UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
       ------------------------------------------------------------------

                                    FORM 10-K


                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
           -----------------------------------------------------------
                                   (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, 2000
                                       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 No. 333-82153
                          -----------------------------


                             AIRCRAFT FINANCE TRUST
                             ----------------------
             (Exact name of registrant as specified in its charter)

                                   51-6512392
                             (IRS Employer I.D. No.)

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

    1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890
                                 (302) 651-1000
          (Address and telephone number of principal executive offices)

         --------------------------------------------------------------
        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

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

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of 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
           ---

                       This document consists of 99 pages.


                                       1
<PAGE>

                             Aircraft Finance Trust

                          2000 Form 10-K Annual Report

                                Table of Contents


                                                                            Page
                                                                            ----
PART I
Item 1.       Business.........................................................3
Item 2.       Properties......................................................22
Item 3.       Legal Proceedings...............................................22
Item 4.       Submission of Matters to a Vote of Security Holders.............22

PART II
Item 5.       Market for Registrant's Common Equity and Related
              Stockholder Matters.............................................23
Item 6.       Selected Financial Data.........................................24
Item 7.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations.......................................24
Item 7A.      Quantitative and Qualitative Disclosures about Market Risk......30
Item 8.       Financial Statements and Supplementary Data.....................33
Item 9.       Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure........................................48

PART III
Item 10.      Directors and Executive Officers of the Registrant..............48
Item 11.      Executive Compensation..........................................55
Item 12.      Security Ownership of Certain Beneficial Owners and
              Management......................................................56
Item 13.      Certain Relationships and Related Transactions..................56

PART IV
Item 14.      Exhibits, Financial Statement Schedules and Reports on
              Form 8-K........................................................58


                                       2
<PAGE>

                                     PART I

Item 1.       Business

Introduction

     Aircraft Finance Trust was formed on April 13, 1999 as a Delaware  business
trust and is a special  purpose  company.  The  authorized  business of Aircraft
Finance  Trust and its  present  and future  subsidiaries  is limited to buying,
owning,  leasing and selling  commercial  jet aircraft  and related  activities.
Aircraft Finance Trust currently has three subsidiaries:  AFT Trust-Sub I, which
is a Delaware business trust,  Aircraft Finance Trust Ireland Limited,  which is
an Irish  corporation,  and Aircraft Finance France S.A.R.L.,  which is a French
Corporation   (collectively  "Aircraft  Finance").  All  of  Aircraft  Finance's
aircraft are owned by AFT Trust-Sub I. Three of these aircraft are leased by AFT
Trust-Sub  I to  Aircraft  Finance  Trust  Ireland  Limited and one is leased to
Aircraft  Finance France  S.A.R.L.  for sublease to the ultimate user.  Aircraft
Finance's  principal  executive offices are located at 1100 North Market Street,
Rodney Square North,  Wilmington,  Delaware 19890. Its telephone number is (302)
651-1000.

     The beneficial  interests in Aircraft Finance were originally  purchased by
UniCapital  AFT-I, Inc. (51%) and UniCapital  AFT-II,  Inc. (49%), each of which
were  wholly-owned  subsidiaries  of UniCapital  Air Group Inc., a  wholly-owned
subsidiary  of  UniCapital  Corporation  (UniCapital).  During 1999,  UniCapital
AFT-I,  Inc. sold 49.9% of its beneficial  interest in Aircraft Finance to third
party financial services  companies.  UniCapital Air Group, Inc. entered into an
agreement during 1999 to sell its interest in UniCapital  AFT-I,  Inc. to one of
the financial services companies. At December 31, 2000, these financial services
companies own 51% of Aircraft  Finance,  and UniCapital Air Group, Inc. owns 49%
through its subsidiaries. On December 11, 2000, UniCapital Corporation announced
that it had filed  petitions for  reorganization  under Chapter 11 of the United
States Bankruptcy Code.

     On May 5, 1999,  Aircraft  Finance  issued $1,209  million of  asset-backed
notes (the "Initial  Notes").  As of that date,  the Initial Notes  consisted of
$512.5  million of Class A-1  Notes,  $400  million  of Class A-2 Notes,  $126.5
million of Class B Notes, $106 million of Class C Notes and $64 million of Class
D Notes.  On January 20, 2000,  Aircraft  Finance  completed  an exchange  offer
whereby Aircraft Finance issued four classes of new notes, also designated Class
A-1, Class A-2, Class B and Class C (the "Exchange Notes"),  in exchange for the
four corresponding classes of the Initial Notes. The terms of the Exchange Notes
are  identical in all material  respects to the Initial  Notes,  except that the
Exchange Notes are registered under the Securities Act of 1933, as amended.  The
Class D Notes  were not  exchanged  and remain  unregistered.  $3 million of the
Class A-2  Initial  Notes were not  tendered  in the  exchange  offer and remain
outstanding.  The  remaining  outstanding  Initial  Notes  and  the  outstanding
Exchange Notes are together referred to as the Notes.

     Also on May 5, 1999,  Aircraft  Finance  and its  subsidiaries  agreed with
General Electric Capital Corporation to purchase 36 commercial jet aircraft from
General Electric  Capital  Corporation and some of its affiliates under a master
aircraft  purchase  agreement.  Aircraft  Finance  paid  the  purchase  price of
approximately  $1,196  million  in full  for  these  initial  aircraft  with the
proceeds from the sale of the Initial Notes and from the sale of its  beneficial
interest.  Remaining proceeds were used to fund cash reserves of $52 million. At
December 31, 2000, all of the initial aircraft were on lease to 22 lessees based
in 14 countries.  For a detailed  discussion  of the value of the aircraft,  see
"The Aircraft Portfolio".

                                       3
<PAGE>


     The trust agreement  governing Aircraft Finance provides for four trustees.
One of the four trustees of Aircraft Finance is Wilmington Trust Company,  which
is acting as the statutory  trustee and the owner trustee.  The remaining  three
trustees are the  "controlling  trustees"  and have the  authority to manage the
property and affairs of Aircraft Finance under the trust  agreement.  All of the
controlling  trustees are independent from General Electric Capital Corporation.
One of the controlling trustees, called the "equity trustee", has been appointed
by the holders of Aircraft Finance's  beneficial  interest,  while the two other
controlling  trustees,   called  the  "independent  controlling  trustees",  are
independent of those holders. The holders of the beneficial interest of Aircraft
Finance may remove and replace the equity trustee. Each independent  controlling
trustee may designate a replacement  for the other  controlling  trustee if such
other controlling trustee resigns or his office is deemed vacant.

     The trust  agreement  requires  that any  decision  relating to  insolvency
proceedings,  mergers  or other  reorganizations  of  Aircraft  Finance  must be
approved by a unanimous vote of the controlling trustees.  Any sale of aircraft,
decisions  requiring Aircraft  Finance's approval under the servicing  agreement
for the aircraft or under the agreement with the  administrative  agent, and the
reduction  of any  required  level of  reserves  must be  approved by the equity
trustee and at least one of the independent  controlling  trustees. In order for
the controlling  trustees to approve an aircraft sale on other than pre-approved
terms, they must confirm to the indenture  trustee,  prior to the sale, that the
sale will not  materially  and  adversely  affect the holders of the Notes.  The
acquisition  of  additional  aircraft by  Aircraft  Finance and the terms of any
related  financing need only be approved by the equity  trustee,  subject to the
terms of the trust  agreement and the indenture,  including  confirmation by the
rating agencies that the transaction will not adversely affect the rating on the
Notes.

     As is common with many other special purpose  companies,  Aircraft  Finance
will  not  have  any  officers  or  other  employees,  except,  in the case of a
subsidiary,  as may be required by applicable law. Aircraft Finance has arranged
for third-party  service  providers to provide  aircraft  servicing,  managerial
services and financial  advice.  See "Part III, Item 10. Directors and Executive
Officers of the Registrant" for further information  regarding the management of
Aircraft Finance.

     Aircraft  Finance may acquire  additional  commercial  passenger or freight
aircraft  from General  Electric  Capital  Corporation  or  UniCapital  or their
respective affiliates.  The indenture under which the Notes were issued contains
a number of conditions for the  acquisition  of additional  aircraft and for the
financing of such an acquisition. If these conditions are met, there is no limit
under the indenture to the number of additional  aircraft that Aircraft  Finance
may acquire.

     All of the net revenues of Aircraft  Finance and its  subsidiaries are used
to pay principal,  interest and other amounts due on the Notes or to provide for
cash reserves for some or all of the  subclasses  of Notes.  Except for accruals
for the payment of  anticipated  expenses  and  required  reserves,  none of the
revenues will be re-used or retained in the business of Aircraft  Finance or its
subsidiaries.  In  addition,  none of the  earnings of  Aircraft  Finance may be
distributed to the holders of its beneficial interest until all Notes are repaid
in full with the limited  exception of  reimbursing  any payments  made by those
holders to cure interest shortfalls.

     Because the Notes do not provide for fixed principal payments, the ultimate
repayment  of the Notes,  the amount of  individual  payments  over time and the
speed of repayment are fully a function of Aircraft Finance's ability to collect
revenues  from the  portfolio of the 36 aircraft  and, if  acquired,  additional
aircraft.  Set forth below in the Risk Factors  section are a variety of factors
that, in addition to general economic conditions, could influence materially the
collection of revenues -- principally lease rents and sale proceeds -- available
for debt repayment.

                                       4
<PAGE>


     References in this Form 10-K to the appraised value of aircraft at December
31, 2000 means the average of three  appraisals  of the  aircraft as of December
31, 2000. For further discussion of the appraisals,  see "The Aircraft Portfolio
- Appraisal of Aircraft".


Risk Factors

     The  following  summarizes  certain  risks that may  materially  affect the
business  operations  of Aircraft  Finance and its ability to pay the  interest,
principal  and  premium,  if any, on the Notes in full at or before  their final
maturity  dates  and to  make  cash  distributions  to the  beneficial  interest
holders.  There  may be  additional  risks  and  uncertainties  not known at the
present.  There can be no assurance that payments under the aircraft leases will
be adequate to pay the interest,  principal and premium, if any, on the Notes in
accordance with their terms.

         It should be noted that this  Annual  Report on Form 10-K  (Form  10-K)
contains, in addition to historical information, forward-looking statements that
involve risks and  uncertainties.  These statements relate to Aircraft Finance's
future plans,  objectives,  expectations  and  intentions,  and the  assumptions
underlying  or  relating to any of these  statements.  These  statements  may be
identified by the use of words such as "expect," "may,"  "anticipate,"  "intend"
and "plan". Aircraft Finance assumes no obligation to update any forward-looking
statements to reflect  actual  results or changes in the factors  affecting such
forward-looking  statements.   Aircraft  Finance's  actual  results  may  differ
materially from those discussed in the forward-looking  statements  contained in
this Form 10-K based on risks, including those discussed below.

Aircraft  Finance is a special purpose entity and therefore is relying on only a
limited number of revenue sources for its business.

     It is unlikely that Aircraft  Finance would be able to obtain any alternate
source of funds if any of its limited  sources of funds prove to be insufficient
to pay the Notes and its other obligations.  The sole sources of payment for the
Notes and the other obligations of Aircraft Finance and its subsidiaries are:

     (1)  funds  derived  from the  aircraft  owned or to be  acquired  by them,
          including:  rents,  deposits,  maintenance reserves and other payments
          under  existing  leases and any  future  leases,  insurance  proceeds,
          proceeds  from  the  sale of  aircraft  and any  payments  by  General
          Electric Capital Corporation as to several initial Brazilian leases;

     (2)  liquidity  reserves funded out of the proceeds of the Initial Notes or
          that  may be  funded  out of the  proceeds  of  any  future  notes  or
          beneficial  interests  in  Aircraft  Finance or  provided  through any
          future credit facilities;

     (3)  net payments under swap or other hedging agreements;

     (4)  investment earnings; and

     (5)  net  proceeds  from the sale of any notes  issued to  refinance  other
          notes.

Aircraft  Finance has no  employees or managers of its own,  and  therefore  its
ability to generate  revenues  depends on contracts  with, and  performance  by,
independent third party service providers.

                                       5
<PAGE>


     Inadequate   performance  and/or  resignations  by  service  providers  may
materially  and  adversely  affect  revenues  and  costs.  In the  absence of an
ownership stake,  third party service providers may have no incentive to perform
beyond the strict requirements of their contract. Aircraft Finance is especially
dependent  on  service  providers  because  neither  Aircraft  Finance  nor  its
subsidiaries have any employees or executive managers of its own.

     Aircraft  Finance  relies on contracts with GE Capital  Aviation  Services,
Limited, an affiliate of General Electric Capital Corporation,  as the servicer,
Phoenix  American  Financial  Services,  Inc., as successor to  Resource/Phoenix
Incorporated,  as  the  administrative  agent,  Bankers  Trust  Company  as  the
financial  advisor and security  trustee,  Lehman  Brothers  Inc. as the capital
markets advisor and other service  providers for all asset servicing,  executive
and administrative functions.

     Regarding these arrangements, please note that:

     (1)  any of  these  organizations  may  fail  to  perform  its  contractual
          obligations adequately;

     (2)  any of these organizations may exercise contract termination rights;

     (3)  Aircraft  Finance may find it  difficult  to recover  damages for poor
          performance in light of contractual limitations;

     (4)  Aircraft  Finance may not be able to terminate the contract  itself --
          in particular its rights to terminate the aircraft servicing agreement
          are very limited; and

     (5)  Aircraft  Finance may not have the legal right to locate  satisfactory
          replacements on favorable terms.

The  aircraft  servicer  may face  conflicts  of interest  that could  result in
preferential  treatment for a third party at the expense of Aircraft Finance. If
the  sevicer  did  prefer a third  party in a  conflict  of  interest,  it could
adversely affect Aircraft Finance's revenues.

     GE Capital Aviation Services, Limited will from time to time have conflicts
of interest that may adversely  affect its ability to perform its obligations as
the servicer for Aircraft  Finance because it manages  aircraft and other assets
of other entities,  in particular for its affiliate,  General  Electric  Capital
Corporation  and its group.  These  conflicts will arise if the servicer  leases
Aircraft  Finance's  aircraft to the same  entities that are also the lessees of
other  aircraft  managed  by  the  servicer.  In  this  circumstance,  decisions
affecting some aircraft may  unavoidably  be adverse to others.  If the servicer
makes a decision adverse to Aircraft  Finance's  interests,  Aircraft  Finance's
revenues could suffer.

     These  conflicts  may be  particularly  acute  when a lessee  in  financial
distress  needs to return some of its aircraft.  Conflicts  will also arise when
the  aircraft of Aircraft  Finance are being  marketed for re-lease or sale at a
time when other aircraft  managed by the servicer are being similarly  marketed.
These  circumstances may be especially  sensitive where General Electric Capital
Corporation  is  providing  financing  for the  marketed  aircraft  or where the
servicer's  contractual  arrangements have the effect of requiring  preferential
treatment for other aircraft.

                                       6
<PAGE>


     Under the terms of its  servicing  agreement  with the  servicer,  Aircraft
Finance is not necessarily  entitled to be informed of all conflicts of interest
involving  the  servicer  and is limited in its right to  replace  the  servicer
because of conflicts of interest.

Because Aircraft Finance's contract limits its remedies against the servicer for
poor performance, Aircraft Finance may at some point bear costs that will reduce
its available revenues.

     Under the aircraft  servicing  agreement,  Aircraft  Finance may not in all
cases have the right to recover  damages for  inadequate  performance.  Aircraft
Finance's  right to terminate the servicing  agreement by reason of a failure of
the servicer to perform is, moreover,  limited to those failures to perform that
materially  and adversely  affect  Aircraft  Finance and its  subsidiaries  as a
whole.

     In particular,  the servicer is not  contractually  responsible  for, among
other things:

     (1)  the transfer of aircraft,  leases or other assets to any person within
          Aircraft Finance;

     (2)  the  adequacy  of the  terms of any  aircraft  lease,  including  rent
          payments, maintenance reserves or security deposits;

     (3)  the reliability or creditworthiness of any lessee; and

     (4)  the terms of the Notes and the ability of  Aircraft  Finance to comply
          with the terms of the Notes.

     Aircraft  Finance has agreed to indemnify  the servicer and its  affiliates
for broad  categories of losses  arising out of the  performance of services for
the aircraft and leases held by  subsidiaries  of Aircraft  Finance,  unless the
losses arise from the servicer's gross negligence or willful misconduct.

Market interest rate fluctuations could change expected cash flows.

     Interest rate exposure  arises to the extent that Aircraft  Finance's fixed
and floating rate obligations under the Notes do not correlate to either or both
of the mix of fixed and floating rate rental payments for different  periods and
the timing of those payments.  Although  Aircraft  Finance will attempt to hedge
that exposure as described in "Item 7A. Quantitative and Qualitative Disclosures
about  Market  Risk",  it  makes  no  assurance  that it will  be  effective  in
implementing  its hedging goals. In addition,  the premature  termination of any
lease may result in Aircraft Finance incurring  prepayment or cancellation costs
under its hedging agreements.

Changes in the aircraft portfolio could change expected cash flows.

     The  assumptions  regarding the expected cash flow of Aircraft  Finance are
subject not only to a variety of economic  factors,  but also to any substantial
change  in the  composition  of  the  aircraft  portfolio  from  that  initially
contemplated.  Any substantial  change in that composition  could  significantly
alter  expected  cash flows and the nature  and degree of risks  affecting  cash
flows. Three principal factors could affect the fleet composition.

     (1)  The exercise of purchase options by lessees.  The exercise of a lessee
          purchase  option may result in sale  proceeds  lower than  target sale
          prices of the  aircraft if payments on the Notes have not been made as
          assumed.   Two  lessees  with  respect  to  three  of  the   aircraft,

                                       7
<PAGE>

          representing  11.8% of the aggregate  appraised  value at December 31,
          2000, have unexpired options to purchase aircraft.

     (2)  The loss of aircraft  through  casualty or  governmental  taking.  The
          proceeds  of  insurance  and taking  awards may not be  sufficient  to
          compensate  for the loss of the revenue  otherwise  available from the
          affected aircraft.

     (3)  The  purchase of  additional  aircraft.  Aircraft  Finance may acquire
          additional  commercial  passenger  or freight  aircraft  from  General
          Electric  Capital   Corporation  or  UniCapital  or  their  respective
          affiliates.  Although any additional aircraft may add to the cash flow
          of Aircraft Finance and such  acquisitions are subject to confirmation
          by the rating  agencies  rating the Notes that the  agencies  will not
          lower,  qualify  or  withdraw  any rating on the Notes as a result and
          other  requirements  of the indenture  governing  the Notes,  Aircraft
          Finance cannot  predict the effect of additional  aircraft on its cash
          flows and ability to repay the Notes.

Aircraft  Finance will not receive  enough  revenues  from its current  aircraft
leases to repay the Notes in full and therefore it will have to re-lease or sell
the aircraft in order to repay the Notes in full.

     Aircraft Finance will need to re-lease aircraft as current leases expire in
order to continue to generate  enough revenue to pay the Notes in full.  Failing
re-leasing,  it will need to attempt to sell the  aircraft to provide  funds for
note  payments.  Aircraft  Finance  may  be  unable  to  sell  the  aircraft  at
satisfactory prices if market conditions decline.

Over the life of the aircraft portfolio,  it is likely that some of the aircraft
lessees will experience financial difficulties which will cause them to delay or
miss rental payments to Aircraft Finance.

     The ability of each aircraft lessee to perform its lease  obligations  will
depend not only on the  managerial  skills of its  employees but also on general
economic  conditions  in the  country or region in which it  operates as well as
competition,  fare levels, passenger demand, and operating costs, including, but
not limited to, the cost of fuel. Some of Aircraft  Finance's  existing  lessees
are in a weak financial position,  and this is likely to be the case with future
aircraft  lessees as well. As the aircraft  approach the end of their realizable
useful life, it is increasingly  likely that the aircraft will be leased to less
creditworthy  lessees. In a portfolio the size of Aircraft Finance's,  it should
be expected  that some  aircraft  lessees may at some point be slow in paying or
may  fail to pay in  full.  In most  instances,  late  payments  are  recovered,
together with default interest or other similar payments required by the leases.
In other instances, a restructuring of the lease is required, involving anything
from a simple rescheduling of payments to the termination of a lease.

     A  delayed  or  missed  rental  payment  from a lessee  decreases  Aircraft
Finance's  revenues,  adversely  affecting  the timely or full  repayment of the
Notes.  A  certain  level  of  delinquency  has been  assumed  for  purposes  of
calculating  the estimated  final payment date for the Notes.  Aircraft  Finance
cannot  assure,  however,  that  default  levels  will not  increase  over time,
particularly if the current favorable economic conditions do not continue.

Increased  fuel  prices  could  have a  negative  financial  impact on  Aircraft
Finance's current lessees and could adversely affect its ability to re-lease the
aircraft.

                                       8
<PAGE>


     Oil prices have increased in recent years,  and many airlines have reported
reduced levels of  profitability  due to higher fuel prices.  To the extent that
fuel prices remain at their current levels or increase further, this could cause
lessees to experience financial  difficulties which could cause them to delay or
miss  their  rental  payments.  High fuel  prices  could also  adversely  affect
Aircraft Finance's ability to re-lease or sell aircraft on advantageous terms.

Aircraft Finance faces competition from a variety of entities.

     In leasing and selling  aircraft in its portfolio,  Aircraft  Finance faces
competition from a variety of entities. These include:

     (1)  the manufacturers of aircraft, such as Boeing and Airbus;

     (2)  financial  institutions  engaged  in the  leasing  business  and other
          leasing  companies,  such as General Electric Capital  Corporation and
          International Lease Finance Corporation;

     (3)  banks  and  other  financial  institutions  that  have  foreclosed  on
          aircraft collateral;

     (4)  airlines which are disposing of aircraft; and

     (5)  other aircraft portfolio entities formed for purposes similar to those
          of Aircraft Finance.

     Many,  if not most,  of these  entities  have  greater  resources,  greater
financial flexibility and longer operating histories than Aircraft Finance.

Operational restrictions may harm Aircraft Finance's ability to compete.

     The indenture  governing  the Notes and other  governing  documents  impose
restrictions on how Aircraft Finance operates its business.  These  restrictions
may limit the ability to compete  effectively  in the  aircraft  leasing  market
under  certain  circumstances.  For  example,  there  are  concentration  limits
contained in the indenture that restrict  Aircraft  Finance's ability to lease a
certain  percentage  of  aircraft  to  any  individual  lessee,  to  lessees  in
particular countries,  or to lessees in particular geographical regions. Most of
Aircraft Finance's competitors do not operate under such restrictions.

The  concentration  of lessees in a particular  geographical  region may amplify
Aircraft Finance's exposure to local economic conditions.

     The commercial  aviation industry  throughout the world generally is highly
sensitive  to general  economic  conditions.  Because a  substantial  portion of
business and, especially, leisure airline travel is discretionary,  the industry
has tended to suffer during economic downturns. In addition,  local economic and
political  conditions  can influence the  performance  of a lessee  located in a
particular region. The effect of those local conditions on Aircraft Finance will
be more or less  intense  depending  on the  concentration  of the number of its
lessees in that region.

     European  concentration.  As of December 31, 2000,  lessees based in Europe
account for aircraft having 50.12% of the aggregate  appraised value at December
31, 2000,  with all 50.12% based in "developed"  European  markets as opposed to
"emerging" European markets. The financial prospects for European lessees can be
expected to depend largely on the level of economic activity in Europe generally
and in the specific  countries in which these  lessees  operate.  A recession or

                                       9
<PAGE>

other  worsening  of  economic  conditions  in one or more of  these  countries,
particularly  if combined with high fuel prices  and/or a weak euro,  may have a
material  adverse  effect on the  ability  of  European  lessees  to meet  their
financial  and other  obligations  under the  leases.  In  addition,  commercial
airlines in Europe  face,  and can be  expected  to continue to face,  increased
competitive pressures, in part as a result of the continuing deregulation of the
airline industry by the EU. There can be no assurance that competitive pressures
resulting from such  deregulation will not have a material adverse impact on the
operations of our European lessees.

     Asia Pacific region  concentration.  As of December 31, 2000, lessees based
in the Asia  Pacific  region,  including  China and India,  account for aircraft
having  14.51% of the  aggregate  appraised  value at  December  31,  2000.  The
commercial  aircraft  industry  in Asia was  adversely  affected  by the  severe
economic and financial  difficulties  experienced  in the region during 1998 and
1999.  Since  1999,  there  has been  some  stabilization  and  recovery  in the
economies of this region. If the recessionary conditions that prevailed in large
parts of the region were to recur,  they would have an adverse  impact on global
aircraft demand.

     Latin  American  concentration.  As of December 31, 2000,  lessees based in
Latin America  account for aircraft  having  10.64% of the  aggregate  appraised
value at  December  31,  2000.  The  prospects  for lessee  operations  in Latin
American  countries  depend in part on the general level of political  stability
and economic  activity and policies in those countries.  Future  developments in
the political  systems or economies of these countries or the  implementation of
future  government  policies may  materially  affect lessee  operations in those
countries.

     During 1999, Brazil  experienced  significant  downturns in its economy and
financial  markets,  including  large  decreases in  financial  asset prices and
dramatic  decreases  in the  value of its  currency.  While  there has been some
stabilization in the Brazilian economy within the last twelve months, any future
general deterioration in the Brazilian economy could lead to a material decrease
in Aircraft Finance's leasing revenues and an increase in default related costs.

     North  American  concentration.  As of December 31, 2000,  lessees based in
North America  account for aircraft  having  24.75% of the  aggregate  appraised
value at December 31, 2000. The commercial aircraft industry in North America is
highly  sensitive to general  economic  conditions.  Since air travel is largely
discretionary,  the industry has suffered severe financial  difficulties  during
economic downturns.  Over the past several years, nearly half of the major North
American  passenger airlines have entered into plans of reorganization or sought
protection  through  bankruptcy,  insolvency  or other similar  proceedings  and
several major U.S. airlines have ceased operations.

     On January 10, 2001, Trans World Airlines,  Inc.  ("TWA"),  one of Aircraft
Finance's  lessees,  filed for Chapter 11  bankruptcy  protection  in the United
States  Bankruptcy Court for the District of Delaware (the "Bankruptcy  Court").
TWA leases one aircraft  from Aircraft  Finance,  which  represents  4.9% of the
aircraft by aggregate  appraised  value as of December  31,  2000.  On March 23,
2001, TWA paid rents due as of March 22, 2001.  There can be no assurances  that
TWA will  continue  to make the rental  and other  payments  required  under the
leases with Aircraft Finance.  TWA's failure to make such payments would have an
adverse impact on Aircraft  Finance's revenues and cash flows. By order of Judge
Peter J. Walsh dated March 12, 2001, the Bankruptcy  Court  authorized  American
Airlines,  Inc.'s  ("American")  bid,  submitted on February  28, 2001,  to sell
substantially  all of TWA's assets to American.  As of March 30, 2001,  Aircraft
Finance is in negotiations with American with respect to the TWA lease. However,
there are no assurances that such  negotiations  will not reduce lease payments,
or  that  the  related  aircraft  will  not be  returned  to  Aircraft  Finance.


                                       10
<PAGE>

Maintenance costs may at times be paid by Aircraft Finance.

     Any  failure of an  aircraft  to be  maintained  or  modified  properly  in
accordance  with  manufacturer's  requirements or  airworthiness  directives and
other governmental requirements, including those relating to noise and emissions
standards,  can  impair  the  safety of the  aircraft,  result in  grounding  or
penalties and affect the ability to re-lease or to sell the aircraft.  The costs
of maintenance  can be substantial  and may have a higher payment  priority than
that of the  Notes.  In many  cases,  the  lessee is  required  to  provide  for
maintenance or modifications.  Lessees could,  however, fail to pay those costs,
and the burden would fall on Aircraft Finance. In addition,  Aircraft Finance as
the lessor is, in some instances,  required to bear a portion of the maintenance
costs,  and the  pressure of  competition  may require it to bear an  increasing
portion of those costs in the future.  Although  Aircraft Finance  established a
cash  reserve  which is $52 million as of December  31,  2000,  any  significant
variations  in the costs  required to be paid  directly by Aircraft  Finance may
materially impair the ability of Aircraft Finance to make payments on the Notes.

Other operating costs may at times be paid by Aircraft Finance.

     As in the case of  maintenance  costs,  Aircraft  Finance  may incur  other
operational  costs upon a lessee default or where the terms of the lease require
it to pay a portion of those costs. Those costs include:

     (1)  the costs of casualty,  liability and political risk insurance and the
          liability  costs or losses  when  insurance  coverage  has not been or
          cannot be obtained as required or is insufficient in amount or scope;

     (2)  the costs of  licensing,  exporting or importing an aircraft,  airport
          taxes, customs duties, air navigation charges and similar governmental
          or quasi-governmental impositions, which can be substantial; and

     (3)  penalties and costs associated with the failure of lessees to keep the
          aircraft registered under all appropriate local requirements.

     The failure to pay some of these costs can result in liens on the aircraft,
and the failure to register can result in a loss of insurance. These matters can
prevent the  re-lease,  sale or other use of the  aircraft  until the problem is
cured.

Aircraft  Finance  will  need to  re-lease  or sell  aircraft  to  maintain  its
revenues.

     The number and types of the aircraft that Aircraft  Finance must place with
lessees  through  December 31, 2005 is presented in the table below.  That table
shows  the years in which  the  leases  for  those  aircraft  are  contractually
scheduled to expire or have  terminated.  The table  illustrates that the leases
for  33 of the  aircraft,  representing  approximately  89.6%  of the  aggregate
appraised  value at December 31, 2000,  are  scheduled to expire or permit early
termination on or before  December 31, 2005.  The table assumes that,  except as
indicated,  no  lease  terminates  prematurely,  no  aircraft  are  sold  and no
additional  aircraft are  purchased.  More aircraft will need to be re-leased to
the extent leases terminate prematurely.

                                       11
<PAGE>


                                           Year Ending December 31,
                                           ------------------------
Aircraft Type                   2001      2002      2003       2004      2005
-------------                   ----      ----      ----       ----      ----
B737-300...................       1(a)      2          -         4         4
B737-400...................       -         2          1         -         2
B767-300ER.................       -         -          -         -         -
B767-300ER.................       -         -          1         1         1
A310-300...................       -         -          1         -         -
A320-200...................       -         -          2         4         1
DC-10-30...................       -         2          -         -         -
MD-83......................       1         1(b)       1         1         -
                                -----     ------    -----      ---       ---
Total......................       2         7          6        10         8

(a)  Lessee returned the aircraft in January 2001 and paid a termination fee.
(b)  An early termination option is assumed to be exercised.

Aircraft  Finance  may have  difficulty  in  re-leasing  or selling  aircraft at
favorable terms.

     The servicer, GE Capital Aviation Services,  Limited, has agreed to seek to
re-lease  aircraft  serviced by it as they become available upon the termination
of any lease.  The  servicer  has not assured  Aircraft  Finance,  and  Aircraft
Finance  makes no  assurances,  that it will be able to  re-lease  aircraft on a
timely basis, at equally  favorable rental rates or otherwise on favorable lease
terms.  Aircraft Finance's ability to obtain timely and favorable lease terms or
to sell aircraft at attractive prices may be adversely affected by unpredictable
changes in general  economic  conditions,  passenger  demand and the competitive
strength of the airline  industry.  The  availability of commercial jet aircraft
for lease or sale has periodically  experienced  cycles of over supply and under
supply,  resulting in sharp decreases and increases in aircraft values and lease
rates. Among other factors that could influence lease terms and sales prices are
the following:

     (1)  cyclical changes in interest rates and the availability of credit;

     (2)  fluctuations  in the cost of fuels and other  materials,  labor costs,
          costs  associated  with  changing  governmental  regulations  and  air
          traffic control constraints;

     (3)  manufacturer  production levels,  particularly increased production of
          new  aircraft,  as announced by Boeing and Airbus,  which makes older,
          used models less attractive, especially in Asia where an oversupply is
          already perceived to exist;

     (4)  the  cessation or  announced  cessation of  production  of  particular
          aircraft  models,  such as,  after the merger of Boeing and  McDonnell
          Douglas,  the MD-80,  of which  there are four in  Aircraft  Finance's
          initial  portfolio,  representing  approximately 7.0% of the aggregate
          appraised value at December 31, 2000 of the portfolio;

     (5)  the  operating  history of  particular  aircraft,  the identity of its
          operators  and  legal  and  regulatory   requirements   affecting  its
          operation and transfer or leasing;

     (6)  changes  in  aircraft  technology,   either  significant  advances  by
          manufacturers  or  governmentally  mandated  modifications,  that  may
          render older models  substantially  less  attractive  or may result in
          modification costs that reduce net sales prices or rentals; and

                                       12
<PAGE>


     (7)  competition from aircraft  manufacturers,  airlines,  aircraft leasing
          companies, financial institutions, aircraft broker and special purpose
          leasing vehicles that may have greater financial resources and greater
          legal and financial  flexibility to structure and offer more favorable
          leasing, pricing or financing alternatives.

Aircraft type concentrations may amplify other risk factors.

     The  concentration  of the types of aircraft  held by Aircraft  Finance may
amplify some of the factors noted above.  The aircraft owned by Aircraft Finance
include eight aircraft  types,  three of which  represent  together 70.2% of the
aggregate   appraised   value  at  December  31,  2000,   with  Boeing  737-300s
constituting  27.9%,  Boeing 767-300ERs  constituting 23.9% and Airbus A320-200s
constituting 18.4% of that aggregate appraised value. Also,  narrowbody aircraft
constitute 65.5% of the aggregate appraised value at December 31, 2000.


The Aircraft Portfolio

     The following  tables set forth  details of the aircraft  owned by Aircraft
Finance as of  December  31,  2000.  See "Item 7.  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations - Recent Developments"
for further  information about events that have occurred  subsequent to December
31, 2000.

     The following table identifies the 36 aircraft by type of aircraft.
                                                             % of Aircraft by
                    Type of      Number of                 Appraised Value as of
Manufacturer       Aircraft      Aircraft     Body Type     December 31, 2000
------------       --------      --------     ---------     -----------------
Boeing             B737-300         11       Narrowbody              27.9%
                   B737-400          5       Narrowbody              12.2%
                   B767-200ER        2       Widebody                 5.4%
                   B767-300ER        4       Widebody                23.9%

Airbus             A310-300          1       Widebody                 2.5%
                   A320-200          7       Narrowbody              18.4%
McDonnell Douglas  DC-10-30          2       Widebody                 2.7%
                   MD-83             4       Narrowbody               7.0%
                                   ---                          ----------
Total                               36                              100.0%

     All of the  aircraft  hold or are  capable of  holding a noise  certificate
issued  under  Chapter  3 of  Volume  I,  Part  II of  Annex  16 of the  Chicago
Convention or have been shown to comply with the Stage 3 noise levels set out in
Section  36.5 of  Appendix C of Part 36 of the United  States  Federal  Aviation
Regulations.

                                       13
<PAGE>


     The following table identifies the countries in which the lessees of the 36
aircraft are based, calculated as of December 31, 2000.
                                                            % of Aircraft by
                                             Number of    Appraised Value as of
Country                                      Aircraft       December 31, 2000
-------                                      --------       -----------------
U.K.........................................     7                  21.9%
U.S.........................................     5                  12.9%
Italy.......................................     2                   9.1%
Belgium.....................................     1                   2.6%
Brazil......................................     3                   8.0%
Canada......................................     4                  11.9%
China.......................................     2                   5.1%
France......................................     2                   6.4%
Indonesia...................................     1                   2.6%
India.......................................     2                   4.3%
Philippines.................................     1                   2.5%
Spain.......................................     3                   5.0%
Ireland.....................................     2                   5.1%
Mexico........................................   1                   2.6%
                                               ---              ---------
Total.......................................    36                 100.0%

     The  following  table  identifies  the regions in which the 36 aircraft are
based, calculated as of December 31, 2000.

                                                            % of Aircraft by
                                             Number of    Appraised Value as of
Region                                       Aircraft       December 31, 2000
------                                       --------       -----------------
Developed Markets
     Europe................................      17                 50.1%
     North America.........................       9                 24.8%
Emerging Markets
     Asia..................................       6                 14.5%
     Latin America.........................       4                 10.6%
                                               ----               -------
Total......................................      36                100.0%

                                       14
<PAGE>



     The  following  table  identifies  the current  lessees of the 36 aircraft,
calculated as of December 31, 2000.

                                                            % of Aircraft by
                                             Number of    Appraised Value as of
Lessee                                       Aircraft       December 31, 2000
------                                       --------       -----------------
Air 2000 Limited...........................       1                   7.1%
Airtours International Airways Limited.....       2                   4.7%
America West Airlines, Inc.................       1                   2.7%
Linee Aeree Italiane S.p.A.................       1                   7.1%
British Airways............................       1                   2.6%
British Midland Airways PLC................       3                   7.5%
Canadian Airlines International Ltd........       3                   9.3%
China Eastern Airlines Corporation Limited.       2                   5.1%
City Bird..................................       1                   2.7%
Continental Airlines, Inc..................       2                   2.7%
Eurofly S.p.A..............................       1                   1.9%
Frontier Airlines, Inc.....................       1                   2.6%
Garuda Indonesian Airlines, pt.............       1                   2.6%
Jet Airways (India) Limited................       2                   4.3%
Philippine Airlines........................       1                   2.5%
Royal Aviation, Inc........................       1                   2.6%
Spanair S.A................................       3                   5.0%
Societe de Transport Aerien Regional.......       2                   6.4%
VARIG......................................       3                   8.0%
TWA........................................       1                   4.9%
Virgin Express S.A. N.V....................       2                   5.1%
Mexicana...................................       1                   2.6%
                                                ---              ---------
Total......................................      36                 100.0%

Total Number of Lessees: 22

     The following table lists the 36 aircraft by seat category.

                                                             % of Aircraft by
                                                Number of  Appraised Value as of
Seat Category        Aircraft Types             Aircraft     December 31, 2000
-------------        --------------             --------     -----------------
121-170              B737-300, B737-400, MD-83     20                47.1%
135-180                               A320-200      7                18.4%
171-240       A310-300, B767-200ER, B767-300ER      7                31.8%
240+                                  DC-10-30      2                 2.7%
                                                  ---            ---------
Total                                              36               100.0%

                                       15
<PAGE>



     The  following   table   identifies   the  aircraft  by  year  of  aircraft
manufacture. The weighted average age of the 36 aircraft as of December 31, 2000
is approximately 6.4 years.

                                                             % of Aircraft by
                                              Number of    Appraised Value as of
Year of Manufacture                           Aircraft       December 31, 2000
-------------------                           --------       -----------------
1980.......................................       1                   1.2%
1982.......................................       1                   1.4%
1986.......................................       1                   1.5%
1987.......................................       2                   5.4%
1988.......................................       1                   2.5%
1989.......................................       1                   1.7%
1991.......................................       6                  15.9%
1992.......................................       4                  11.2%
1993.......................................       1                   2.6%
1996.......................................       5                  12.9%
1997.......................................      10                  26.8%
1998.......................................       1                   2.7%
1999.......................................       2                  14.2%
                                               ----              ---------
Total......................................      36                 100.0%


     Further particulars of the 36 aircraft, calculated as of December 31, 2000,
are contained in the table below:

<TABLE>
<CAPTION>
                                                                                                 Date        Appraised
                                                                                                  of         Value as of
             Country in which                          Aircraft          Engine       Serial     Manu-      December 31,
Region       Aircraft is based     Lessee               Type             Type         Number    facture         2000
------       -----------------     ------               ----             ----         ------    -------         ----
<S>          <C>                 <C>                   <C>              <C>            <C>       <C>        <C>
Europe (Developed)                                                                                              ($000)
             Belgium             City Bird             B737-400         CFM56-3C1      28491     11/96      $   31,153
             France              STAR Airlines         A320-200         CFM56-5B4        737      9/97          38,180
             France              STAR Airlines         A320-200         CFM56-5B4        749      9/97          37,553
             Ireland             Virgin Express        B737-300         CFM56-3C1      28333      8/96          28,523
             Ireland             Virgin Express        B737-400         CFM56-3C1      28489     11/96          31,237
             Italy               Alitalia              B767-300ER       CF6-80C2B7F    30008      3/99          83,763
             Italy               Eurofly S.p.A.        MD-83            JT8D-219       53199      3/92          22,940
             Spain               Spanair S.A.          MD-83            JT8D-219       49398     11/86          17,390
             Spain               Spanair S.A.          MD-83            JT8D-219       49791      9/89          20,443
             Spain               Spanair S.A.          MD-83            JT8D-219       53198      4/91          21,387
             United Kingdom      Air 2000              B767-300ER       CF6-80C2B7F    29617      3/99          83,807
             United Kingdom      Airtours              A320-200         CFM56-5A3        221      9/91          27,827
             United Kingdom      Airtours              A320-200         CFM56-5A3        222     10/91          27,670
             United Kingdom      British Airways       B737-300         CFM56-3C1      28548     12/97          30,347
             United Kingdom      British Midland       B737-300         CFM56-3C1      28554     12/96          28,673
             United Kingdom      British Midland       B737-300         CFM56-3C1      28557      3/97          29,513
             United Kingdom      British Midland       B737-300         CFM56-3C1      28558      4/97          29,533
North America (Developed)
             United States       America West          B737-300         CFM56-3C1      28740      6/98          31,750

                                       16
<PAGE>

             United States       Continental           DC-10-30         CF6-50C2       46584      2/80          14,343
             United States       Continental           DC-10-30         CF6-50C2       48292      2/82          17,133
             United States       Frontier Airlines     B737-300         CFM56-3C1      28563      8/97          29,977
             United States       TWA                   B767-300ER       PW4060         25403      1/92          58,167
             Canada              Canadian Airlines     A320-200         CFM56-5A1        210      7/91          26,903
             Canada              Canadian Airlines     A320-200         CFM56-5A1        231      9/91          27,487
             Canada              Canadian Airlines     B767-300ER       CF6-80C2B6F    25221      7/91          55,613
             Canada              Royal Aviation        A310-300         CF6-80C2A2       448      2/88          30,033
Asia (Emerging)
             China               China Eastern         B737-300         CFM56-3C1      28561      6/97          29,917
             China               China Eastern         B737-300         CFM56-3C1      28562      7/97          29,987
             India               Jet Airways           B737-400         CFM56-3C1      25663     11/92          25,210
             India               Jet Airways           B737-400         CFM56-3C1      25664     11/92          25,067
             Indonesia           Garuda                B737-400         CFM56-3C1      28490     11/96          30,997
             Philippines         Philippine            B737-300         CFM56-3C1      28559      5/97          29,683

Latin America (Emerging)
             Brazil              VARIG                 B737-300         CFM56-3C1      28564     11/97          30,364
             Brazil              VARIG                 B767-200ER       CF6-80C2B      23805      7/87          32,253
             Brazil              VARIG                 B767-200ER       CF6-80C2B      23806      7/87          31,790
             Mexico              Mexicana              A320-200         V2500-A1         373      1/93          30,790
                                                                                                            ----------
Total                                                                                                       $1,177,403
                                                                                                            ==========
</TABLE>

Appraisal of Aircraft.

     Aircraft  Finance  has agreed to deliver  to Bankers  Trust  Company as the
security  trustee,  commencing in 2000,  appraisals of the base value of each of
the aircraft at least once each year by May 31. The appraisals must come from at
least three independent appraisers that are members of the International Society
of Transport Aircraft Trading or any similar organization and be dated within 30
days prior to their delivery to the trustee.

     Three appraisers,  Aircraft Information Services, Inc., BK Associates, Inc.
and Morten Beyer & Agnew, Inc.,  provided appraisals of the value of each of the
aircraft as of December 31, 2000.  The  appraisals  assume,  among other things,
that the  aircraft  are utilized  normally in an open,  unrestricted  and stable
market,  adjusted  where  necessary  to  account  for the  reported  maintenance
standard of the aircraft.  Values  calculated under these  assumptions are "base
values." The current  appraised  value of each  aircraft is determined by taking
the average of the base values contained in the three appraisals. The appraisals
were not based on a physical inspection of the aircraft.

     Based on the appraisals,  the aggregate of the current appraised values for
the   aircraft  as  of  December   31,  2000  is   $1,177,403,333   compared  to
$1,256,133,667   and   $1,322,643,333   as  of  December   31,  1999  and  1998,
respectively.  These base  values  should not be relied upon as a measure of the
market or realizable value of any initial aircraft. In addition, the base values
of the  aircraft  are  expected  to  decline  over  time due to the aging of the
aircraft,  increasing  maintenance  expenses and similar factors. The appraisals
listed above were as of December 31, 2000,  and the base values of the aircraft,
if determined as of any date subsequent to December 31, 2000,  would be expected
to be lower than the base values in the appraisals.

                                       17
<PAGE>


     The  appraised  base values  obtained  and to be obtained  assume an "open,
unrestricted  stable market  environment with a reasonable balance of supply and
demand"  and  other  factors  common  for like  appraisals.  At any point in the
aircraft leasing cycle, however, there will be imbalances of aircraft supply and
demand and there may be particularly pronounced imbalances for specific aircraft
types.  Consequently,  although  some initial  aircraft  may have market  values
approximating or exceeding the appraised values given them, others,  such as the
older aircraft,  may have market values below,  and in some cases  significantly
below,  those appraised base values. At a cyclical low, the market value of most
aircraft types is likely to be less than, and in some cases  significantly  less
than,  the  appraised  base  values.  Accordingly,  you should  not place  undue
reliance on the indicated  appraised values as an accurate  depiction of current
market or realizable values at any one point in time.

The Leases.

     As of  December  31,  2000,  there  were 22  lessees  under  leases for the
aircraft in 14 different countries. Aircraft Finance recognized $100 million and
$145 million of rental and other  income from  operating  leases,  respectively.
This was comprised of $14 million in the 1999 Period and $22 million in the 2000
Period from lessees based in the United States of America and $86 million in the
1999 Period and $123 million in the 2000 Period from lessees  based  outside the
United States of America.  During the year ended  December 31, 2000,  15% of the
rental and other income was derived from lessees  based in the United  States of
America,  and 85% from  lessees  based  outside  the United  States of  America,
including  21% from the United  Kingdom,  10% from Canada,  9% from Italy and 7%
from Brazil. The following description relates to the leases for the aircraft in
effect on December 31, 2000.  Any leases of  additional  aircraft and any future
leases  entered  into for the  re-lease  of any  aircraft  may  differ  from the
description provided below.

     As a general matter,  weakly capitalized airlines are more likely than well
capitalized  airlines  to seek  operating  leases.  It should be  expected  that
varying  numbers of lessees  at any point in time will be  experiencing  payment
difficulties.

     The servicer has advised Aircraft Finance that in the servicer's experience
some lessees of aircraft  similar to the aircraft owned by Aircraft  Finance and
its affiliates  fail to make timely lease,  maintenance  and other payments from
time to time over the course of their leases.  In most instances,  late payments
are recovered, together with default interest or other similar payments required
by the leases.  In some instances,  the financial  difficulties of a portfolio's
lessees may result in a formal or  informal  restructuring.  Restructurings  may
involve the voluntary  termination  of a lease prior to its  expiration  and the
arrangement  of  subleases  from the lessee to  another  aircraft  operator.  In
addition,  restructurings  may involve  reduced rental  payments for a specified
period, which may be several months.

Management, Lease Terms.

     All  leases of the  aircraft  will be  managed  by the  servicer  under the
servicing  agreement.  All of the leases for the initial  aircraft are operating
leases. Under those leases, the lessees agreed to lease the aircraft for a fixed
term,  although in some cases the lessees  have  purchase  options,  termination
rights and extension  rights.  Although most of the lease  documentation for the
initial aircraft is fairly standardized in many respects, significant variations
do exist as a result of lessee negotiation.

                                       18
<PAGE>


Lease Payments and Security.

     Each  lease for an initial  aircraft  requires  the lessee to pay  periodic
rentals  during the lease term. A number of the leases require the lessee to pay
periodic amounts as maintenance reserves.

     The lessees are required to make payments  without  withholding  payment on
account  of any  amounts  the lessor may owe the lessee or any claims the lessee
may have against the lessor for any breach of contract.  Each lease  includes an
obligation  of the  lessee to  gross-up  payments  under the lease  where  lease
payments are subject to  withholdings  and other taxes,  although  sometimes the
gross-up  amount will be limited to the amount  that would have been  payable if
such lease had never been  transferred to Aircraft  Finance.  The leases for the
initial  aircraft  also require the lessee to indemnify  the lessor for some tax
liabilities  including,  in some leases,  value added tax and stamp duties,  but
generally  excluding  income tax or its  equivalent  imposed on the lessor.  The
lessees must also pay default interest on any overdue amounts. In the lease with
British  Airways,  the lessee may exercise  remedies if the lessor  breaches its
covenant not to interfere with the lessee's use of the aircraft.

     Under the leases for the initial  aircraft,  the lessee must pay  operating
expenses  accrued or payable during the term of the lease,  which would normally
include  maintenance,  operating,  overhaul,  airport  and  navigation  charges,
certain taxes, licenses, consents and approvals,  aircraft registration and hull
"all risks" and public liability insurance premiums.  The lessees are obliged to
remove liens on the aircraft other than liens permitted under the leases.

     Under all but six of the leases for the  initial  aircraft,  the lessee has
provided security  deposits to secure its obligations.  In eleven of the leases,
the lessee has provided only cash security  deposits.  In ten of the leases, the
lessee has provided only a letter of credit.  In the remaining nine leases,  the
lessee has provided both letters of credit and a cash security deposit.

Rentals.

     Most of the rental  payments  are payable on a fixed rate basis and are not
adjustable by reference to market  interest rate changes.  Rentals under most of
the leases for the initial aircraft are payable monthly in advance.

Operation of the Original Aircraft.

     The leases  require the lessees to operate the aircraft in compliance  with
all applicable laws and regulations.  The initial aircraft generally must remain
in the  possession  of the lessees,  and any  subleases of the aircraft  must be
approved  by the  lessor.  Under some of the  leases,  the lessee may enter into
charter or other  arrangements for the aircraft if the lessee does not part with
operational control of the aircraft.  Generally,  the lessees are not allowed to
re-register the aircraft without the lessor's  permission,  except in connection
with a permitted sublease if operating in specified countries.

     All of the leases for the initial  aircraft permit the lessees to remove or
replace the engines and in some cases other  equipment or components.  Sometimes
lessees  are  allowed  to enter  into  pooling  arrangements  for the  temporary
borrowing of equipment, in some cases without the lessor's consent. Under all of
the leases, the lessees may deliver the aircraft, engines and other equipment or
components to their  manufacturer for testing or similar  purposes,  or to other
parties for  service,  maintenance,  repair or other work  required or permitted
under the lease.  The  lessor's  ability to  repossess  the aircraft or engines,

                                       19
<PAGE>

equipment or components  from any sublessee,  transferee,  manufacturer or other
person may be restricted by liens or similar rights and by applicable bankruptcy
and similar laws.

Maintenance and Maintenance Reserves.

     The leases for the aircraft specify maintenance  standards and the required
condition of the aircraft upon redelivery to the lessor. In addition, under some
of the  leases,  depending  on the  condition  of the  aircraft,  including  the
airframe,  engines, the auxiliary power unit or landing gear at redelivery,  the
lessee may have to make  adjustment  payments to the lessor.  During the term of
each lease, the lessee must ensure that the aircraft is maintained in accordance
with an agreed  maintenance  program designed to provide that the aircraft meets
applicable airworthiness and other regulatory requirements. Under the leases for
the initial aircraft,  maintenance is generally  performed by the lessee or, for
some of the regional  lessees,  by a designated  airline or other air  authority
approved  maintenance  provider.  Under  most  of the  leases  for  the  initial
aircraft,  the lessee must provide monthly maintenance  reserves.  In some cases
where the lessee has paid maintenance  reserves,  those payments will be used to
reimburse  the lessee for  maintenance  charges,  including  major  airframe and
engine overhauls.

     Some of the leases for the  initial  aircraft  do not  require  maintenance
reserves  to be paid.  In those  cases the lessor must rely on the credit of the
lessee or any credit  support  the  lessee  provides  to ensure  that the lessee
returns the aircraft in the  condition  required by the lease upon  termination,
makes any  payments  required  based on the  aircraft's  return  condition  upon
termination of the lease and performs scheduled maintenance throughout the lease
term.

     Some  of the  leases  for  the  initial  aircraft  require  the  lessor  to
contribute  to the  cost  of the  first  maintenance  event  in  respect  to the
airframe,   engines,   auxiliary   power  unit  or  landing  gear.  Such  lessor
contributions  are  generally  determined on a pro-rated  basis,  based upon the
condition of these components at delivery to the lessee.

     The leases for the initial  aircraft require the lessees to comply with the
airworthiness   directives  of  the  relevant  aviation   authorities  and  with
manufacturers'  service  bulletins.  The  lessees  primarily  bear  the  cost of
compliance. Some of the leases, however, require the lessor to contribute to the
cost of compliance  with  selected  airworthiness  directives or  manufacturers'
service bulletins if compliance costs are above a specified threshold.

Lessees' Options.

     The leases or side  agreements  between the lessor and the lessee for three
of the aircraft, representing 11.8% of the aggregate appraised value at December
31,  2000  of  the  aircraft,  grant  purchase  options  to  the  lessee  or its
affiliates.  None of the purchase  options were  exercisable  as of December 31,
2000.  The latest date on which a purchase  option may be  exercised is December
31, 2003 for a purchase on April 30, 2005, or if all lease extension options are
exercised,  April 30,  2010.  If a purchase  option is  exercised,  the proceeds
realized from the exercise may not, in some  circumstances,  equal the principal
of the Notes allocable to the relevant aircraft.

     Seven of the  leases  for the 36  aircraft  give the  lessee  the option to
extend the term of the lease.  The rent  payable  during  the  extension  period
varies from lease to lease.  Three of the leases  allow the lessee to  terminate
its lease prior to the scheduled  expiration  date,  though sometimes the lessee
must pay a fee or fulfill other requirements.

                                       20
<PAGE>


Indemnification and Insurance of the Aircraft.

     Insurance  Requirements.  The leases for the initial  aircraft  require the
lessees to bear  responsibility and carry insurance for any liabilities  arising
out of the operation of the aircraft. These include any liabilities for death or
injury to persons and damage to  property  that would  ordinarily  attach to the
operator of the  aircraft,  subject to customary  exclusions.  In addition,  the
lessees  must carry  other  types of  insurance  that are  customary  in the air
transportation  industry.  These  include  aircraft  hull all risks and hull war
risks insurance at a value stipulated in the lease and aircraft spares insurance
on a replacement cost basis, in each case subject to customary deductibles.  The
servicer must monitor the lessees'  compliance with the insurance  provisions of
the leases.

     In  addition,  Aircraft  Finance  also  has in  place  its  own  contingent
liability  coverage.  That  coverage  covers both a liability  that  exceeds the
coverage  provided by a lessee's policy and instances in which a lessee's policy
lapses  for  any  reason.  Aircraft  Finance  and its  subsidiaries'  contingent
third-party liability insurance covers all of the aircraft, and their contingent
hull and hull war risks insurance covers some of the aircraft. The amount of the
contingent  liability  policies may or may not exceed the amount  required under
the relevant lease. The amount of third-party  contingent  liability  compliance
insurance is subject to limitations imposed by the air transportation  insurance
industry.

     If any of the existing insurance policies are canceled or terminated and if
an aircraft is  re-leased,  the servicer may from time to time engage  insurance
experts at Aircraft  Finance's  expense to advise and recommend the  appropriate
amount of insurance coverage Aircraft Finance should procure.

     Liability  Insurance.  The leases for the initial  aircraft  require  third
party  liability  insurance  for a combined  single limit for bodily  injury and
property damage in minimum amounts ranging between $500 million and $750 million
for each  aircraft.  In general,  liability  coverage on each aircraft  includes
third party legal liability, passenger legal liability, baggage legal liability,
cargo  legal  liability,  mail  and  aviation  general  third  party  (including
products) legal liability.

     In some  jurisdictions  Aircraft  Finance  may be  liable,  as  owner of an
aircraft,  for  obligations  that may be insured  against by the lessees even if
Aircraft Finance is not responsible for the loss that results in the obligation.
In addition,  claims may be made against  Aircraft  Finance or its subsidiary on
the  basis  of  alleged  responsibility  for a loss,  even if such  claim is not
ultimately sustained.

     The losses for which  coverage is provided  include  both  operating  costs
relating to the actual  operation  of the  aircraft as well as losses to persons
and property  resulting from the operation of the aircraft.  The latter types of
losses are generally covered by the lessees' liability insurance.

     Aircraft Property Insurance.  In addition to hull risk, hull war and allied
peril risk and  aircraft  spares  insurance  coverage  obtained by the  lessees,
Aircraft  Finance will also purchase  "total loss only" coverage with respect to
some  initial  aircraft.  Aircraft  Finance is  required  to  maintain  aircraft
property  insurance on its aircraft in an amount equal to the greatest of a) the
note target price,  b) the  appraised  value for such aircraft or c) 110% of the
net book  value of such  aircraft.  In some  cases,  the  lessor is  allowed  to
increase  the insured  value above the  stipulated  loss value  consistent  with
industry  practice.  In those cases the lessee is responsible  for any increased
premium that results.  Permitted  deductibles range from $100,000 to $1,000,000;
the deductibles, however, apply only in the case of a partial loss.

     The leases for the initial aircraft include provisions defining an event of
loss or a casualty  occurrence so that upon total loss of the airframe,  with or
without  loss of the  engines,  an agreed  value is payable by the lessee.  This

                                       21
<PAGE>

payment is generally  funded with  insurance  proceeds.  The air  transportation
insurance industry practice, however, is to treat only a loss with likely repair
costs of greater than 75% of the insured  value of the  aircraft,  including the
engines,  as a total loss. Where insurance proceeds exceed the cost of repair or
the amount  required  to be insured  under the lease,  most  leases  require the
lessor to pay to the lessee the balance of the insurance proceeds received under
the hull all risks or war risks policy after deduction of all amounts payable by
the lessee to the lessor under the lease.

     All  insurance  policies  currently  in place  contain a breach of warranty
endorsement so that the additional insureds continue to be protected even if the
lessee violates one or more of the provisions of the insurance policies. In many
cases,  these  endorsements also provide that this protection will only apply if
the additional insured has not caused,  contributed to or knowingly condoned the
breach.

     An  insurance  advisor has  confirmed to the  servicer  that the  insurance
currently  detailed  in the  current  insurance  certificates  as to the initial
aircraft meets customary practices.

     Generally,  the  leases  for the  initial  aircraft  require  the lessee to
maintain as part of its hull war and allied perils  insurance  coverage for loss
or damage  resulting  from a  governmental  confiscation  or  requisition of the
applicable aircraft. In some countries,  however, such as France and China, that
kind of insurance may not be obtainable by the lessee.


Item 2.       Properties

     Aircraft  Finance  has no  ownership  or  leasehold  interest  in any  real
property.  For a description of Aircraft  Finance's  interest in other property,
including its aircraft, see "Item 1. Business."


Item 3.       Legal Proceedings

     None.


Item 4.       Submission of Matters to a Vote of Security Holders

     None.

                                       22
<PAGE>

                                     PART II

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

a)   Market Information.

     As of the date of this Annual  Report on Form 10-K (Form  10-K),  no equity
securities of Aircraft  Finance have been registered  with, or are listed on any
national exchange or traded in any established market.

b)   Holders.

     There were ten beneficial interest holders of Aircraft Finance's beneficial
interest certificates at December 31, 2000.

c)   Dividends.

     As of the  date of this  Form  10-K,  no  distributions  to the  beneficial
interest holders have been paid or declared by Aircraft Finance. Under the terms
of the indenture,  Aircraft  Finance is restricted from making  distributions to
the beneficial  interest  holders  until,  among other things,  all  outstanding
principal and interest  balances due on the outstanding  Notes have been paid in
full.

Recent Sales of Unregistered Securities.

     On May 5, 1999,  Aircraft  Finance  issued $1,209  million of  asset-backed
notes (the  Initial  Notes) to  Qualified  Institutional  Buyers as such term is
defined  in Rule 144A  under the  Securities  Act of 1933,  as  amended,  and to
non-U.S.  persons  in  offshore  transactions  in  accordance  with  Regulations
thereunder.  Lehman  Brothers Inc.,  Credit Suisse First Boston  Corporation and
Merrill Lynch, Pierce,  Fenner & Smith Incorporated acted as initial purchasers.
As of that date,  the Initial  Notes  consisted  of $512.5  million of Class A-1
Notes,  $400 million of Class A-2 Notes,  $126.5 million of Class B Notes,  $106
million of Class C Notes and $64 million of Class D Notes.  On January 20, 2000,
Aircraft  Finance  completed an exchange offer whereby  Aircraft  Finance issued
four classes of new notes,  also  designated  Class A-1,  Class A-2, Class B and
Class C (the Exchange Notes), in exchange for the four corresponding  classes of
the Initial Notes. The terms of the Exchange Notes are identical in all material
respects to the Initial  Notes,  except that the Exchange  Notes are  registered
under  the  Securities  Act of 1933,  as  amended.  The  Class D Notes  were not
exchanged  and remain  unregistered.  $3 million of the Class A-2 Initial  Notes
were not tendered in the exchange offer and remain outstanding.

     The Exchange  Notes were  registered  on Form S-4 (file  number  333-82153)
which became  effective on December 20, 1999.  The exchange  offer  commenced on
December  20, 1999 and ended on January 20,  2000.  All Initial  Notes that were
tendered were  exchanged and global notes  representing  the Exchange Notes were
deposited with the trustee and book-entry depository on January 25, 2000.

     The proceeds from the sale of the beneficial interest and the Initial Notes
of $39.1  million and $1,209  million,  respectively,  were used to purchase the
initial  aircraft for $1,196.1  million and to fund the initial cash reserves of
$52 million.  Issuance  related costs  incurred in connection  with the offering
were paid by the seller of the aircraft.

                                       23
<PAGE>



Item 6.       Selected Financial Data

     The selected  financial data in the following table have been derived from,
and should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Form 10-K, of Aircraft Finance.

                                                           December 31,
                                                      2000             1999
                                                      ----             ----
                                                  (in thousands)  (in thousands)

Balance Sheet Data:
   Aircraft, net                                    $1,129,322      $1,170,564
   Total assets                                      1,227,224       1,266,974
   Notes payable                                     1,126,843       1,176,195
   Total liabilities                                 1,174,266       1,219,430
   Total beneficial interest holders' equity            52,958          47,544

Statement of Income Data (1):
   Rental and other income from operating leases       145,117         100,331
   Interest expense                                     78,100          51,482
   Depreciation expense                                 42,784          28,488
   Net income                                            5,414           8,457

(1)  Income  Statement data for 1999 is for the period from inception (April 13,
1999) through December 31, 1999.


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

     On May 5, 1999,  Aircraft  Finance  issued  $1,209  million of Asset Backed
Notes (the "Initial Notes").  The Notes were issued in five classes;  Class A-1,
Class  A-2,  Class B,  Class C and  Class  D.  The  Initial  Notes  were  issued
simultaneously with the execution of an agreement for the sale of the beneficial
interest of Aircraft  Finance  for $39  million and an  agreement  to acquire 36
commercial  jet  aircraft  for $1,196  million.  On January 20,  2000,  Aircraft
Finance completed an exchange offer whereby Aircraft Finance issued four classes
of new notes (the  "Exchange  Notes")  in  exchange  for the four  corresponding
classes of the Initial  Notes.  The terms of the Exchange Notes are identical in
all material  respects to the Initial Notes,  except that the Exchange Notes are
registered  under the  Securities  Act of 1933,  as  amended.  The Class D Notes
remain unchanged. $3 million of the Class A-2 Initial Notes were not tendered in
the exchange offer and remain outstanding.

     Aircraft  Finance is a special purpose entity,  which owns aircraft subject
to operating leases.  Aircraft  Finance's  business consists of aircraft leasing
activities.  Aircraft  Finance may also  engage in  acquisitions  of  additional
aircraft and sales of aircraft.  Any acquisitions of additional aircraft and the
related  issuance of additional  notes will require  confirmation  by the rating
agencies  that they will not lower,  qualify or  withdraw  their  ratings on the
outstanding  Notes  as  a  result.  Aircraft  Finance's  cash  flows  from  such
activities will be used to service the interest and principal on the outstanding
Notes and to make  distribution  of  remaining  amounts  to the  holders  of the
beneficial  interest  certificates,  after the payment of  expenses  incurred by
Aircraft Finance.

     Aircraft  Finance's  ability to generate  sufficient cash from its aircraft
assets to service the Notes will  depend  primarily  on the rental  rates it can
achieve on leases, the lessees' ability to perform according to the terms of the

                                       24
<PAGE>

leases and the prices it can achieve on any aircraft sales.  Aircraft  Finance's
ability to service the Notes will also depend on the level of Aircraft Finance's
operating  expenses,  including  maintenance  obligations  that are  expected to
increase as the aircraft  age, and any  unforseen  contingent  liabilities.  The
indenture  governing the Notes  requires that Aircraft  Finance  maintain a cash
reserve  balance on deposit in the  Collections  Account  and  permits  Aircraft
Finance  to  establish  a  credit  facility,  in order to  provide  a source  of
liquidity for Aircraft Finance's obligations.

     Any  statements  contained  herein that are not historical  facts,  or that
might be considered an opinion or projection,  whether expressed or implied, are
meant as, and should be considered,  forward-looking  statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on assumptions  and opinions  concerning a variety of known
and  unknown  risks.  If  any  assumptions  or  opinions  prove  incorrect,  any
forward-looking  statements  made  on  that  basis  may  also  prove  materially
incorrect.  Aircraft Finance assumes no obligation to update any forward-looking
statements to reflect  actual  results or changes in the factors  affecting such
forward-looking statements.

Recent Developments

The Aircraft and Lessees

     Under the terms of the  indenture,  Aircraft  Finance is required to obtain
annual appraisals of its aircraft.  In February 2001,  Aircraft Finance received
appraisals  of the adjusted  base values of the aircraft as of December 31, 2000
from three independent  appraisers that are members of the International Society
of Transport Aircraft Trading.  The average of the three appraisals was $1,177.4
million.  Such  average is below the assumed  portfolio  values set forth in the
indenture  relating to the notes for certain  months in 2001.  This reduction in
the  appraised  value  of  the  portfolio  resulted  in an  increased  scheduled
principal payment to the Class A Notes in March 2001.

     In February 2000, a B737-300 aircraft formerly leased to a Dutch lessee was
delivered for lease to a lessee based in the  Philippines for a lease term of 57
months.  The aircraft with respect to this lessee represents  approximately 2.5%
of the aggregate appraised value of all aircraft owned at December 31, 2000.

     In March 2000, Aircraft Finance entered into a restructuring agreement with
Canadian  Airlines,  a  lessee  of  two  Airbus  A320-200  aircraft.  Under  the
restructuring  agreement,  Canadian  Airlines,  a subsidiary of Air Canada,  was
replaced  by Air Canada  Capital LTD as the new  lessee.  Air Canada  guarantees
these leases. Pursuant to this restructuring, the cash security deposits of $1.5
million held by Aircraft Finance in connection with these aircraft were returned
to Canadian  Airlines.  As of December  31,  2000,  all current rent amounts due
under these leases had been paid.  The two aircraft  with respect to this lessee
represent  approximately  4.6% of the aggregate  appraised value at December 31,
2000.

     In April 2000,  Aircraft  Finance  entered into an agreement  for one MD-83
aircraft,  currently leased to an Italian lessee, to extend the lease from April
2000 to November  2001.  The  aircraft  with  respect to this lessee  represents
approximately 2.0% of the aggregate appraised value at December 31, 2000.

     In April 2000, a B737-400  aircraft formerly leased to a Turkish lessee was
returned early and re-delivered to a new lessee (based in Belgium) in April 2000
for a lease term of 36 months.  This aircraft  represents  approximately 2.7% of
the aggregate appraised value at December 31, 2000.

                                       25
<PAGE>


     In May  2000,  a  B737-300  aircraft  formerly  leased to  Transbrasil  was
returned  early.  In July 2000, this aircraft was delivered to VARIG for a lease
term  of 60  months.  The  aircraft  with  respect  to  this  lessee  represents
approximately 2.6% of the aggregate appraised value at December 31, 2000.

     In June 2000, a B767-300ER aircraft formerly leased to a Swedish lessee was
delivered  for lease to a Canadian  lessee  for a lease  term of 36 months.  The
aircraft  with  respect  to this  lessee  represents  approximately  4.7% of the
aggregate appraised value at December 31, 2000.

     In July  2000,  a second  B737-400  aircraft  was  returned  from a Turkish
lessee.  On December 5, 2000 this aircraft was delivered to an Indonesian lessee
for a lease term of 60 months.  This aircraft  represents  approximately 2.6% of
the aggregate appraised value at December 31, 2000.

     In September 2000, an A320-200  aircraft  formerly leased by a lessee based
in the United  States was returned  early.  In October  2000,  this aircraft was
delivered  to a lessee  based in  Mexico  for a lease  term of 60  months.  This
aircraft  represents  approximately  2.6% of the  aggregate  appraised  value at
December 31, 2000.

     On November 29, 2000, Phoenix American  Incorporated (PAI), an affiliate of
Resource/Phoenix  Incorporated  (RP),  agreed to buy  substantially  all of RP's
assets. RP was the initial  administrative  agent for Aircraft Finance.  Phoenix
American  Financial  Services Inc. (PAFS),  an affiliate of PAI, will act as the
administrative agent of Aircraft Finance in place of RP.

     In January 2001, a B737-300  aircraft  formerly leased by a lessee based in
Ireland was returned early. Aircraft Finance has entered into a letter of intent
with a lessee  based in the United  Kingdom  for a short term lease of 6 months.
The  projected  delivery  date of the aircraft is March 31, 2001.  This aircraft
represents  approximately 2.4% of the aggregate  appraised value at December 31,
2000.

     On January 10, 2001, Trans World Airlines,  Inc.  ("TWA"),  one of Aircraft
Finance's  lessees,  filed for Chapter 11  bankruptcy  protection  in the United
States  Bankruptcy Court for the District of Delaware (the "Bankruptcy  Court").
TWA leases one aircraft  from Aircraft  Finance,  which  represents  4.9% of the
aircraft by aggregate  appraised  value as of December  31,  2000.  On March 23,
2001, TWA paid rents due as of March 22, 2001.  There can be no assurances  that
TWA will  continue  to make the rental  and other  payments  required  under the
leases with Aircraft Finance.  TWA's failure to make such payments would have an
adverse impact on Aircraft  Finance's revenues and cash flows. By order of Judge
Peter J. Walsh dated March 12, 2001, the Bankruptcy  Court  authorized  American
Airlines,  Inc.'s  ("American")  bid,  submitted on February  28, 2001,  to sell
substantially  all of TWA's assets to American.  As of March 30, 2001,  Aircraft
Finance is in negotiations with American with respect to the TWA lease. However,
there are no assurances that such  negotiations  will not reduce lease payments,
or that the related aircraft will not be returned to Aircraft Finance.



Other Developments

     On January 20, 2000,  Aircraft Finance  completed an exchange offer whereby
Aircraft  Finance  issued  four  classes  of  new  Notes,  the  Exchange  Notes,
designated  Class A-1,  A-2,  B and C, in  exchange  for the four  corresponding
classes of the Initial  Notes.  The terms of the Exchange Notes are identical in
all material  respects to the Initial Notes,  except that the Exchange Notes are
registered under the Securities Act of 1933, as amended.  The Class D Notes were
not  exchanged and remain  unchanged.  $3 million of the Class A-2 Initial Notes
were not tendered in the exchange offer and remain outstanding.

                                       26
<PAGE>


     As previously discussed,  Aircraft Finance has entered into agreements with
two  lessees  for the two  aircraft  formerly  leased to Turkish  and  Brazilian
lessees. As a result of these agreements,  the concentration of the five largest
lessees is 39.04% of the most recent  appraised  value of the portfolio.  One of
the concentration  limits in the indenture requires the five largest lessees not
to exceed 35% of the most recent  appraised  value of the  portfolio.  Under the
indenture,  Aircraft  Finance is not  permitted to enter into a lease  agreement
that would exceed certain  concentration limits unless it receives rating agency
confirmation that the rating agencies will not downgrade,  qualify,  or withdraw
their  ratings  on the Notes.  Aircraft  Finance  received  such  rating  agency
confirmations from the rating agencies during June, 2000.

         On June 21, 2000,  Wayne  Lippman  tendered his  resignation  as equity
trustee of Aircraft  Finance  effective  upon the  appointment of a replacement.
Donald G. Butler has been appointed by the holders of the  beneficial  interests
in Aircraft Finance as the new equity trustee of Aircraft Finance.

         During the year ended  December  31,  2000,  there were four lessees on
non-accrual  status.  With respect to these  lessees  three  aircraft  have been
returned  early,  as discussed  above,  and the other is still under lease.  The
total amount of rent and  maintenance  reserve  payments  outstanding  under the
leases for the five aircraft from these four lessees  amounted to  approximately
$6.5  million as of December 31, 2000.  One of these  lessees,  based in Brazil,
owed approximately $1.0 million at December 31, 2000 for outstanding maintenance
reserve payments, after the application of a $1.0 million cash security deposit.
The second lessee based in the United States owed  approximately $1.3 million at
December  31,  2000 for  outstanding  maintenance  reserve  payments  after  the
application  of $0.8 million of cash  security  deposits and a letter of credit.
The third lessee,  based in Turkey,  owed approximately $3.6 million at December
31,  2000 for  outstanding  rent and  maintenance  reserve  payments  after  the
application of $1.1 million of cash security deposits and letters of credit. The
fourth lessee,  also based in the United States, owed approximately $0.6 million
at December 31, 2000 for outstanding rent.

     As of December 31, 2000, Aircraft Finance has repaid aggregate principal on
the Notes of $82.2  million,  as compared to $70.2  million  anticipated  in the
Offering  Memorandum  dated  April 21,  1999.  For a more  detailed  analysis of
Aircraft  Finance's  performance  compared to the  assumptions  in the  Offering
Memorandum,  see Exhibit 99.4. Aircraft Finance's ability to generate sufficient
cash from its  aircraft  assets to service  the  outstanding  Notes will  depend
primarily on the rental rates it can achieve on leases,  the lessees' ability to
perform  according  to the terms of the leases and the prices it can  achieve on
any aircraft sales.  Aircraft Finance's ability to service the outstanding Notes
will  also  depend  on the  level  of  Aircraft  Finance's  operating  expenses,
including maintenance  obligations that are expected to increase as the aircraft
age, and any  unforeseen  contingent  liabilities.  The indenture  governing the
Notes requires that Aircraft  Finance maintain a cash reserve balance on deposit
in a  collections  account and permits  Aircraft  Finance to  establish a credit
facility,  in order to  provide a source of  liquidity  for  Aircraft  Finance's
obligations.

Results of Operations

     Results of operations from the period from April 13, 1999  ("Inception") to
December  31, 1999  reflect  results  from the  commencement  of  operations  to
December 31, 1999. As a result,  historical results of operations for the period
from  Inception  to  December  31,  1999 are not  comparable  to the year  ended
December 31, 2000.

     Aircraft  Finance  reported net income of $5.4 million on total revenues of
$150.7 million for the year ended December 31, 2000 ("2000 Period"), compared to
net income of $8.5 million on total  revenues of $103 million  during the period

                                       27
<PAGE>

from inception (April 13, 1999) to December 31, 1999 ("1999  Period").  Aircraft
Finance's  revenues  consisted of rental and other income from operating  leases
and  interest  income  earned on cash  balances.  Net income  decreased  by $3.1
million  from the 1999  Period to the 2000  Period  due mainly to  increases  in
interest expense, depreciation expense, and operating expenses.

     Rental and other income from aircraft  subject to operating  leases for the
2000 Period was $145.1  million  compared to $100.3 million for the 1999 Period.
The increase in rental income is primarily due to twelve months of operation for
the 2000 Period compared to approximately  eight months for the 1999 Period. The
decrease in rental income on an annualized basis was impacted by four lessees on
non-accrual  status,  off  lease  time for six  aircraft  and lower  rentals  on
re-marketed aircraft.

     Interest  income during the 2000 Period was $5.6 million,  compared to $2.7
million during the 1999 Period.  Interest income consists  primarily of interest
earned on Aircraft  Finance's  cash  balances,  which are invested in short-term
highly liquid investments as permitted by the indenture.  The amount of interest
income  earned  varies  based  upon  the  current  interest  rates  paid on such
investments and the level of cash balances held by Aircraft Finance. In addition
to higher  average cash  balances  during 2000,  interest  rates earned on those
balances were also higher during the 2000 Period.

     Interest  expense,  net of interest rate swap income of $7.1  million,  was
$78.1  million for the 2000 Period  compared to $51.5  million,  net of interest
rate swap  expenditures  of $1.2  million,  for the 1999  Period.  The  weighted
average  interest rate on the Notes during the 2000 Period was 6.68% compared to
6.47% during the 1999 Period.  The outstanding  balance of the Notes at December
31, 2000 was $1,126.8 million compared to $1,176.2 million at December 31, 1999.
Interest  expense varies based on the actual interest rates on the floating rate
Notes,  the interest rate swap costs and the outstanding  principal  balances of
the Notes.

     Depreciation  expense  during the 1999 Period and the 2000 Period was $28.5
million and $42.8 million, respectively. Depreciation expense in the 2000 Period
was  higher  than that in the 1999  Period  due to the fact that  there  were 12
months of operations in the 2000 Period and approximately 8 months of operations
in the 1999 Period.  On an annualized  basis,  depreciation  expense in the 2000
Period approximated that of the 1999 Period.

     Operating  expense  during the 1999  Period  and the 2000  Period was $10.6
million and $18.5 million,  respectively. The increase in operating expenses was
primarily  the result of direct  lease  expenses  incurred  in  connection  with
several  aircraft  being  re-leased  or  repossessed  during  the  2000  Period.
Operating expense primarily consists of aircraft  maintenance  expense and lease
related costs. Most of Aircraft  Finance's lease contracts require the lessee to
bear the obligation for maintenance costs on airframes and engines,  and require
the lessee to make  certain  payments to the lessor,  calculated  on measures of
usage to cover the expected costs of scheduled  maintenance  charges,  including
major airframe and engine overhauls.  Under the provisions for many leases,  for
certain  airframe  and  engine  overhauls,  the lessee is  reimbursed  for costs
incurred up to, but not exceeding,  related payments made by the lessee,  to the
lessor  based on those  measures of usage.  Reserves are  maintained  at amounts
considered adequate to cover those estimated expenditures for maintenance costs.

     Administrative  and other  expenses  during  the 1999  Period  and the 2000
Period were $4.0 million and $6.0 million, respectively.  These expenses consist
primarily  of  fees  paid  to  the  service  providers  and  other  general  and
administrative  costs.  The most significant of these fees was the servicer fee,
which  amounted to $3.1  million in the 1999 Period and $4.4 million in the 2000
Period.  A  significant  portion of the fees paid to the Servicer  correspond to
rental payments due and received.  These fees are based upon a fixed  percentage
of rental  receipts,  and will  vary with  rental  income of  Aircraft  Finance.
Annualized,  the  increase in  administrative  expenses  was mainly due to legal
costs  incurred  in  the  2000  Period  in  connection  with  several   aircraft
repossessions as well as the formation of a French subsidiary.

                                       28
<PAGE>



Liquidity

     Aircraft  Finance  held  cash and cash  equivalents  of $76.7  million  and
restricted cash of $17.8 million at December 31, 2000, compared to cash and cash
equivalents  of $72.7 million and  restricted  cash of $19.5 million at December
31,  1999.  The  liquidity  reserve  amount,  which is included in cash and cash
equivalents,  was $52 million at December 31, 2000 and  December  31, 1999.  The
liquidity  reserve  amount is required  under the terms of the  indenture and is
intended to serve as a source of liquidity  for Aircraft  Finance's  maintenance
obligations and other contingent costs.

     Aircraft  Finance has the ability to enter into certain credit  facilities,
however, as of December 31, 2000, had not done so.


Cash Flows from Operating Activities

     Aircraft  Finance's  cash flows from  operating  activities  depend on many
factors  including,  but not limited to, the performance of lessees and Aircraft
Finance's  ability to  re-lease  aircraft,  the average  cost of the Notes,  the
efficiency of its interest rate hedging  policies,  the ability of interest rate
swap providers to perform under the terms of the swap agreements and the ability
of Aircraft Finance to refinance certain  subclasses of Notes that have not been
repaid with lease cash flows.

     Net cash provided by operating  activities for the 2000 Period  amounted to
$54.9 million,  which was generated  primarily  from a $7.1 million  increase in
security and other deposits and lease cash flows,  net of operating  expense and
interest  expense on the Notes.  Other items  included  in net cash  provided by
operating  activities  included a $1.7  million  decrease  in  restricted  cash,
partially offset by a $2.1 million decrease in deferred rental income.

     Net cash provided by operating  activities for the 1999 Period  amounted to
$56.5 million  ,which was generated  primarily  from security and other deposits
and lease cash flows,  net of operating  expense and interest  expense on Notes.
Other items  included in net cash provided by operating  activities was deferred
rental income of $7.0 million. These were partially offset by restricted cash of
$19.5 million.


Cash Flows from Investing and Financing Activities

     Net cash used in investing  activities for the 2000 Period amounted to $1.5
million for capitalized aircraft improvements.

     Net cash used in  investing  activities  for the 1999  Period  amounted  to
$1,199.1 million,  due to $1,196.1 million for the purchase of aircraft and $3.0
million for capitalized aircraft improvements and aircraft delivery costs.

     Net cash used in financing activities for the 2000 Period amounted to $49.4
million of principal  repayments on the Notes. As a result, the balance of these
Notes was  $1,126.8  million at December  31,  2000.  Generally,  principal  and
interest are repaid on certain Notes monthly based upon the cash collected,  the
anticipated  expenses  and the cash  balances  held by  Aircraft  Finance on the
calculation date. As a result, monthly principal payments on the Notes will vary
depending on Aircraft Finance's revenues and expenses for the month.

     Net cash provided by financing  activities for the 1999 Period  amounted to
$1,215.3  million  due to the  receipt  of  proceeds  from the  Notes of  $1,209
million,  issued  on May 5,  1999,  as well as the  issuance  of the  beneficial
interest  certificates  for $39.1 million,  partially offset by $32.8 million of

                                       29
<PAGE>

principal  repayment on the Notes.  As a result,  the balance of these Notes was
$1,176.2 million at December 31, 1999.

     One of Aircraft Finance's original interest rate swap agreements expired on
April 15, 2000;  however,  Aircraft Finance entered into three new interest rate
swap  agreements  in June,  2000. As a result,  Aircraft  Finance was a party to
seven  interest  rate  swap  agreements  at  December  31,  2000.  Four of these
agreements  were  entered  into on May 5, 1999 and the other three were  entered
into on June  29,  2000 but had an  effective  date of July  15,  2000.  The net
aggregate  amounts due to be paid or received  by Aircraft  Finance  under these
agreements  is  determined  monthly  and is due on the same day as the  payments
under the Notes.  The net economic  effect of these  interest  rate swaps was to
hedge  Aircraft  Finance's  variable  interest rate  exposure from  movements in
interest  rates  over the  duration  of the lease  terms.  Please  see "Item 7A.
Quantitative  and  Qualitative   Disclosures  about  Market  Risk"  for  further
information about these interest rate swap agreements.


New Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative  Instruments and Hedging  Activities".  In June 1999, the FASB issued
SFAS No. 137,  "Accounting for Derivative  Instruments and Hedging  Activities -
Deferral  of the  Effective  Date of FASB  Statement  No.  133",  to  defer  the
effective date of FAS 133 by one year. In June 2000,  the FASB issued  Statement
of Financial  Accounting  Standard No. 138 ("FAS 138")  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an Amendment of FASB
Statement No. 133". FAS 138 amends the accounting and reporting standards of FAS
133 for certain derivative instruments and certain hedging activities.  FAS 133,
as amended,  is effective for all fiscal  quarters of all fiscal years beginning
after June 15, 2000  (January 1, 2001 for the Trust).  FAS 133 requires that all
derivative  instruments  be recorded  on the balance  sheet at their fair value.
Changes in the fair value of  derivatives  are  recorded  each period in current
earnings or other  comprehensive  income,  depending on whether a derivative  is
designated  as part of a hedge  transaction  and,  if it is,  the  type of hedge
transaction. For cash-flow hedge transactions, in which the Trust is hedging the
variability  of cash flows related to a  variable-rate  asset,  liability,  or a
forecasted  transaction,  changes in the fair value of the derivative instrument
will be reported in other comprehensive income.

     The Trust estimates that it will record an adjustment of approximately $1.7
million  (gain) in other  comprehensive  income to  recognize  at fair value all
derivative instruments that will be designated as cash flow hedging instruments.


Item 7A.       Quantitative and Qualitative Disclosures about Market Risk

     Interest incurred by Aircraft Finance on the Notes and the rental and other
income  received  by  Aircraft  Finance  under  operating  leases  are  based on
combinations of variable and fixed measures of interest rates.  Aircraft Finance
is exposed to  interest  rate risk to the extent  that the mix of  variable  and
fixed  interest  obligations  under  the  Notes do not  correlate  to the mix of
variable and fixed rents under operating  leases.  Aircraft  Finance has engaged
advisors  to  monitor  interest  rates in  order to  mitigate  its  exposure  to
unfavorable variations. Aircraft Finance utilizes interest rate swaps that shift
the risk of fluctuations  in floating rates to the  counterparty in exchange for
fixed payments by Aircraft Finance.  Risks in the use of these instruments arise
from the  possible  inability of the  counterparties  to meet the terms of their
contracts and from market movements in securities values and interest rates.

                                       30
<PAGE>


     The  controlling  trustees  of Aircraft  Finance,  with the  assistance  of
Bankers Trust Company and Lehman  Brothers Inc., are  responsible  for reviewing
and approving  the overall  interest rate  management  policies and  transaction
authority  limits.  Counterparty  risk will be  monitored  on an ongoing  basis.
Counterparties  will  be  subject  to the  prior  approval  of  the  controlling
trustees.  Currently,  Aircraft Finance's counterparty is an affiliate of Lehman
Brothers Inc. Future  counterparties will consist primarily of the affiliates of
major   United   States   and   European   financial   institutions,   including
special-purpose  derivative  vehicles,  that have credit ratings or that provide
collateralization  arrangements,  consistent with maintaining the ratings of the
Notes.

     Aircraft  Finance is a party to five classes of Notes.  The estimated  fair
value of these Notes at December 31, 2000 was approximately  $1,121 million. The
terms of each class of the Notes,  including the outstanding principal amount at
December 31, 2000, are as follows:

                 Outstanding
      Class of    Principal                       Expected Final       Final
       Notes       Amount      Interest Rate       Payment Date    Maturity Date
       -----       ------      -------------       ------------    -------------
     Class A-1   $512,500,000    LIBOR + 0.48%      May 15, 2004    May 15, 2024
     Class A-2    322,800,722    LIBOR + 0.50%     June 15, 2008    May 15, 2024
     Class B      121,541,899    LIBOR + 1.15%      May 15, 2016    May 15, 2024
     Class C      106,000,000            8.00%     July 15, 2016    May 15, 2024
     Class D       64,000,000           11.00%   August 15, 2016    May 15, 2024

     Aircraft Finance is a party to seven interest rate swap  agreements.  Under
the  agreements,  Aircraft  Finance  will pay a fixed  rate of  interest  on the
notional  amount to the  counterparty  and, in turn, the  counterparty  will pay
Aircraft  Finance a rate of  interest  on the  notional  amount  based on 30-day
LIBOR.  On  December  31,  1999 and 2000,  the  estimated  fair  values of these
interest   rate  swaps  were   approximately   $34  million  and  $1.7  million,
respectively.

     Expected  final  payment  dates  relating to the Notes are set forth in the
indenture.  They  were  determined  based on the  assumptions  set  forth in the
Registration  Statement  relating to the  issuance of the  Exchange  Notes.  The
actual  final  payments  for each  Class of Notes is likely to occur  earlier or
later than the  Expected  Final  Payment  Date as a result of  various  factors,
including the assumptions  regarding  revenues,  interest,  expenses,  operating
costs,  stress case scenarios and aircraft  valuations.  These  assumptions have
not, and are not likely in the future to correspond to actual experience.

     The one month LIBOR rate with  respect to the Notes as of December 31, 1999
and 2000 was 6.46% and 6.71%, respectively.

                                       31
<PAGE>


     The  following  table  presents,  as of  December  31,  2000,  the terms of
Aircraft Finance's interest rate swap agreements:

   Fixed       Rate to be          Rate to be
 Notional   paid by Aircraft  received by Aircraft    Maturity         Estimated
  Amount         Finance             Finance            Date          fair value
  ------         -------             -------            ----          ----------
 60,000,000       5.50%               LIBOR         January 15, 2002     213,499
 20,000,000       7.13%               LIBOR         January 15, 2002   (257,881)
175,000,000       5.56%               LIBOR         October 15, 2002     546,368
 20,000,000       7.14%               LIBOR         October 15, 2002   (474,311)
345,000,000       5.65%               LIBOR         January 15, 2004   1,387,700
230,000,000       5.71%               LIBOR        November 15, 2004   1,048,718
 15,000,000       7.17%               LIBOR             May 15, 2005   (752,810)

     Aircraft Finance expects to enter into additional  swaps, or sell at market
values or unwind  part or all of its  initial  swaps and any  future  swaps on a
periodic basis in its efforts to mitigate its exposure to unfavorable changes in
interest rates.  Any changes in Aircraft  Finance's  policy regarding its use of
interest rate hedging  products will be subject to periodic review by the rating
agencies.


                                       32
<PAGE>

Item 8.       Financial Statements and Supplementary Data















                     Aircraft Finance Trust and Subsidiaries


                  Financial Statements as of December 31, 1999
              and 2000 and for the Period from Inception (April 13,
                           1999) to December 31, 1999
                    and for the year ended December 31, 2000
                                together with the
               Report of Independent Certified Public Accountants


                                       33
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Trustees:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements  of income,  of cash flows and of changes in beneficial
interest present fairly,  in all material  respects,  the financial  position of
Aircraft  Finance Trust and its  subsidiaries  as of December 31, 1999 and 2000,
and the  results of their  operations  and their cash flows for the period  from
inception  (April 13, 1999) to December 31, 1999 and the year ended December 31,
2000, in conformity with accounting  principles generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America,  which  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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.




PricewaterhouseCoopers LLP

Fort Lauderdale, Florida
March 20, 2001



                                       34
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

                           Consolidated Balance Sheets

                             (dollars in thousands)

                                                      December 31,  December 31,
                                                          2000          1999
                                                       ----------   ----------

                                     Assets

Cash and cash equivalents                              $   76,658   $   72,682
Restricted cash                                            17,761       19,468
Rents and other receivables                                 3,352        4,122
Aircraft, net                                           1,129,322    1,170,564
Other assets                                                  131          138
                                                       ----------   ----------

     Total assets                                      $1,227,224   $1,266,974
                                                       ==========   ==========

              Liabilities and Beneficial Interest Holders' Equity

Accounts payable and accrued liabilities               $    5,007   $    5,819
Deferred rental income                                      4,927        7,031
Security and other deposits                                37,489       30,385
Notes payable:
     Class A-1                                            512,500      512,500
     Class A-2                                            322,801      368,897
     Class B                                              121,542      124,798
     Class C                                              106,000      106,000
     Class D                                               64,000       64,000
                                                       ----------   ----------
     Total Notes payable                                1,126,843    1,176,195
                                                       ----------   ----------

     Total liabilities                                  1,174,266    1,219,430
                                                       ----------   ----------

Commitments and contingencies (Note 9)                                    --

Beneficial interest holders' equity:
     Beneficial interest                                   52,958       47,544
                                                       ----------   ----------

     Total liabilities and beneficial interest
        holders' equity                                $1,227,224   $1,266,974
                                                       ==========   ==========


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


                                       35
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

                        Consolidated Statements of Income

                             (dollars in thousands)



                                                                Period from
                                                                 Inception
                                            Year Ended        (April 13, 1999)
                                         December 31, 2000   to December 31,1999
                                         -----------------   -------------------

Revenues:
   Rental and other income from
     operating leases                         $145,117             $100,331
   Interest income                               5,629               2,679
                                              --------            --------

      Total revenues                           150,746             103,010
                                              --------            --------

Expenses:
   Interest expense                             78,100              51,482
   Depreciation expense                         42,784              28,488
   Operating expense                            18,460              10,632
   Administration and other                      5,988               3,951
                                              --------            --------

      Total expenses                           145,332              94,553
                                              --------            --------

Net Income                                    $  5,414            $  8,457
                                              ========            ========

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

                                       36
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

                      Consolidated Statements of Cash Flows

                             (dollars in thousands)

                                                                Period from
                                                                 Inception
                                            Year Ended        (April 13, 1999)
                                         December 31, 2000  to December 31, 1999
                                         -----------------  --------------------
Cash Flows from Operating Activities:
Net income                                  $     5,414        $     8,457
Adjustments to reconcile net income to net
     cash provided by operating activities:
     Depreciation expense                        42,784             28,488
Changes in assets and liabilities:
     Rents and other receivables                    770             (4,122)
     Restricted cash                              1,707            (19,468)
     Other assets                                     7               (138)
     Accounts payable and accrued
        liabilities                                (812)             5,819
     Deferred rental income                      (2,104)             7,031
     Security and other deposits                  7,104             30,385
                                            -----------        -----------

     Net cash provided by operating
        activities                               54,870             56,452
                                            -----------        -----------

Cash Flows from Investing Activities:
Purchase of aircraft                               --           (1,196,087)
Aircraft improvements                            (1,542)            (2,965)
                                            -----------        -----------

     Net cash used in investing activities       (1,542)        (1,199,052)
                                            -----------        -----------

Cash Flows from Financing Activities:
Issuance of beneficial interest                    --               39,087
Proceeds from notes payable                        --            1,209,000
Repayment of notes payable                      (49,352)           (32,805)
                                            -----------        -----------

     Net cash (used in) provided by
        financing activities                    (49,352)         1,215,282
                                            -----------        -----------

Net Increase in Cash and Cash Equivalents         3,976             72,682

Cash and Cash Equivalents at Beginning of
   Period                                        72,682               --
                                            -----------        -----------

Cash and Cash Equivalents at End of Period  $    76,658        $    72,682
                                            ===========        ===========

Supplemental Cash Flow Information:
Cash Paid for Interest Expense              $    78,198        $    47,883
                                            ===========        ===========

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

                                       37
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

            Consolidated Statement of Changes in Beneficial Interest

                             (dollars in thousands)


                                                                      Beneficial
                                                                       Interest
                                                                       --------

Issuance of Beneficial Interest (May 5, 1999)                           $39,087

   Net income                                                             8,457
                                                                        -------

Balance at December 31, 1999                                             47,544

   Net income                                                             5,414
                                                                        -------

Balance at December 31, 2000                                            $52,958
                                                                        =======


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

                                       38
<PAGE>


                     Aircraft Finance Trust and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2000


Note 1 - Organization

         Aircraft Finance Trust is a  special-purpose  statutory  business trust
that was formed on April 13, 1999 under the laws of Delaware.  Aircraft  Finance
Trust and its two subsidiaries  (collectively "Aircraft Finance") were formed to
conduct  certain  limited  activities,  including  buying,  owning,  leasing and
selling commercial jet aircraft and related activities.

         The Trust  Agreement  provides for four trustees,  an Owner Trustee and
three controlling trustees. The three controlling trustees have the authority to
manage the property and affairs of Aircraft  Finance under the Trust  Agreement.
One of the  controlling  trustees,  the  equity  trustee,  is  appointed  by the
beneficial  interest  holders,  while  the other two  controlling  trustees  are
independent of the beneficial  interest holders.  Aircraft Finance does not have
any officers or employees.  Aircraft  Finance has contracted  with certain third
parties to provide  aircraft  servicing,  lease  administration  and  accounting
services and financial and capital market advisory services.

         On May 5, 1999, Aircraft Finance completed a securitization transaction
in which it  received  proceeds  from a  private  placement  offering  of notes,
received  proceeds from the issuance of  beneficial  interest  certificates  and
simultaneously paid for 36 commercial jet aircraft.


Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

         The accompanying  consolidated  financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and includes the  accounts of Aircraft  Finance and its  wholly-owned
subsidiaries.  All significant  intercompany accounts and transactions have been
eliminated.

Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during  the  reporting  period.  While  management  believes  that the
estimates  and related  assumptions  used in the  preparation  of the  financial
statements are  appropriate,  actual results could differ from those  estimates.
Significant  estimates  are  made in the  assessment  of the  collectibility  of
receivables,  depreciable  lives and estimated salvage values of leased aircraft
and estimates of expected  maintenance  and overhaul  costs in  connection  with
certain leases of aircraft.

                                       39
<PAGE>

Cash and Cash Equivalents

         Aircraft  Finance  classifies  highly liquid  investments with original
maturities  of  three  months  or  less  from  the  date  of  purchase  as  cash
equivalents.

Operating Leases

         Aircraft are recorded at cost and depreciated on a straight-line  basis
over the estimated life to their estimated  salvage value.  Generally,  aircraft
and aircraft  equipment are depreciated  over estimated useful lives of 30 years
from the date of  manufacture to a 15% estimated  salvage  value.  Certain major
additions and modifications to aircraft may be capitalized.  Aircraft  Finance's
estimates are reviewed periodically to ensure continued appropriateness.

         Revenue  under  operating  leases is  recognized  as rental income on a
straight-line basis over the lease term. In addition, certain leases provide for
contingent rental payments based on measures of usage.

         Aircraft  Finance will generally  place lessees on  non-accrual  status
when the cumulative  amount of outstanding rent receivables due from such lessee
is equivalent to three monthly payments or if other  circumstances  warrant such
treatment.  Upon placement on to non-accrual status, all outstanding receivables
accrued but not paid will be reversed against income.  Subsequent  payments from
lessees  placed on to  non-accrual  status will be recognized on a cash basis as
received. The Lessee will not be placed back on to current accrual status unless
they become  current with all past due amounts and they further  demonstrate  an
improvement in their financial position.

         In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS 121"), the recognition of an impairment loss for an asset
held for use is required  when the  estimate of  undiscounted  future cash flows
expected  to be  generated  by the  asset  is less  than  its  carrying  amount.
Measurement of an impairment loss is to be recognized based on the fair value of
the asset.  Fair value reflects the  underlying  economic value of the aircraft,
including  engines,  in normal market conditions (where supply and demand are in
reasonable equilibrium) and assumes adequate time for a sale and a willing buyer
and seller.  Short-term  fluctuations in the market place are disregarded and it
is assumed that there is no necessity either to dispose of a significant  number
of aircraft  simultaneously or to dispose of aircraft quickly. The fair value of
the assets is based on independent  valuations of the aircraft and/or  estimates
of discounted future cash flows. The appraisals assume, among other things, that
the aircraft are utilized  normally in an open,  unrestricted and stable market,
adjusted where necessary to account for the reported maintenance standard of the
aircraft.  Values  calculated  under these  assumptions  are "base  values." The
current  appraised value of each aircraft is determined by taking the average of
the base values contained in the three appraisals. The appraisals were not based
on a physical inspection of the aircraft. SFAS 121 also requires that long-lived
assets to be disposed of be reported at the lower of the carrying amount or fair
value less estimated disposal costs.

Maintenance Reserves

         Most lease  contracts  require  the lessee to bear the  obligation  for
maintenance  costs on  airframes  and  engines,  and  require the lessee to make
certain  payments  to the lessor,  calculated  on measures of usage to cover the
expected costs of scheduled  maintenance  charges,  including major airframe and

                                       40
<PAGE>

engine  overhauls.  Reserves are  maintained at amounts  considered  adequate to
cover those expected payments for maintenance costs.

Income Taxes

         The  operating  results of  Aircraft  Finance  are  included in the tax
returns of their beneficial  interest holders.  As such, Aircraft Finance is not
subject to U.S. Federal, State and local income taxes.

Derivative Financial Instruments

         Derivative financial instruments,  as defined in Statement of Financial
Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments
and Fair Value of  Financial  Instruments",  used by  Aircraft  Finance  include
interest  rate  swaps.   Aircraft  Finance  utilizes   interest  rate  swaps  to
synthetically  alter the repricing  characteristics  of  variable-rate  interest
obligations,  effectively allowing Aircraft Finance to pay a fixed interest rate
on certain notes,  reducing its exposure to unfavorable  variations in the LIBOR
rate charged on those variable rate interest  obligations.  Risks arise from the
use of such instruments  from the possible  inability of the  counterparties  to
meet the terms of their  contracts  and from  market  movements  in  values  and
interest  rates.  Aircraft  Finance does not enter into  interest rate swaps for
trading purposes.

         In accounting for interest rate swaps,  the net differential to be paid
or received on the interest rate swap is recognized as a yield adjustment to the
related asset or liability over the life of the swap  agreement.  If the related
liability  is disposed of, the swap  agreement is marked to market.  Thereafter,
the interest rate swap is accounted for in the consolidated financial statements
at its fair value with any unrealized gains and losses  recognized in the period
incurred. If the interest rate swap agreement is terminated, the gain or loss is
deferred  and  amortized  over  the  remaining  life  of the  related  asset  or
liability.

Fair Value of Financial Instruments

         Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial  Instruments",  requires disclosure of the fair value of
financial  instruments,  for both  assets  and  liabilities  recognized  and not
recognized on the balance  sheet,  for which it is  practicable to estimate fair
value.  Fair value of  Aircraft  Finance's  financial  instruments  are based on
pricing  models or formulas  using  assumptions  about  future  interest  rates,
interest  volatility  and other  factors  (swaps,  swaptions  and interest  rate
floors).


Note 3 - Cash Balances

         Aircraft  Finance  maintains  various cash  accounts as required by the
Trust indenture,  including a Rental Account, a Collections  Account, an Expense
Account,  the Lessee Funded Accounts and restricted  reserve accounts related to
one lessee.

         All payments under the leases are deposited into the Rental Account and
subsequently swept to the Collection Account within one business day of receipt.
Aircraft Finance  maintains a cash reserve balance in the Collection  Account in
an amount determined monthly in accordance with the Trust indenture. At December
31, 2000, the cash reserves included in the Collection Account were $52 million.
The cash  reserves are intended to provide a source of liquidity for the payment

                                       41
<PAGE>

of expenses, swap payments and interest on certain classes of notes. Expenses of
Aircraft Finance are generally paid out of the Expense Account,  which is funded
through transfers from the Collections Account.

         The Lessee Funded Accounts and certain lessee reserve  accounts are not
available for general use.  Security  deposits and maintenance  reserve payments
from lessees that are required to be  segregated  from other funds are deposited
into the Lessee Funded Accounts.  Lessee reserve accounts include a deposit from
the Seller of the  aircraft  that can be drawn upon by Aircraft  Finance  should
such  lessee be  delinquent  on any of its rent  payments.  The  balances in the
Lessee Funded  Accounts and the one lessee  reserve  account were $11.00 million
and $6.75 million at December 31, 2000,  and $12.72 million and $6.75 million at
December 31, 1999, respectively.


Note 4 - Aircraft Under Operating Leases

         On May 5, 1999,  Aircraft Finance  purchased 36 commercial jet aircraft
from General Electric Capital Corporation and certain of its subsidiaries having
an  aggregate  cost of $1,196  million  pursuant to a Master  Aircraft  Purchase
Agreement.  Aircraft Finance financed these purchases  primarily through the net
proceeds from Aircraft  Finance's  private  placement of asset-backed  notes and
proceeds  from the  issuance of  beneficial  interests.  At December  31,  2000,
Aircraft Finance had 36 aircraft on lease, as follows:

                                            December 31, 2000  December 31, 1999
                                            -----------------  -----------------
                                             (in thousands)     (in thousands)

     Aircraft under operating lease           $ 1,200,594        $ 1,167,431
     Accumulated depreciation                     (71,272)           (27,842)
                                              -----------        -----------
     Aircraft under operating lease, net        1,129,322          1,139,589

     Aircraft off-lease                              --               31,620
     Accumulated depreciation                        --                 (645)
                                              -----------        -----------
     Aircraft off-lease, net                         --               30,975

     Aircraft, net                            $ 1,129,322        $ 1,170,564
                                              ===========        ===========

         All  aircraft  are  compliant  with Stage 3 noise levels set out in the
United States Federal Aviation  Regulations.  As of December 31, 2000,  Aircraft
Finance's 36 aircraft were on lease to 22 airlines in 14 countries.  An analysis
of the various lessee expiration  periods of the aircraft under operating leases
is as follows at December 31, 2000:

         On lease for a further period of:
         More than five years..........................................  3
         From one to five years........................................ 31
         Less than one year............................................  2
                                                                        --

         Total aircraft portfolio...................................... 36
                                                                        ==

                                       42
<PAGE>

         At December 31, 2000 future scheduled  minimum lease contract  payments
to be received  under  operating  leases for the years ended December 31, are as
follows: (dollars in thousands)

         2001.................................................    $129,057
         2002.................................................     117,748
         2003.................................................      92,723
         2004.................................................      64,116
         2005.................................................      29,962
         Thereafter...........................................      38,789
                                                                  --------

         Total................................................    $472,395
                                                                  ========

         Additional  contingent  rentals are earned by Aircraft Finance based on
certain  lessee's  usage.  Contingent  rentals  amounting to $15.23  million and
$11.56  million were earned by Aircraft  Finance  during the year ended December
31, 2000 and the period from  inception  (April 13,  1999) to December 31, 1999,
respectively.

         During the year ended  December  31,  2000,  there were four lessees on
non-accrual  status,  and as such,  were reversed  from income.  With respect to
these  lessees,  three  aircraft  have  been  returned  early  and  subsequently
re-leased,  and the other is still  under  lease.  The total  amount of rent and
maintenance reserve payments  outstanding under the leases for the five aircraft
from these four lessees  amounted to  approximately  $6.5 million as of December
31, 2000.  Subsequent  collection of all  delinquent  receivables  is considered
unlikely.


Note 5 - Notes Payable

         On May 5, 1999 (the "Initial Closing Date"), Aircraft Finance completed
a private  placement  offering  of $1,209  million  of  securitized  notes  (the
"Initial Notes") on a basis exempt from registration under the Securities Act of
1933, as amended.  Aircraft Finance utilized the proceeds from the Initial Notes
as payment for the acquisition of 36 commercial jet aircraft.  Underwriting  and
certain other issuance  related costs  incurred in connection  with the offering
were paid by the Seller.

         On January 20,  2000,  Aircraft  Finance  completed  an exchange  offer
whereby  Aircraft Finance issued four classes of new notes (the "Exchange Notes"
or "Notes") in exchange for the four corresponding classes of the Initial Notes.
The terms of the Exchange  Notes are  identical in all material  respects to the
Initial  Notes,  except  that  the  Exchange  Notes  are  registered  under  the
Securities  Act of 1933,  as amended.  The Class D Notes  remain  unchanged.  $3
million of the Class A-2 Initial  Notes were not tendered in the exchange  offer
and remain outstanding.

         The  repayment  terms of each  class of  Initial  Notes  are such  that
certain  principal amounts are expected to be repaid on dates which are based on
certain operating  assumptions (the "Expected Final Payment Date") or refinanced
through  the  issuance  of new notes,  but in any event are  ultimately  due for
repayment on specified  final maturity dates (the "Final  Maturity  Date").  The
Expected Final Payment Dates, Final Maturity Dates and interest rates applicable
to each class of the Initial Notes are listed as follows: (dollars in thousands)

                                       43
<PAGE>



                    Initial                      Expected Final        Final
Class of Note  Principal Amount   Interest Rate   Payment Date     Maturity Date
-------------  ----------------   -------------   ------------     -------------

   Class A-1     $    512,500     LIBOR + 0.48%      May 15, 2004   May 15, 2024
   Class A-2          400,000     LIBOR + 0.50%     June 15, 2008   May 15, 2024
   Class B            126,500     LIBOR + 1.15%      May 15, 2016   May 15, 2024
   Class C            106,000             8.00%     July 15, 2016   May 15, 2024
   Class D             64,000            11.00%   August 15, 2016   May 15, 2024
                 ------------
                 $  1,209,000
                 ============

         Expected final payment dates relating to the Notes are set forth in the
indenture.  They  were  determined  based on the  assumptions  set  forth in the
Registration  Statement  relating to the  issuance of the  Exchange  Notes.  The
actual  final  payments  for each  Class of Notes is likely to occur  earlier or
later than the  Expected  Final  Payment  Date as a result of  various  factors,
including the assumptions  regarding  revenues,  interest,  expenses,  operating
costs,  stress case scenarios and aircraft  valuations.  These  assumptions have
not, and are not likely in the future to correspond to actual experience.

         The one-month LIBOR rate with respect to these notes as of December 31,
2000 was 6.71%.

         If the Class A-1 Notes are not repaid on or before their Expected Final
Payment Date, such class of notes will accrue interest  thereafter at the stated
interest rate plus 0.50% per annum ("Maturity Step-Up Interest").

         Aircraft  Finance has the right to make an optional  redemption  of any
Notes.  Should Aircraft Finance choose to exercise an early redemption of any of
the Notes,  it may be  required to pay a  redemption  premium as required by the
Trust indenture.

         The dates on which  principal  repayments  on the Notes  will  actually
occur will  depend on the cash flows  generated  by the rental  income  from the
Aircraft  Finance's  portfolio  of  aircraft,   Aircraft  Finance's  ability  to
refinance any or all of the Notes and the amount of operating  costs incurred in
the  ordinary  course of  business.  Amounts  received by  Aircraft  Finance and
available for distribution are paid in accordance with the priorities  specified
in the Trust  indenture.  As of  December  31,  2000 and  December  31, 1999 the
estimated  fair value of the Notes was  approximately  $1,121 million and $1,167
million, respectively.


Note 6 - Derivative Financial Instruments

Interest Rate Swap Agreements

         One of the Aircraft  Finance's  original  interest rate swap agreements
expired on April 15,  2000,  however,  Aircraft  Finance  entered into three new
interest rate swap agreements in June, 2000. As a result,  at December 31, 2000,
Aircraft  Finance was a party to seven interest rate swap agreements  which four
of them were  entered  into on May 5, 1999 and the other three on July 15, 2000.
Under the agreements,  Aircraft Finance will pay a fixed rate of interest on the
notional  amount to the  counterparty  and, in turn, the  counterparty  will pay
Aircraft  Finance a rate of interest on the notional  amount based on LIBOR.  On
December 31, 2000 and December 31, 1999,  the fair values of these interest rate
swaps was approximately $1.7 million and $34 million, respectively.

                                       44
<PAGE>


         The following table presents, as of December 31, 2000, a summary of the
terms of the  Aircraft  Finance's  interest  rate swap  agreements:  (dollars in
thousands)

  Fixed       Rate to be          Rate to be
Notional   paid by Aircraft  received by Aircraft     Maturity         Estimated
 Amount         Finance             Finance             Date          fair value
 ------         -------             -------             ----          ----------
   60,000         5.50%              LIBOR          January 15, 2002  $     213
  175,000         5.56%              LIBOR          October 15, 2002        546
  345,000         5.65%              LIBOR          January 15, 2004      1,388
  230,000         5.71%              LIBOR         November 15, 2004      1,049
   20,000         7.14%              LIBOR          October 15, 2002       (474)
   20,000         7.13%              LIBOR          January 15, 2002       (258)
   15,000         7.17%              LIBOR              May 15, 2005       (753)


Note 7 - New Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative  Instruments and Hedging  Activities".  In June 1999, the FASB issued
SFAS No. 137,  "Accounting for Derivative  Instruments and Hedging  Activities -
Deferral  of the  Effective  Date of FASB  Statement  No.  133",  to  defer  the
effective date of FAS 133 by one year. In June 2000,  the FASB issued  Statement
of Financial  Accounting  Standard No. 138 ("FAS 138")  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an Amendment of FASB
Statement No. 133". FAS 138 amends the accounting and reporting standards of FAS
133 for certain derivative instruments and certain hedging activities.  FAS 133,
as amended,  is effective for all fiscal  quarters of all fiscal years beginning
after June 15, 2000  (January 1, 2001 for the Trust).  FAS 133 requires that all
derivative  instruments  be recorded  on the balance  sheet at their fair value.
Changes in the fair value of  derivatives  are  recorded  each period in current
earnings or other  comprehensive  income,  depending on whether a derivative  is
designated  as part of a hedge  transaction  and,  if it is,  the  type of hedge
transaction. For cash-flow hedge transactions, in which the Trust is hedging the
variability  of cash flows related to a  variable-rate  asset,  liability,  or a
forecasted  transaction,  changes in the fair value of the derivative instrument
will be reported in other comprehensive income.

     The Trust estimates that it will record an adjustment of approximately $1.7
million  (gain) in other  comprehensive  income to  recognize  at fair value all
derivative instruments that will be designated as cash flow hedging instruments.


Note 8 - Related Party

         On May 5, 1999,  UniCapital  Corporation (parent company of the initial
beneficial interest holders) purchased approximately $3.8 million of the Class D
Notes.  UniCapital  Corporation  subsequently  sold these notes to an  unrelated
party in July 1999.

         On  June  21,  2000  Wayne  Lippman,  an  employee,  at that  time,  of
UniCapital  Air Group,  Inc. an affiliated  company of  UniCapital  Corporation,
tendered his  resignation as equity trustee of Aircraft  Finance  effective upon
appointment  of a replacement.  Donald G. Butler,  co-founder and Executive Vice
President of TransCapital Corporation,  has been appointed by the holders of the
beneficial  interest in Aircraft  Finance as the new equity  trustee of Aircraft
Finance.  The  acquisition  of additional  aircraft by Aircraft  Finance and the

                                       45
<PAGE>

terms of any related  financing  need only be  approved  by the equity  trustee,
subject  to the  terms  of the  trust  agreement  and the  indenture,  including
confirmation  by the rating  agencies  that the  transaction  will not adversely
affect the rating on the Notes.  Further,  any sale of any  aircraft,  decisions
requiring Aircraft  Finance's approval under the Servicing  Agreement with GECAS
or the agreement with the administrative agent and the reduction of any required
level of reserves must be approved by the equity trustee and at least one of the
Independent controlling trustees.


Note 9 - Commitments and Contingencies

         In accordance  with the terms of a servicing  agreement (the "Servicing
Agreement"),  GE Capital  Aviation  Services,  Limited,  ("GECAS") is performing
certain aircraft related  services with respect to Aircraft  Finance's  aircraft
portfolio. Such activities include the collection of rents and other amounts due
from lessees,  the monitoring of  maintenance,  insurance and other  obligations
under the aircraft  leases,  the enforcement of rights against the lessees,  the
remarketing  of  aircraft  for  re-lease  or sale and the  performance  of other
specified aircraft-related services. In accordance with the Servicing Agreement,
fees payable to GECAS by Aircraft  Finance include base fees and fees calculated
as a percentage  of lease  rentals  received,  in addition to certain  incentive
based fees.

         The  Servicing  Agreement  expires on the latter of (i) the  payment in
full of all  amounts  due on the  notes and other  similar  obligations  and all
amounts due to the holders of beneficial  interests in Aircraft Finance and (ii)
the  date on  which  Aircraft  Finance  and its  subsidiaries  cease  to own any
aircraft.  Each party has the right to terminate the Servicing  Agreement  under
specified circumstances.

         Additionally,  Aircraft  Finance has  contracted  with third parties to
provide  administrative,  financial  and  capital  markets  advisory  and  trust
services.  As of  December  30,  2000,  included  in  Administration  and  other
expenses,  is  approximately  $4.4  million  and $0.5  million  respectively  of
Servicer and Administrative fees.


Note 10 - Concentration of Credit Risk

         Credit risk with respect to operating  lease  receivables  is generally
diversified due to the number of lessees comprising  Aircraft Finance's customer
base and the different geographic areas in which they operate. During the period
from inception (April 13, 1999) to December 31, 1999 (the "1999 Period") and the
year ended December 31, 2000 (the "2000  Period")  Aircraft  Finance  recognized
$100 million and $145 million of rental and other income from operating  leases,
respectively.  This was  comprised  of $14  million  in the 1999  period and $22
million in the 2000  period  from  lessees  based in the  United  States and $86
million in the 1999  period and $123  million in the 2000  period  from  lessees
based outside the United States. At December 31, 2000, 36 of Aircraft  Finance's
36 aircraft were on lease to 22 lessees in 14  countries.  Also, on December 31,
2000,  ten of the  aircraft  are being  leased to lessees  domiciled  in certain
emerging  markets,  including  those  located  in Latin  America  and Asia.  The
exposure of Aircraft Finance's aircraft to particular countries and customers is
managed partly through  concentration limits and through obtaining deposits from
lessees and certain cash reserves.

         At December 31,  2000,  Aircraft  Finance  held cash  reserves of $6.75
million that are  available to fund  delinquent  rentals and other  payments due
from one certain  lessee.  Such amounts are not  available  for general use. The
reserve amount is required to be returned to the Seller after two years from the
delivery date of the aircraft,  providing the lessee has not been delinquent for

                                       46
<PAGE>

more than sixty days on any single rental  payment  during the last year of such
two year  period.  Any unused  reserve  amount must be returned to the Seller at
lease expiration.



                                       47
<PAGE>

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

     None.


                                    PART III

Item 10.      Directors and Executive Officers of the Registrant

Controlling and Independent Trustees.

     The trust agreement  governing Aircraft Finance provides for four trustees.
One of the four trustees of Aircraft Finance is Wilmington Trust Company,  which
is acting as the statutory  trustee and the owner trustee.  The remaining  three
trustees are the  "controlling  trustees"  and have the  authority to manage the
property and affairs of Aircraft Finance under the trust  agreement.  All of the
controlling  trustees are independent from General Electric Capital Corporation.
One of the controlling  trustees,  called the "equity trustee",  is appointed by
the  holders of  Aircraft  Finance's  beneficial  interest,  while the two other
controlling  trustees,   called  the  "independent   controlling  trustees"  are
independent of those holders. The holders of the beneficial interest of Aircraft
Finance  may  remove  and  replace  the  equity  trustee,  and each  independent
controlling  trustee  may be  replaced  by  the  other  independent  controlling
trustee.

     The trust  agreement  requires  that any  decision  relating to  insolvency
proceedings, merger or other reorganization of Aircraft Finance must be approved
by a  unanimous  vote of the  controlling  trustees.  Any sale of any  aircraft,
decisions  requiring Aircraft  Finance's approval under the servicing  agreement
for  the  aircraft  or the  agreement  with  the  administrative  agent  and the
reduction  of any  required  level of  reserves  must be  approved by the equity
trustee  and  at  least  one  of  the  independent   controlling  trustees.  The
controlling  trustees  approving aircraft sales on other than pre-approved terms
must also confirm to the  indenture  trustee,  prior to the sale,  that the sale
will  not  materially  and  adversely  affect  the  holders  of the  Notes.  The
acquisition  of  additional  aircraft by  Aircraft  Finance and the terms of any
related financing need only be approved by the equity trustee.

     The controlling  trustees,  their respective ages and principal  activities
are as follows:

         Name                       Age         Title
         ----                       ---         -----
         David H. Treitel           46          independent controlling trustee
         Richard E. Cavanagh        54          independent controlling trustee
         Donald G. Butler           57          equity trustee

     David H. Treitel -- Mr. Treitel is the Chairman and Chief Executive Officer
of Simat,  Helliesen & Eichner,  Inc. (SH&E), a leading aviation consulting firm
based in New York City.  Mr. Treitel has been with SH&E since 1977, and prior to
taking  up his  current  position  at SH&E in  1996,  he  served  as the  firm's
President from 1993 to September 1998 and its Executive Vice President from 1989
until 1993. Mr. Treitel also serves as a director of Midwest  Express  Holdings,
Inc.

     Richard E. Cavanagh -- Mr.  Cavanagh is the  President and Chief  Executive
Officer of The Conference Board, Inc., a global business research and membership
enterprise  supported by some 3,000 corporate  members in 67 countries and based
in New York City. Prior to taking up his current position in 1995, he served for
eight years as the Executive Dean of the Kennedy School of Government at Harvard

                                       48
<PAGE>

University.  Before  that,  he was a partner of  McKinsey &  Company,  Inc.,  an
international  management consulting firm. During his 17 years with McKinsey, he
took a two-year  public  service  leave and held senior  positions  in the White
House Office of Management & Budget.  He  co-authored  the  management  book The
Winning Performance.  Mr. Cavanagh serves as a director of Airplanes Limited and
Airplanes U.S. Trust (other  aircraft  securitization  vehicles),  the BlackRock
Mutual Fund family,  Arch Chemicals (formerly Olin), The Fremont Group (formerly
Bechtel Investments) and The Guardian Life Insurance Company.

     Donald G. Butler -- Mr. Butler is a co-founder and Executive Vice President
of   TransCapital   Corporation,   that  was  started  in  1976.  Mr.   Butler's
responsibilities  include the management of TransCapital's  commercial  aircraft
business have encompassed originating,  overseeing and/or successfully marketing
the interests in over 70 commercial  aircraft with an aggregate  value in excess
of $1.6 billion and includes the  development of an asset  management  system to
oversee and manage the aviation assets. The company's principal geographic focus
and business has been North America and Europe.  In November,  1990,  Mr. Butler
presented  INVESTMENT  OPPORTUNITIES  IN AGING AIRCRAFT at the Avmark  Services,
Ltd. International Conference on Understanding Aging Aircraft.

     As is common with many other special purpose  companies,  neither  Aircraft
Finance nor any of its  subsidiaries  will have any officers or other employees,
except,  in the case of a  subsidiary,  as may be  required by  applicable  law.
Aircraft Finance has arranged for GE Capital Aviation Services, Limited (GECAS),
Phoenix American  Financial  Services,  Inc.  (PAFS),  Wilmington Trust Company,
Bankers Trust Company and Lehman  Brothers Inc. to provide  aircraft  servicing,
managerial services and financial advice.

The Servicer

     The servicer and Aircraft  Finance have entered into a servicing  agreement
dated as of May 5, 1999.  The servicing  agreement sets forth the various duties
of GECAS as the servicer with respect to the  management and  administration  of
the aircraft and the leases, the aircraft  marketing  activities to be performed
by the servicer and the aircraft management-related  obligations of the servicer
in  connection  with  offers and sales by  Aircraft  Finance of  refinancing  or
additional notes.

     The  servicer  has agreed to provide its  services in  accordance  with the
express terms of the servicing  agreement.  The terms of the servicing agreement
provide that the servicer  will act in  accordance  with laws  applicable to it,
with directions given by the administrative agent on behalf of Aircraft Finance,
with  specified  standards  of  care  and  with  specified  standards  regarding
conflicts of interest. The duties and obligations of the servicer are limited to
those expressly set forth in the servicing  agreement,  and the servicer has not
undertaken  any fiduciary or other  implied  duties or  obligations  to Aircraft
Finance, the holders of the notes or any other person.

     The servicer has agreed to perform the services  required by the  servicing
agreement with  reasonable care and diligence at all times and, if a conflict of
interest arises as to an Aircraft Finance aircraft and other aircraft managed by
GECAS,  in good  faith.  In  addition,  to the  extent  that  either two or more
particular  Aircraft  Finance aircraft or an Aircraft Finance aircraft and other
aircraft managed by GECAS have substantially  similar  objectively  identifiable
characteristics  that are relevant for purposes of the particular services to be
performed,  the servicer  has agreed not to  discriminate  among those  Aircraft
Finance  aircraft or between any of the Aircraft  Finance aircraft and any other

                                       49
<PAGE>

managed  aircraft on an unreasonable  basis and, in the case of the two aircraft
leased to VARIG, on the basis of General Electric Capital Corporation's interest
in the reserve deposits established for the VARIG leases.

     If the  servicer  in  good  faith  determines  that  circumstances  as to a
particular  aircraft or lease require an  arm's-length  negotiation  between the
servicer or any of its affiliates and Aircraft Finance and the servicer believes
it would not be  appropriate  for the  servicer  to act on  behalf  of  Aircraft
Finance,  the servicer  has agreed to notify  Aircraft  Finance  promptly and to
withdraw  from acting as the  servicer  with  respect to the matter and Aircraft
Finance  has  agreed to  appoint  an  independent  representative  to act on its
behalf.  The servicer is entitled to act on its own or its affiliates' behalf in
those negotiations.

     Neither  Aircraft  Finance  nor the  servicer  may  assign  its  rights and
obligations under the servicing agreement without the other's prior consent. The
servicer may, however,  delegate some, but not all, of its duties to some of its
affiliates.

     Aircraft services.  The main categories of aircraft services being provided
by the servicer under the servicing agreement are:

        (1)    lease marketing and remarketing, lease negotiation and execution;

        (2)    collecting  rental  payments and other  amounts due under leases,
               aircraft maintenance, insurance monitoring and procurement, lease
               compliance and enforcement and accepting  delivery and redelivery
               of aircraft;

        (3)    sales services and aircraft acquisition;

        (4)    monitoring   aircraft   maintenance  and  providing  records  and
               information about the aircraft;

        (5)    using commercially reasonable efforts to keep Aircraft Finance in
               compliance  with terms of the indenture  that directly  relate to
               the operation of the aircraft;

        (6)    limited  assistance  in  connection  with the  public or  private
               offerings of any notes, such as providing information relating to
               the servicer  and its  affiliates  for  inclusion in any offering
               document or  prospectus,  participating  in marketing  activities
               solely with respect to the aircraft and  providing  underwriters,
               rating   agencies  and  other   advisors   with  the   reasonable
               opportunity to conduct due diligence with respect to the servicer
               as it relates to the aircraft;

        (7)    legal and other professional  services with respect to the lease,
               sale or financing of the aircraft,  any amendment or modification
               of any lease,  the enforcement of the rights of Aircraft  Finance
               and its subsidiaries  under any lease, any disputes that arise as
               to any  aircraft  or for any  other  purpose  that  the  servicer
               reasonably   determines  is  necessary  in  connection  with  the
               performance of its services; and

        (8)    periodic  reporting of  operational  information  relating to the
               aircraft.

     Operating  guidelines.  Under the  servicing  agreement,  the  servicer  is
entitled to exercise such authority as is necessary to give it a practicable and
working autonomy in performing its services.  The servicing  agreement  provides
that the servicer  will give  Aircraft  Finance and its agents access to records

                                       50
<PAGE>

related to the aircraft under specified circumstances to enable Aircraft Finance
to monitor  the  performance  by the  servicer  and not  commingle  any funds of
Aircraft  Finance  with its own funds.  Aircraft  Finance,  acting  through  the
administrative  agent  or  directly,  has  established  monitoring  and  control
procedures  that it  expects  will  enable  it to  properly  manage  its and its
subsidiaries' business and assets.

     The  servicing  agreement  requires  all  transactions  entered into by the
servicer  on  behalf  of  Aircraft  Finance  and  its  subsidiaries  other  than
intercompany  transactions  to be at arm's  length  and on market  terms  unless
otherwise agreed or directed by the  administrative  agent on Aircraft Finance's
behalf.   Transactions  or  matters  on  behalf  of  Aircraft  Finance  and  its
subsidiaries that require the specific approval of Aircraft Finance include:

        (1)    sales of or agreements to sell  aircraft,  other than as required
               by a lease or the purchase agreement for the initial 36 aircraft;

        (2)    entering  into any new leases if the lease  does not comply  with
               any applicable  operating covenants set forth under the indenture
               governing  the notes or if the lease grants a purchase  option in
               favor of the lessee and  renewing or extending  existing  leases,
               other than as a result of the exercise of an extension option;

        (3)    terminating any lease or leases to any single lessee for aircraft
               then having an aggregate  depreciated net book value in excess of
               $75  million  unless  a  substantially   similar  replacement  or
               substitute lease is put into place;

        (4)    unless provided for in the applicable  budget,  entering into any
               contract for the  modification  or  maintenance of aircraft where
               the costs to be incurred by Aircraft Finance and its subsidiaries
               will  exceed the  greater of the  estimated  aggregate  cost of a
               heavy   maintenance   check  for  similar   aircraft   and  total
               refurbishment  of the related  engines and available  maintenance
               reserves or other  collateral under the related lease or if those
               costs would be outside  the  ordinary  course of the  business of
               Aircraft Finance and its subsidiaries;

        (5)    issuing any  guarantee  on behalf of, or  otherwise  pledging the
               credit of,  Aircraft  Finance or any of its  subsidiaries,  other
               than with  respect to trade  payables in the  ordinary  course of
               business  and other than  guarantees  by Aircraft  Finance of the
               obligations of its subsidiaries;

        (6)    entering into, amending or granting a waiver with respect to, any
               transaction  between  Aircraft  Finance or its  subsidiaries  and
               General Electric Capital Corporation or any of its affiliates not
               contemplated in the servicing agreement;

        (7)    incurring any actual or contingent liability, unless contemplated
               in the applicable  budget pursuant to a transaction of a type for
               which Aircraft Finance's specific approval is otherwise required,
               incurred  in the  ordinary  course of the  business  of  Aircraft
               Finance and its subsidiaries or incurred in entering into a lease
               or performing any obligations under a lease; and

                                       51
<PAGE>


        (8)    entering into any order or  commitment to acquire,  or acquiring,
               aircraft or aircraft  engines unless provided for in a lease, the
               order or  commitment  to  acquire a  replacement  engine has been
               provided for in the applicable budget or the servicer  determines
               that the  purchase  or  exchange  of an  engine is  necessary  or
               appropriate.

     Budgets.  The servicing  agreement  calls for the  administrative  agent to
adopt  each year a single  lease  operating  budget  for all  aircraft  owned by
Aircraft  Finance  and its  subsidiaries  and a single  budget for the  aircraft
expenses related to all aircraft.

     Servicing fees and their payment priority. The servicing agreement provides
that Aircraft Finance will pay to the servicer a base fee of $150,000 per month,
which  increases if additional  aircraft are acquired by Aircraft  Finance and a
rent fee equal to 1% of the  aggregate  amount of basic  rent due for all or any
part of a month for any Aircraft  Finance aircraft and 1% of the aggregate basic
rent actually  paid for the month.  The servicer also will receive a disposition
fee  equal  to 1% of the  gross  proceeds  of the sale of any  Aircraft  Finance
aircraft.  The servicer also will be reimbursed for aircraft  maintenance  costs
and  insurance,  outside legal and  professional  advisory fees and other out of
pocket  expenses  incurred in  connection  with its  performance.  The aggregate
reimbursement  expenses may be significant.  Aircraft Finance has also agreed to
indemnify  the servicer as  described  under "Risk  Factors -- Because  Aircraft
Finance's   contract   limits  its  remedies   against  the  servicer  for  poor
performance,  Aircraft Finance may at some point bear costs that will reduce its
available  revenues." The  subsidiaries of Aircraft  Finance have guaranteed the
obligations of Aircraft Finance to the servicer.

     The above fees and expense reimbursements are payable monthly in arrears on
the payment  dates for the Notes.  The payment of those fees and  expenses has a
payment  priority  that is higher than that of all  payments  on the Notes.  The
servicer  has  agreed  to  allocate  a  portion  of the  fees  payable  to it to
UniCapital to the extent of the two initial and any other aircraft acquired from
UniCapital.

     The servicer is also entitled to additional fees (the "Additional Servicing
Fees")  consisting of an additional  sales fee for each sale of an aircraft,  an
additional  disposition  fee for  each  sale of an  aircraft  and an  additional
rent-related  fee based on basic rent actually paid.  Additional  Servicing Fees
are payable only after all amounts on the Notes have been paid in full.

     In addition,  the servicer will be entitled to fees for aircraft management
services under the servicing  agreement in connection with the offer and sale by
Aircraft Finance of refinancing and additional notes and any resales of notes by
any person who has any right to cause Aircraft Finance to assist in the resale.

     Term and termination.  The term of the servicing  agreement  expires on the
later of the payment in full of all  amounts due on the Notes and other  similar
obligations  and all amounts due to the  holders of the  beneficial  interest in
Aircraft Finance and Aircraft  Finance and its subsidiaries  ceasing to hold any
aircraft.  Each party also has the right to terminate  the  servicing  agreement
under specified circumstances.

     The servicer has the right to terminate the  servicing  agreement if, among
other things,  Aircraft  Finance  defaults in its payment and other  obligations
under the servicing agreement and related documents, any material representation
or warranty made by Aircraft  Finance or its subsidiaries is false or misleading
in a manner  material  to the  servicer,  Aircraft  Finance or its  subsidiaries
become subject to bankruptcy or other insolvency  proceedings,  neither Aircraft
Finance nor any of its  subsidiaries  holds any aircraft or the indenture or any
guaranty in favor of the servicer ceases to be in effect.

                                       52
<PAGE>


     The servicer may resign under the servicing  agreement  with respect to all
aircraft, or at its election,  any affected aircraft if it reasonably determines
that directions given, or services  required,  would, if carried out be unlawful
under applicable law, be in violation of any corporate policy regarding business
practices  or  legal,  ethical  or  social  matters,  be  likely  to  lead to an
investigation by any  governmental  authority of the servicer or its affiliates,
expose the  servicer to  liabilities  for which,  in the  servicer's  good faith
opinion,  adequate bond or indemnity has not been provided or place the servicer
in a conflict of interest with respect to which,  in the  servicer's  good faith
opinion,  the servicer could not continue to perform its  obligations  under the
servicing agreement.  Whether or not it resigns, the servicer is not required to
take any action of the foregoing kind. The servicer may also resign in the event
it becomes subject to unindemnified taxes.

     Aircraft  Finance has the right to terminate the servicing  agreement  upon
payment in full of the Notes and other  similar  obligations.  Aircraft  Finance
also has the right to terminate the servicing  agreement if, among other things,
the servicer  ceases to be at least 75% owned  directly or indirectly by General
Electric  Capital   Corporation  or  its  ultimate   parent,   General  Electric
Corporation, the servicer breaches its obligations under the servicing agreement
in a manner  that is material to  Aircraft  Finance  and its  subsidiaries  as a
whole, the servicer,  General  Electric Capital  Corporation or General Electric
Company  becomes  subject to  bankruptcy or  insolvency  proceedings,  there are
insufficient  funds for the  payment on any Class A Note for a period of 60 days
or at least 10 aircraft remain off-lease but available for re-lease for a period
of at least 90 days following specified events set forth in the indenture.

     Aircraft  Finance may remove the servicer for any affected  aircraft if the
servicer has reasonably  determined that directions given, or services required,
would, if carried out, place the servicer in a conflict of interest with respect
to which, in the servicer's good faith opinion,  the servicer could not continue
to perform its obligations under the servicing agreement.

     The servicer may not resign or be removed under the servicing agreement and
the servicing  agreement may not be  terminated,  except as described  above and
unless a replacement servicer,  which may be UniCapital,  has been appointed and
Aircraft Finance has obtained a confirmation from the rating agencies rating the
Notes that they will not lower, qualify or withdraw any rating as a result. If a
replacement  servicer has not been appointed  within 90 days after notice of any
termination,  resignation  or  removal,  the  servicer  may  petition  any court
jurisdiction to appoint a replacement  servicer.  The servicer may terminate the
servicing  agreement,  whether or not a replacement servicer has been appointed,
if Aircraft Finance fails, after the applicable cure periods, to pay amounts due
to the servicer.

Corporate Management

     Corporate  management services for Aircraft Finance will be provided by the
administrative  agent, Phoenix American Financial Services,  Inc., the financial
advisor, Bankers Trust Company, the owner trustee,  Wilmington Trust Company and
the capital markets advisor, Lehman Brothers Inc.

Administrative Agent

     On November 29, 2000, Phoenix American  Incorporated (PAI), an affiliate of
Resource/Phoenix  Incorporated  (RP),  agreed to buy  substantially  all of RP's
assets. RP was the initial  administrative  agent for Aircraft Finance.  Phoenix
American  Financial  Services Inc. (PAFS),  an affiliate of PAI, will act as the

                                       53
<PAGE>

administrative agent of Aircraft Finance. The administrative agent has agreed to
provide administrative, accounting and other services that include:

        (1)    monitoring  the  performance  of the servicer and  reporting  its
               conclusions to the controlling trustees of Aircraft Finance;

        (2)    acting as a liaison  with various  rating  agencies to assess the
               impact of  management  decisions  on the ratings of the notes and
               coordinating responses to rating agency questions;

        (3)    maintaining  accounting ledgers and providing draft accounts on a
               quarterly and annual basis;

        (4)    preparing annual budgets for Aircraft Finance's approval;

        (5)    authorizing the payment of expenses and determining the amount of
               expense accruals;

        (6)    coordinating any amendments to the agreements of Aircraft Finance
               and its subsidiaries, with the approval of Aircraft Finance;

        (7)    supervising  outside counsel and other professional  advisers and
               coordinating legal and other professional  advice other than with
               respect to any  service or matter that is the  responsibility  of
               the servicer or any additional servicer;

        (8)    preparing  and   coordinating   press  releases  and  reports  to
               investors and to the SEC, and managing investor relations;

        (9)    preparing  or  arranging  for the  preparation  of and filing all
               required tax returns; and

        (10)   overseeing  the general  operation of any liquidity  facility and
               advising  Aircraft  Finance as to the appropriate  reserve levels
               for the Notes.

     In  addition  to  its   services  on  behalf  of  Aircraft   Finance,   the
administrative  agent has  agreed to act as the  agent for the  trustee  and the
security  trustee in managing the accounts in which the funds and investments of
Aircraft  Finance will be held in the name of the  security  trustee and related
matters.  Aircraft Finance is not entitled to direct the administrative agent as
to these matters.  Phoenix American  Financial  Services,  Inc.'s duties for the
trustee and the security trustee include:

        (1)    establishing and maintaining the accounts held in the name of the
               security trustee and any other accounts;

        (2)    directing withdrawals and transfers from those accounts under the
               indenture governing the notes;

        (3)    calculating   certain  monthly  payments  and  making  all  other
               calculations required under that indenture;

        (4)    providing  reports  and other  information  required  under  that
               indenture;

                                       54
<PAGE>


        (5)    providing the trustee with information required by the trustee to
               provide its reports to the holders of the Notes; and

        (6)    subject to specified  limitations and at the written direction of
               the controlling  trustees,  directing the investment of the funds
               in those accounts in investments permitted by that indenture.

     The administrative agent is entitled to a fee of $497,000 per year, plus an
additional amount for any additional  aircraft  acquired in the future,  payable
monthly in arrears in equal installments.  The administrative  agent is entitled
to be indemnified by Aircraft Finance against any loss or liability  incurred by
the administrative  agent in connection with its services to Aircraft Finance or
as the agent for the trustee and the  security  trustee,  other than through its
own  deceit,  fraud,  gross  negligence  or  willful  misconduct  or that of its
officers, directors, agents and employees.

Financial Advisor

     Bankers  Trust  Company  will act as the  initial  financial  advisor.  The
financial  advisor is responsible for assisting  Aircraft  Finance in developing
models for the purposes of analyzing  the  financial  impact of aircraft  lease,
sale and capital investment decisions.  The agreement with the financial advisor
may be terminated  by either  Aircraft  Finance or the  financial  advisor on 30
days' written notice.

Owner Trustee

     Wilmington  Trust will act as the initial owner trustee.  The owner trustee
will  maintain  the books and  records,  including  minute books and records and
trust  certificate   records,  of  Aircraft  Finance.  It  will  make  available
telephone,  facsimile and post office box facilities and will maintain  Aircraft
Finance's principal place of business in Delaware.

Capital Markets Advisor

     Lehman Brothers Inc. will act as the initial capital markets  advisor.  The
capital  markets  advisor is  responsible  for providing  Aircraft  Finance with
investment  banking advice in connection with the issuance of additional  notes,
financial advice to assist Aircraft Finance in evaluating interest rate risk and
other analytical advice. Aircraft Finance may remove the capital markets advisor
at any time on 90 days' written notice.


Item 11.      Executive Compensation

         All trustees will be compensated for travel and other expenses incurred
by them in the performance of their duties. The independent controlling trustees
receive a salary of $60,000 per annum for their  services in such  capacity,  as
well  as  additional   compensation  in  the  event  Aircraft  Finance  acquires
additional  aircraft.  The aggregate  annual  compensation  for each independent
controlling  trustee  may not  exceed  $100,000  per annum.  The equity  trustee
appointed by the beneficial  interest  holders does not receive any compensation
from Aircraft Finance for his services.

                                       55
<PAGE>


Item 12.      Security Ownership of Certain Beneficial Owners and Management

a) Security ownership of certain beneficial owners.

                                       Name and Address of
Title of Class                          Beneficial Owner        Percent of Class
--------------                          ----------------        ----------------

Beneficial Interest Certificate     UniCapital AFT-II, Inc.            19%
                                    10800 Biscayne Boulevard
                                    Miami, Florida 33161

Beneficial Interest Certificate     UniCapital AFT-III, Inc.           30%
                                    1209 Orange Street
                                    Wilmington, DE 19801

Beneficial Interest Certificate     IBC Aircraft Services, Inc.        20%
                                    1200 San Bernardo
                                    Laredo, Texas 78042-1359

Beneficial Interest Certificate     General Bank                       10%
                                    800 West 6th Street
                                    Los Angeles, CA 90017

Beneficial Interest Certificate     TransCapital Corporation          *8.5%
                                    11130 Sunrise Valley Drive
                                    Reston, VA 20191

* TransCapital  Corporation owns 7.40% of the beneficial  interest  directly and
1.1% indirectly through its wholly-owned subsidiary UniCapital AFT-I, Inc.


Item 13.      Certain Relationships and Related Transactions

a)       Transactions with management and others.

     On May 5, 1999, UniCapital  Corporation,  the parent company of the initial
beneficial interest holders, purchased approximately $3.8 million of the Class D
Notes.  UniCapital  Corporation  subsequently  sold these Notes to an  unrelated
party in July 1999. Also on May 5, 1999,  General Electric Capital  Corporation,
parent company of the aircraft servicer,  purchased  approximately $48.2 million
of the Class D Notes.

     Aircraft  Finance and its  subsidiaries  have acquired title to 36 Aircraft
from General  Electric  Capital  Corporation and its affiliates under the master
aircraft  purchase  agreement  dated as of May 5, 1999. Two of the aircraft were
acquired by General Electric Capital  Corporation  affiliates from affiliates of
UniCapital on May 5, 1999.  These two aircraft were acquired by Aircraft Finance
for $85.9  million.  UniCapital  has  indicated  that it may at some  point sell
additional  aircraft to Aircraft Finance.  The servicer has agreed to allocate a
portion of the fees payable to it to UniCapital to the extent of the two initial
and  any  other  aircraft  acquired  from  UniCapital.  On  December  11,  2000,
UniCapital  Corporation announced that it had filed petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code.

                                       56
<PAGE>


b)   Certain business relationships.

     Donald G.  Butler,  the  equity  trustee  and one of the three  controlling
trustees of Aircraft Finance,  is an employee of TransCapital  Corporation,  the
parent company of UniCapital AFT-I, Inc.. The acquisition of additional aircraft
by Aircraft Finance and the terms of any related financing need only be approved
by the  equity  trustee,  subject  to the terms of the trust  agreement  and the
indenture,  including  confirmation  by the rating agencies that the transaction
will not adversely affect the rating on the Notes.


                                       57
<PAGE>


                                     PART IV

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

a.       Financial Statements.

         The following are included in Part II of this report:
                                                                            Page

                  Report of Independent Certified Public Accountants.........34
                  Consolidated Balance Sheet.................................35
                  Consolidated Statement of Income...........................36
                  Consolidated Statement of Cash Flows.......................37
                  Consolidated Statement of Changes in Beneficial Interest...38
                  Notes to Consolidated Financial Statements.................39

b.       Current Reports on Form  8-K.

         During the quarterly  period ended December 31, 2000,  Aircraft Finance
         filed reports on Form 8-K dated October 16, 2000, November 15, 2000 and
         December  15, 2000.  Such  reports on Form 8-K  included  copies of the
         monthly reports to holders of the Notes.

c.       Exhibits required to be filed by Item 601 of Regulation S-K.

Exhibit
Number

3.1      Certificate of Trust of Aircraft Finance Trust.*
3.2      Amended and Restated Trust Agreement of Aircraft Finance Trust dated as
         of May 4, 1999.*
4.1      Indenture  dated as of May 5,  1999  between  Aircraft  Finance  Trust,
         Resource/Phoenix, Inc. and Bankers Trust Company.*
4.2      Form of Global Note (included in Exhibit 4.1).*
4.4      Registration  Rights Agreement dated as of May 5, 1999 between Aircraft
         Finance Trust and Lehman Brothers Inc.*
4.5      Form of Restricted Global Note.**
4.6      Form of Exchange Notes.**
10.1     Master  Aircraft  Purchase  Agreement,  dated as of May 5,  1999  among
         General  Electric  Capital  Corporation,  Aircraft  Finance Trust,  the
         Sellers listed on Annex A thereto and AFT Trust-Sub I.*
10.2     Security  Trust  Agreement  dated as of May 5,  1999  between  Aircraft
         Finance  Trust,  Bankers  Trust  Company,  AFT Trust-Sub I and Aircraft
         Finance Trust Ireland, Limited.*
10.3     Servicing  Agreement dated as of May 5, 1999 among GE Capital  Aviation
         Services, Limited and Aircraft Finance Trust.*
10.4     Administrative Agency Agreement dated as of May 5, 1999 between Bankers
         Trust  Company,  Aircraft  Finance Trust,  ReSource/Phoenix,  Inc., AFT
         Trust-Sub I and Aircraft Finance Trust Ireland, Limited.*
10.5     Reference  Agency  Agreement  dated as of May 5, 1999  between  Bankers
         Trust Company, Aircraft Finance Trust and ReSource/Phoenix, Inc.*
10.6     Master Swap  Agreement  and  Schedule  dated as of May 5, 1999  between
         Aircraft Finance Trust and Lehman Brothers Financial Products Inc.*
21.      Subsidiaries of Aircraft Finance Trust.*
23.1     Consent of Aircraft Information Services, Inc.**

                                       58
<PAGE>

23.2     Consent of BK Associates, Inc.**
23.3     Consent of Morton, Beyer & Agnew.**
27.1     Financial Data Schedule.**
99.1     Appraisal of Aircraft Information Services, Inc.***
99.2     Appraisal of BK Associates, Inc.***
99.3     Appraisal of Morton, Beyer & Agnew.***
99.4     Other information - Analysis of actual cash flows versus assumed case.
         ***

*        Incorporated  by  reference to the  Registration  Statement on Form S-4
         (File No. 333-82153)  previously filed with the Securities and Exchange
         Commission on July 2, 1999.
**       Incorporated  by reference  to the 1999 form 10-K (File No.  333-82153)
         previously  filed with the Securities and Exchange  Commission on March
         22, 2000.
***      Filed herewith.

d.       Financial Statement Schedules.

         All  financial  statement  schedules  are omitted  because they are not
         applicable,  not  required  or  because  the  required  information  is
         included in the financial statements or notes thereto.


                                       59
<PAGE>

                                   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.


                                        AIRCRAFT FINANCE TRUST
                                        by Wilmington Trust Company,
                                        not in its individual capacity but
                                        solely as the Owner Trustee


      March 22, 2001                    By:    /S/CHARISSE L. RODGERS
--------------------------                 -------------------------------------
           Date                         Name:  Charisse L. Rodgers
                                        Title: Senior Financial Services Officer


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 dates indicated.



SIGNATURE                       TITLE                             DATE
---------                       -----                             ----


/S/DAVID H. TREITEL             Independent Controlling Trustee   March 22, 2001
------------------------------                                    --------------
David H. Treitel


/S/RICHARD E. CAVANAGH          Independent Controlling Trustee   March 22, 2001
------------------------------                                    --------------
Richard E. Cavanagh


/S/DONALD G. BUTLER             Equity Trustee and Controlling    March 22, 2001
------------------------------  Trustee                           --------------
Donald G. Butler


/S/CHARISSE L. RODGERS          Owner Trustee                     March 22, 2001
------------------------------                                    --------------
Wilmington Trust Company, not
in its individual capacity but
solely as the Owner Trustee



                                       60