payments in
     exchange for flight equipment sold with a book value of $124,230.
</TABLE>
 
                            See accompanying notes.
 
                                       20
<PAGE>   23
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Parent Company: International Lease Finance Corporation (the "Company") is
an indirect wholly owned subsidiary of American International Group, Inc.
("AIG"). AIG is a holding company which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related activities in the
United States and abroad.
 
     Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Investments of less than 20% in other entities are carried at
cost. Investments of between 20% and 50% in other entities are carried under the
equity method. All significant intercompany balances and transactions have been
eliminated in consolidation.
 
     Intercompany Allocations: The Company is party to cost sharing agreements
with AIG. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes to be reasonable. The charges amounted to $5,595
(1996), $6,439 (1995) and $2,506 (1994).
 
     Rentals: The Company, as lessor, leases flight equipment principally under
operating leases. Accordingly, income is reported over the life of the lease as
rentals become receivable under the provisions of the lease or, in the case of
leases with varying payments, under the straight-line method over the
noncancelable term of the lease. In certain cases, leases provide for additional
amounts based on usage.
 
     Flight Equipment Marketing: The Company is a marketer of flight equipment.
Marketing revenues include all revenues from such operations consisting of net
gains on sales of flight equipment, commissions and net gains on disposition of
leased flight equipment.
 
     Flight Equipment: Flight equipment is stated at cost. Major additions and
modifications are capitalized. Normal maintenance and repairs; airframe and
engine overhauls; and compliance with return conditions of flight equipment on
lease are provided by and paid for by the lessee. Under the provisions of most
leases, for certain airframe and engine overhauls, the lessee is reimbursed for
costs incurred up to but not exceeding contingent rentals paid to the Company by
the lessee. The Company provides a charge to operations for such reimbursements
based primarily upon the hours utilized during the period and the expected
reimbursement during the life of the lease.
 
     Generally, all aircraft, including aircraft acquired under capital leases,
are depreciated using the straight-line method over a 25 year life from the date
of manufacture to a 15% residual value.
 
     At the time assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the related accounts and the
difference, net of proceeds, is recorded as a gain or loss.
 
     Capitalized Interest: The Company borrows certain funds to finance progress
payments for the construction of flight equipment ordered. The interest incurred
on such borrowings is capitalized and included in the cost of the equipment. The
amounts were $50,368 (1996), $51,091 (1995) and $44,610 (1994).
 
     Deferred Debt Issue Costs: Deferred debt issue costs incurred in connection
with debt financing are amortized over the life of the debt using the interest
rate method and are charged to interest expense.
 
     Financial Instruments: The Company has granted certain parties the right
but not the obligation to effectively convert certain of the Company's fixed
note obligations to floating rate obligations based on an established notional
amount. The proceeds of such option agreements are initially recorded as a
liability. Subsequently, if material, the value of each such option agreement is
adjusted to fair value with changes in value recorded in income.
 
                                       21
<PAGE>   24
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     When swap agreements are effective in modifying the terms of actual debt
agreements, such swaps are accounted for by the accrual method. Periodic
payments as well as the amortization (by a level yield method) of the initial
value are treated as adjustments to interest expense of the related debt.
 
     Income Taxes: The Company and its U.S. subsidiaries are included in the
consolidated federal income tax return of AIG. The Company and its subsidiaries
are included in the combined California unitary tax return of AIG. The provision
for income taxes is calculated on a separate return basis. Income tax payments
are made pursuant to a tax payment allocation agreement whereby AIG credits or
charges the Company for the corresponding increase or decrease (not to exceed
the separate return basis calculation) in AIG's current taxes resulting from the
inclusion of the Company in AIG's consolidated tax return. Intercompany payments
are made when such taxes are due or tax benefits are realized by AIG.
 
     The deferred tax liability is determined based on the difference between
the financial statement and tax basis of assets and liabilities and is measured
at the enacted tax rates that will be in effect when these differences reverse.
Deferred tax expense is determined by the change in the liability for deferred
taxes ("Liability Method").
 
     Organization: The Company is primarily engaged in the acquisition of new
and used commercial jet aircraft and the leasing and sale of such aircraft to
charter and scheduled airlines throughout the world. In addition, the Company is
engaged in the remarketing of commercial jets for its own account, for airlines
and for financial institutions.
 
     Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
 
     Reclassifications: Certain amounts have been reclassified in the 1995 and
1994 financial statements to conform to the Company's 1996 presentation.
 
NOTE B -- NOTES RECEIVABLE
 
     Notes receivable are primarily from the sale of flight equipment and are
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                   1996         1995
                                                                 --------     --------
        <S>                                                      <C>          <C>
        Fixed rate notes receivable due in varying installments
          to 2005:
          Less than 6%.........................................  $  3,873     $  5,656
          6% to 7.99%..........................................   240,754      290,934
          8% to 9.99%..........................................   140,455       81,486
          10% to 14%...........................................     8,302        4,862
        LIBOR plus 1.1% to LIBOR plus 1.5% notes receivable in
          varying installments to 2002.........................    35,762       40,861
                                                                 --------     --------
                                                                 $429,146     $423,799
                                                                 ========     ========
</TABLE>
 
     Included above, the Company had notes receivable of $10,694 (1996) and
$2,300 (1995) representing restructured lease payments.
 
                                       22
<PAGE>   25
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE B -- NOTES RECEIVABLE (CONTINUED)
     At December 31, 1996, the minimum future notes receivable payments to be
received are as follows:
 
<TABLE>
        <S>                                                                 <C>
        1997..............................................................  $ 48,758
        1998..............................................................   108,924
        1999..............................................................    41,496
        2000..............................................................    33,680
        2001..............................................................    33,325
        Thereafter........................................................   162,963
                                                                            --------
                                                                            $429,146
                                                                            ========
</TABLE>
 
     The Company sold notes receivable with certain limited recourse provisions
to a related party of the Company. The notes were sold at face value including
accrued interest and aggregated $116,235 in 1996 and $56,413 in 1995. The
Company continues to collect payments from the notes and transfers to the
related party the amounts received less a servicing fee. The Company recorded no
gain or loss on the sale. The Company recorded servicing fee income of $16 in
1996 related to the notes sold. The Company's maximum exposure under recourse
provisions was $23,205 at December 31, 1996 and $11,283 at December 31, 1995.
During 1996, the Company repurchased one note sold in 1995. The note was not
repurchased under the recourse provisions.
 
NOTE C -- NET INVESTMENT IN FINANCE AND SALES-TYPE LEASES
 
     The following lists the components of the net investment in finance and
sales-type leases:
 
<TABLE>
<CAPTION>
                                                                   1996         1995
                                                                 --------     --------
        <S>                                                      <C>          <C>
        Total minimum lease payments to be received............  $122,559     $ 91,124
        Estimated residual values of leased flight equipment...    18,483       26,544
        Less: Unearned income..................................   (37,413)     (31,431)
                                                                 --------     --------
        Net investment in finance and sales-type leases........  $103,629     $ 86,237
                                                                 ========     ========
</TABLE>
 
     Minimum future lease payments to be received for flight equipment on
finance and sales-type leases at December 31, 1996 are as follows:
 
<TABLE>
        <S>                                                                 <C>
        1997..............................................................  $ 15,962
        1998..............................................................    16,398
        1999..............................................................    14,274
        2000..............................................................    15,045
        2001..............................................................    15,045
        Thereafter........................................................    45,835
                                                                            --------
        Total minimum lease payments to be received.......................  $122,559
                                                                            ========
</TABLE>
 
                                       23
<PAGE>   26
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE D -- INVESTMENTS
 
     Investments consist of the following:
 
<TABLE>
<CAPTION>
                                                            1996                1995
                                                      -----------------   -----------------
                                                      PERCENT             PERCENT
                                                       OWNED    AMOUNT     OWNED    AMOUNT
                                                      -------   -------   -------   -------
        <S>                                           <C>       <C>       <C>       <C>
        Cost method:
          Air Liberte...............................    10.8%   $ 4,792     10.8%   $ 4,792
          International Aircraft Investors..........     6.2%       300      6.2%       300
          Others....................................                845               1,058
        Equity method:
          Pacific Ocean Leasing Ltd.................    50.0%     5,848     50.0%     5,858
          Pacific Asia Leasing Ltd..................    25.0%     6,314     25.0%     5,303
                                                                -------             -------
                                                                $18,099             $17,311
                                                                =======             =======
</TABLE>
 
     In addition, the Company has notes receivable of $8,763 (1996) and $11,111
(1995) from entities in which it has investments.
 
     At December 31, 1996, the Company had two aircraft on lease to Air Liberte.
These leases are similar in terms to those of unaffiliated customers.
 
     The Company has sold used aircraft and engines to International Aircraft
Investors ("IAI") on terms similar to those of unaffiliated customers (see Note
K). In exchange for these sales the Company has received notes which are
included in Notes Receivable in the accompanying consolidated balance sheets
(see Note B).
 
     The Company has a 50% interest in Pacific Ocean Leasing Ltd. ("POL"), a
Bermuda corporation. POL presently owns one Boeing 767-200 aircraft and one
spare engine, both of which are on lease to an airline. POL also owns an
inventory of spare parts. Additionally, the Company has guaranteed the bank loan
to POL (see Note K).
 
     The Company has a 25% interest in Pacific Asia Leasing Ltd. ("PAL"), a
Bermuda corporation. PAL presently owns one Boeing 767-300ER aircraft on lease
to an airline. The Company guaranteed part of the loan in connection with the
purchase of such aircraft (see Note K).
 
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS
 
     Debt financing and capital lease obligations are comprised of the
following:
 
<TABLE>
<CAPTION>
                                                                 1996           1995
                                                              ----------     ----------
        <S>                                                   <C>            <C>
        Commercial Paper (weighted average interest rate at
          December 31, 5.48% (1996) and 5.82% (1995)........  $2,757,417     $1,843,630
        Term Notes..........................................   3,500,000      3,550,000
        Medium-Term Notes...................................   2,563,720      2,403,770
        Capital Lease Obligations...........................     995,872      1,088,424
        Bank and other term debt............................                     22,502
        Less: Deferred debt discount........................     (22,749)       (15,692)
                                                              ----------     ----------
                                                              $9,794,260     $8,892,634
                                                              ==========     ==========
</TABLE>
 
                                       24
<PAGE>   27
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
  Bank Financing:
 
     As of December 31, 1996, the Company had committed credit agreements with
46 commercial banks aggregating $2,400,000 and uncommitted lines of credit with
three commercial banks in the amount of $200,000. Bank debt principally provides
for interest rates that vary according to the pricing option then in effect and
range from prime, .25% to .30% over LIBOR or .395% over CD rates, at the option
of the Company. The interest rates on the uncommitted bank lines are fixed for a
period of up to one year at rates determined by the banks. Bank debt is subject
to facility fees of up to .10% of amounts available. Bank financing is used
primarily as backup for the Company's Commercial Paper program.
 
                                       25
<PAGE>   28
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
  Term Notes:
 
     The Company has issued the following Notes which provide for a single
principal payment at maturity and cannot be redeemed prior to maturity:
 
<TABLE>
<CAPTION>
                                                           INITIAL
                                                             TERM          1996           1995
                                                          ----------    ----------     ----------
<S>                                                       <C>           <C>            <C>
5 3/4% Notes due January 15, 1996.....................       3 years    $              $  150,000
6 5/8% Notes due June 1, 1996.........................       4 years                      100,000
4 3/4% Notes due July 15, 1996........................       3 years                      100,000
7.90% Notes due October 1, 1996.......................       5 years                      100,000
6 3/8% Notes due November 1, 1996.....................       4 years                      150,000
4 3/4% Notes due January 15, 1997.....................       3 years       100,000        100,000
5 7/8% Notes due February 1, 1997.....................       4 years       100,000        100,000
5 1/2% Notes due April 1, 1997........................       4 years       100,000        100,000
6 1/2% Notes due July 15, 1997........................       5 years       150,000        150,000
6 3/4% Notes due August 1, 1997.......................       3 years       100,000        100,000
                                                               4 1/2
Floating Rate Notes due October 15, 1997..............         years       100,000        100,000
8 1/8% Notes due January 15, 1998.....................       3 years       150,000        150,000
5 5/8% Notes due March 1, 1998........................       4 years       100,000        100,000
5 3/4% Notes due March 15, 1998.......................       5 years       100,000        100,000
7% Notes due June 1, 1998.............................       4 years       100,000        100,000
6 1/4% Notes due June 15, 1998........................       3 years       100,000        100,000
Floating Rate Notes due June 19, 1998 (swapped to
  6.50%)..............................................       2 years       100,000
5 3/4% Notes due July 1, 1998.........................       5 years       100,000        100,000
8.35% Notes due October 1, 1998.......................       7 years       100,000        100,000
Floating Rate Notes due November 2, 1998 (swapped to
  6.0725%)............................................       2 years       100,000
5 3/4% Notes due January 15, 1999.....................       5 years       150,000        150,000
5 1/2% Notes due January 15, 1999.....................       3 years       150,000
7 1/2% Notes due March 1, 1999........................       4 years       100,000        100,000
6 5/8% Notes due April 1, 1999 (swapped to a floating
  rate(1))............................................       5 years       100,000        100,000
Floating Rate Notes due June 2, 1999 (swapped to
  6.64%)..............................................       4 years       100,000        100,000
Floating Rate Notes due July 15, 1999 (swapped to
  6.235%).............................................       4 years       100,000        100,000
6 1/2% Notes due August 15, 1999......................       7 years       100,000        100,000
6 1/8% Notes due November 1, 1999.....................       4 years       100,000        100,000
5 3/4% Notes due December 15, 1999....................       4 years       150,000        150,000
8 1/4% Notes due January 15, 2000.....................       5 years       100,000        100,000
6.20% Notes due May 1, 2000...........................       7 years       100,000        100,000
7% Notes due May 15, 2000.............................       5 years       100,000        100,000
6 5/8% Notes due August 15, 2000......................       4 years       100,000
6 1/4% Notes due October 15, 2000.....................       5 years       100,000        100,000
8 7/8% Notes due April 15, 2001.......................      10 years       150,000        150,000
6 1/2% Notes due October 15, 2001.....................       5 years       100,000
8 3/8% Notes due December 15, 2004....................      10 years       100,000        100,000
                                                                        ----------     ----------
                                                                        $3,500,000     $3,550,000
                                                                        ==========     ==========
</TABLE>
 
---------------
   See Note L -- Financial Instruments.
(1) Floating rate swap expires April 1, 1997.
 
                                       26
<PAGE>   29
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
  Medium-Term Notes:
 
     The Company's Medium-Term Notes bear interest at rates varying between 4.9%
and 9.88%, inclusive, with maturities from 1997 through 2005. The Medium-Term
Notes provide for a single principal payment at the maturity of the respective
note. They cannot be redeemed by the Company prior to maturity.
 
  Capital Lease Obligations:
 
     The Company's Capital Lease Obligations provide 10 year, fully amortizing
debt in three interest rate tranches. The first 62.5% of the original debt is at
a fixed rate of 6.55%. The second 22.5% of the original debt is at fixed rates
varying between 6.18% and 6.89%. The final 15% of the original debt is at a
floating LIBOR based rate. The debt matures through 2005. The flight equipment
associated with the obligations had a net book value of $1,174,845 (1996) and
$1,215,912 (1995).
 
     Maturities of debt financing and capital lease obligations (excluding
commercial paper) at December 31, 1996 are as follows:
 
<TABLE>
            <S>                                                        <C>
            1997.....................................................  $1,334,987
            1998.....................................................   1,750,087
            1999.....................................................   1,720,802
            2000.....................................................   1,000,052
            2001.....................................................     453,552
            Thereafter...............................................     800,112
                                                                       ----------
                                                                       $7,059,592
                                                                        =========
</TABLE>
 
     Under the most restrictive provisions of the related borrowings,
consolidated retained earnings at December 31, 1996, in the amount of $311,775
are unrestricted as to payment of dividends.
 
NOTE F -- SHAREHOLDERS' EQUITY
 
  Preferred Stock:
 
     In February and November 1995, 500 shares each of Series E and F and G and
H, respectively, of Market Auction Preferred Stock ("MAPS") were issued in
connection with public offerings at $100 per share. Proceeds, net of issuance
costs, to the Company were $197,144 (1995). In addition, issuance costs of $130
for Series G and H were incurred in 1996. The MAPS have a liquidation value of
$100 per share and are not convertible. The dividend rate, other than the
initial rate, for each dividend period for each series will be reset
approximately every 7 weeks (49 days) on the basis of orders placed in an
auction. At December 31, 1996, the dividend rates for Series A through H ranged
from 3.90% to 4.38%.
 
  Stock Appreciation Rights:
 
     Stock Appreciation Rights ("SARs") were granted to certain employees of the
Company during 1990. The SARs granted generally vest over a nine year period
from the effective date and are exercisable immediately upon vesting. SARs
initially have no value but can gain a cash value based upon the difference
between a Benchmark Price and a Formula Price (based on adjusted pre-tax cash
flow of the Company), but not in excess of an aggregate of $150,000, to be
accrued and paid over the period of the plan. The SAR plan became effective on
January 1, 1991. No value has been earned or accrued under the SAR plan as of
December 31, 1996.
 
                                       27
<PAGE>   30
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE G -- RENTAL INCOME
 
     Minimum future rentals on noncancelable operating leases and subleases of
flight equipment which have been delivered at December 31, 1996 are as follows:
 
<TABLE>
<CAPTION>
                                   YEAR ENDED
            ---------------------------------------------------------
            <S>                                                        <C>
            1997.....................................................  $1,292,030
            1998.....................................................   1,057,695
            1999.....................................................     835,580
            2000.....................................................     649,204
            2001.....................................................     473,549
            Thereafter...............................................     743,476
                                                                       ----------
                                                                       $5,051,534
                                                                       ==========
</TABLE>
 
     Additional rentals earned by the Company based on the lessees' usage
aggregated $194,741 (1996), $168,121 (1995) and $122,321 (1994). Flight
equipment is leased, under operating leases, with remaining terms ranging from
one to 10 years.
 
NOTE H -- RENTAL EXPENSE
 
     As of December 31, 1995 and 1996, the Company had entered into
sale-leaseback transactions in the amounts of $412,626 and $507,600,
respectively, relating to seven aircraft for each transaction. The transactions
resulted in the sale and leaseback of these aircraft for one year operating
leases, each with six one year extension options, maturing on December 22, 1997
and September 20, 1997, respectively. The lease rates equate to fixed principal
amortization and floating interest payments based on LIBOR or commercial paper
pricing.
 
     Minimum future rental expense for 1997 is $29,160 at December 31, 1996.
 
NOTE I -- INCOME TAXES
 
     The provision (benefit) for income taxes is comprised of the following:
 
<TABLE>
<CAPTION>
                                                               1996       1995       1994
                                                             --------   --------   --------
    <S>                                                      <C>        <C>        <C>
    Current:
      Federal..............................................  $(16,700)  $(32,962)  $(34,027)
      State................................................     1,957      1,427     (3,508)
      Foreign..............................................     9,381
                                                             --------   --------   --------
                                                               (5,362)   (31,535)   (37,535)
    Deferred:
      Federal..............................................   138,750    162,129    149,364
      State................................................     9,777     11,315     (1,765)
                                                             --------   --------   --------
                                                              148,527    173,444    147,599
                                                             --------   --------   --------
                                                             $143,165   $141,909   $110,064
                                                             ========   ========   ========
</TABLE>
 
                                       28
<PAGE>   31
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE I -- INCOME TAXES (CONTINUED)
     The provision for deferred income taxes is comprised of the following
temporary differences:
 
<TABLE>
<CAPTION>
                                                               1996       1995       1994
                                                             --------   --------   --------
    <S>                                                      <C>        <C>        <C>
    Accelerated depreciation on flight equipment...........  $132,101   $182,125   $180,137
    Excess of state income taxes not currently deductible
      for Federal income tax purposes......................    (3,422)    (3,960)       626
    Tax versus book lease differences......................    35,933        779       (806)
    Provision for overhauls................................    (7,726)    (4,370)    (9,951)
    Rentals received in advance............................    (5,855)      (308)   (14,511)
    Straight line rents....................................    (3,020)      (606)    (2,315)
    Other..................................................       516       (216)    (5,581)
                                                             --------   --------   --------
                                                             $148,527   $173,444   $147,599
                                                             ========   ========   ========
</TABLE>
 
     The deferred tax liability at December 31, 1996 consists of the following:
 
<TABLE>
    <S>                                                      <C> 
    Accelerated depreciation on flight equipment...........  $819,375
    Excess of state income taxes not currently deductible
      for Federal income tax purposes......................   (17,471)
    Tax versus book lease differences......................    67,897
    Provision for overhauls................................   (38,773)
    Rentals received in advance............................   (36,477)
    Straight line rents....................................    14,408
    Other..................................................       335
                                                             --------
                                                             $809,294
                                                             ========
</TABLE>
 
     A reconciliation of computed expected total provision for income taxes to
the amount recorded is as follows:
 
<TABLE>
<CAPTION>
                                                               1996       1995       1994
                                                             --------   --------   --------
    <S>                                                      <C>        <C>        <C>
    Computed expected provision based upon a federal rate
      of 35%...............................................  $138,229   $118,421   $109,202
    State income taxes, net of Federal income taxes........     7,628      8,282      5,772
    Foreign sales corporation benefit......................    (6,160)    (7,305)    (3,178)
    Subsidiary losses without tax benefit..................               17,169
    Other..................................................    (1,818)     5,342     (1,732)
    Foreign taxes..........................................     5,286
                                                             --------   --------   --------
                                                             $143,165   $141,909   $110,064
                                                             ========   ========   ========
</TABLE>
 
NOTE J -- OTHER INFORMATION
 
  Concentration of Credit Risk
 
     The Company leases and sells aircraft to airlines. All of the lease
receivables and the majority of notes receivable are from airlines located
throughout the world. The Company generally obtains deposits on leases and
obtains collateral in flight equipment on notes receivable. The Company has no
single customer which accounts for 10% or more of revenues.
 
                                       29
<PAGE>   32
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE J -- OTHER INFORMATION (CONTINUED)
  Segment Information
 
     The Company operates within one industry, the marketing of flight equipment
through leasing and sales.
 
     Revenues include rentals of flight equipment to foreign airlines of
$1,202,651 (1996), $1,002,251 (1995) and $798,619 (1994).
 
     The following table sets forth the dollar amount and percentage of total
rental revenues attributable to the indicated geographic areas for the years
indicated:
 
<TABLE>
<CAPTION>
                                              1996                   1995                  1994
                                       ------------------     ------------------     ----------------
                                         AMOUNT       %         AMOUNT       %        AMOUNT      %
                                       ----------   -----     ----------   -----     --------   -----
                                                           (DOLLARS IN THOUSANDS)
<S>                                    <C>          <C>       <C>          <C>       <C>        <C>
Europe...............................  $  551,703    38.2%    $  462,252    36.9%    $353,009    35.5%
Asia/Pacific.........................     332,159    23.0        255,163    20.4      180,215    18.2
United States and Canada.............     304,801    21.1        304,784    24.3      230,856    23.2
Central, South America and Mexico....     165,819    11.5        166,443    13.2      199,041    20.0
Africa and the Middle East...........      89,957     6.2         65,378     5.2       30,475     3.1
                                       ----------   -----       --------   -----     --------   -----
                                       $1,444,439   100.0%    $1,254,020   100.0%    $993,596   100.0%
                                       ==========   =====       ========   =====     ========   =====
</TABLE>
 
  Employee Benefit Plans
 
     The Company's employees participate in various benefit plans sponsored by
AIG, including a noncontributory qualified defined benefit retirement plan,
various stock option and purchase plans and a voluntary savings plan (401(k)
plan).
 
     AIG's U.S. plans do not separately identify projected benefit obligations
and plan assets attributable to employees of participating affiliates. AIG's
projected benefit obligations exceeded the plan assets at December 31, 1996 by
$21,974.
 
NOTE K -- COMMITMENTS AND CONTINGENCIES
 
  Aircraft orders and options
 
     At December 31, 1996, the Company had committed to purchase 243 aircraft
deliverable from 1997 through 2004 at an estimated aggregate purchase price
(including adjustment for anticipated inflation) of approximately $13,328,600.
 
     At December 31, 1996, the Company had options to purchase 35 aircraft
deliverable from 1999 through 2005 at an estimated aggregate purchase price
(including adjustment for anticipated inflation) of approximately $2,806,500.
 
     Most of these purchase commitments and options are based upon master
arrangements with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the
sales subsidiary of Airbus Industrie ("Airbus").
 
     The Boeing aircraft (models 737, 747, 757, 767 and 777), and the Airbus
aircraft (models A319, A320, A321, A330 and A340) are being purchased pursuant
to purchase agreements executed by the Company and Boeing or Airbus. These
agreements establish the pricing formulas (which include certain price
adjustments based upon inflation and other factors) and various other terms with
respect to the purchase of aircraft. Under certain circumstances, the Company
has the right to alter the mix of aircraft type ultimately acquired. As of
December 31, 1996, the Company had made non-refundable deposits (exclusive of
capitalized interest) with respect to the aircraft which the Company has
committed to purchase of approximately $450,849 and $329,390 with Boeing and
Airbus, respectively.
 
                                       30
<PAGE>   33
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE K -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
  Aircraft orders and options (continued)
     If all 278 aircraft were to be acquired, the estimated aggregate purchase
price (including adjustment for anticipated inflation) would be approximately
$16,135,100. Management anticipates that a significant portion of such aggregate
purchase price will be funded by incurring additional debt. The exact amount of
the indebtedness to be incurred will depend upon the actual purchase price of
the aircraft, which can vary due to a number of factors, including inflation,
and the percentage of the purchase price of the aircraft which must be financed.
 
  Asset Value Guarantees
 
     The Company guaranteed a portion of the residual value of four aircraft for
fees paid in 1991, seven aircraft for fees paid in 1994 and two aircraft for
fees paid in 1996. The aggregate guarantees at December 31, 1996, are $137,184
and, if called upon, are payable in the amounts of $7,084 (1997), $6,100 (1999),
$21,000 (2000), $4,000 (2001), $63,000 (2003) and $36,000 (2006).
 
  Other Guarantees
 
     In connection with the acquisition of eight aircraft by entities in which
the Company has an investment, the Company guaranteed the loans, which at
December 31, 1996 aggregated $71,172.
 
     The Company guaranteed the loans of three customers which, at December 31,
1996, aggregated $15,909.
 
NOTE L -- FINANCIAL INSTRUMENTS
 
     In the normal course of business, the Company employs a variety of
off-balance sheet derivative transactions with the objective to lower its
overall borrowing cost and to maintain its optimal mix of variable and fixed
rate interest obligations. These derivative products include interest rate swap
agreements, swaptions and interest rate floors (off-balance sheet derivative
transactions).
 
     The Company accounts for its off-balance sheet derivative transactions on
an accrual basis. As such, accrued future payments or receipts are reflected in
operating income in the period incurred or earned. Credit risk exposure arises
from the potential that the counterparty may not perform under these agreements
with respect to the off-balance sheet derivative transactions. The Company
minimizes such exposure through transacting with recognized U.S. derivative
dealers at least assigned an "A" rating by a recognized statistical rating
organization. The counterparties to the majority of the off-balance sheet
derivative transactions are assigned an "AAA" rating. One of the counterparties
is a related party of the Company. All of the derivative contracts between the
Company and the related party are at arms length. The Company monitors each
counterparty's assigned credit rating throughout the life of the off-balance
sheet derivative transaction. The Company currently does not require, nor is it
required by, its counterparties to provide security for its positions with the
Company although it can in certain circumstances.
 
     The following table provides the notional and contractual amounts of the
Company's off-balance sheet derivative transactions at December 31, 1996. The
notional amounts used to express the extent of the Company's involvement in swap
transactions represent a standard measurement of the volume of the Company's
swap transactions. Notional amount is not a quantification of market risk or
credit risk and is not recorded on the balance sheet. Notional amounts represent
those amounts used to calculate contractual cash flows to be exchanged and are
not paid or received. The timing and the amount of cash flows relating to
 
                                       31
<PAGE>   34
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED)
swaption and other interest rate option contracts are determined by each of the
respective contractual agreements.
 
     It is management's belief that any failure of a counterparty to perform
under the agreement with respect to these off-balance sheet transactions would
have an immaterial effect on the results of operations, financial condition and
liquidity.
 
     The following table presents the Company's notional amounts of its interest
rate swap agreements, swaptions and interest rate floors by maturity at December
31, 1996.
 
<TABLE>
<CAPTION>
                                                           REMAINING LIFE
                                --------------------------------------------------------------------
                                                            AFTER FIVE       TOTAL          TOTAL
             TYPE               ONE YEAR                      YEARS           1996           1995
------------------------------  --------                    ----------     ----------     ----------
                                               TWO TO
                                             FIVE YEARS
                                             ----------
<S>                             <C>          <C>            <C>            <C>            <C>
Interest Rate:
Swaps.........................  $161,707     $  840,673     $  346,854     $1,349,234     $  974,568
Swaptions(1)..................                  100,000                       100,000        565,670
Floors........................    33,369        133,681        733,384        900,434        412,626
                                --------     ----------     ----------     ----------     ----------
Total.........................  $195,076     $1,074,354     $1,080,238     $2,349,668     $1,952,864
</TABLE>
 
---------------
(1) Swaptions obligate the Company to convert certain fixed note obligations to
    floating rate obligations if the option purchaser chooses to exercise. These
    amounts do not represent credit exposure.
 
     The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
 
          Cash and cash equivalents: The carrying value reported in the balance
     sheet for cash and cash equivalents approximates its fair value.
 
          Notes receivable: The fair values for notes receivable are estimated
     using discounted cash flow analyses, using interest rates currently being
     offered for similar loans to borrowers with similar credit ratings.
 
          Investments: It was not practicable to estimate the fair value of most
     of the Company's investments in the common and preferred stocks of other
     companies because of the lack of a quoted market price and the inability to
     estimate fair value without incurring excessive costs. The carrying amount
     of these investments at December 31, 1996 represents the original cost or
     original cost plus the Company's share of earnings of the investment, which
     management believes is not impaired. For investments held by the Company
     that had a quoted market price at December 31, 1996, the Company used such
     quoted market price in estimating the fair value of such investments.
 
          Debt financing: The carrying value of the Company's commercial paper
     and term debt maturing within one year approximates its fair value. The
     fair value of the Company's long-term debt is estimated using discounted
     cash flow analyses, based on the Company's spread to U.S. Treasury bonds
     for similar debt at year-end.
 
          Off-balance-sheet instruments: Fair values for the Company's
     off-balance-sheet instruments are based on pricing models or formulas using
     current assumptions (swaps, swaptions and interest rate floors) and the
     amount of the guarantee which would not be covered by the fair value of the
     underlying collateral (loan guarantees and asset value guarantees).
 
                                       32
<PAGE>   35
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
 
NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED)
     The carrying amounts and fair values of the Company's financial instruments
at December 31, 1996 and 1995 are as follows:
 
<TABLE>
<CAPTION>
                                                       1996                                    1995
                                       -------------------------------------   -------------------------------------
                                           CARRYING                                CARRYING
                                           AMOUNT OF         FAIR VALUE OF         AMOUNT OF         FAIR VALUE OF
                                       ASSET (LIABILITY)   ASSET (LIABILITY)   ASSET (LIABILITY)   ASSET (LIABILITY)
                                       -----------------   -----------------   -----------------   -----------------
<S>                                    <C>                 <C>                 <C>                 <C>
Cash and cash equivalents............     $    36,558         $    36,558         $    87,097         $    87,097
Notes receivable.....................         429,146             418,520             423,799             408,648
Investments..........................          18,099              18,099              17,311              18,301
Debt financing.......................      (8,798,388)         (8,951,593)         (7,804,210)         (8,034,202)
Off-balance-sheet financial
  instruments:
     Swaps...........................                              (6,386)                                 10,426
     Swaptions.......................          (1,821)             (1,821)             (2,981)             (2,981)
     Interest rate floors............          (4,487)             (4,487)             (2,662)             (2,662)
     Acquired financing options......                                                                       1,574
</TABLE>
 
                                       33
<PAGE>   36
 
            INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
              COL. A                   COL. B                 COL. C                COL. D         COL. E
----------------------------------  ------------   ----------------------------   -----------   -------------
                                                                  ADDITIONS
                                                                  CHARGED TO      
                                     BALANCE AT    CHARGED TO        OTHER        
                                    BEGINNING OF   COSTS AND      ACCOUNTS--      DEDUCTIONS--   BALANCE AT
           DESCRIPTION                 PERIOD       EXPENSES       DESCRIBE       DESCRIBE(1)   END OF PERIOD
----------------------------------  ------------   ----------   ---------------   -----------   -------------
                                                             (DOLLARS IN THOUSANDS)
<S>                                 <C>            <C>          <C>               <C>           <C>
Reserve for overhaul:
Year ended December 31, 1996......    $ 83,857      $ 85,083        $   783         $67,231       $ 102,492
Year ended December 31, 1995......    $ 71,554      $ 71,113        $ 4,191(2)      $63,001       $  83,857
Year ended December 31, 1994......    $ 44,843      $ 57,619        $ 1,802(2)      $32,710       $  71,554
</TABLE>
 
---------------
 
(1) Reimbursements to lessees for overhauls performed and amounts transferred to
    buyers for aircraft sold.
 
(2) Payments received from lessees in lieu of compliance with return conditions.
 
                                       34
<PAGE>   37
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
Dated: March 14, 1997
 
                                          INTERNATIONAL LEASE FINANCE
                                          CORPORATION
 
                                          By       /s/ LESLIE L. GONDA
                                            ------------------------------------
                                                      Leslie L. Gonda
                                                   Chairman of the Board
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
 
<TABLE>
<CAPTION>
               SIGNATURE                                TITLE                       DATE
----------------------------------------    ------------------------------    ----------------
<C>                                         <S>                               <C>
 
          /s/ LESLIE L. GONDA               Director                           March 14, 1997
----------------------------------------
            Leslie L. Gonda
 
        /s/ STEVEN F. UDVAR-HAZY            Chief Executive Officer and        March 14, 1997
----------------------------------------      Director
          Steven F. Udvar-Hazy
 
           /s/ LOUIS L. GONDA               Director                           March 14, 1997
----------------------------------------
             Louis L. Gonda
 
                                            Director
----------------------------------------
            M. R. Greenberg
 
         /s/ EDWARD E. MATTHEWS             Director                           March 14, 1997
----------------------------------------
           Edward E. Matthews
 
                                            Director
----------------------------------------
         Petros K. Sabatacakis
 
                                            Director
----------------------------------------
            Howard I. Smith
 
            /s/ ALAN H. LUND                Chief Financial Officer and        March 14, 1997
----------------------------------------      Chief Accounting Officer
              Alan H. Lund
</TABLE>
 
                                       35
<PAGE>   38
 
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
 
     Since the Registrant is an indirect wholly owned subsidiary of AIG, no
annual report to security holders for the year ended December 31, 1996 or proxy
statement, form of proxy or other proxy soliciting materials have been sent to
securities holders since January 1, 1990.
 
                                       36