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, 1999
                                       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 159 pages.


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<PAGE>

                             Aircraft Finance Trust

                          1999 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........28
Item 8.    Financial Statements and Supplementary Data.......................30
Item 9.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure..............................................44

PART III
Item 10.   Directors and Executive Officers of the Registrant................44
Item 11.   Executive Compensation............................................51
Item 12.   Security Ownership of Certain Beneficial Owners and Management....51
Item 13.   Certain Relationships and Related Transactions....................52

PART IV
Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K...53


                                       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,  selling  commercial  jet  aircraft  and  related  activities.
Aircraft Finance Trust currently has two subsidiaries: AFT Trust-Sub I, which is
a Delaware business trust, and Aircraft Finance Trust Ireland Limited,  which is
an  Irish  corporation   (collectively  "Aircraft  Finance").  All  of  Aircraft
Finance's  aircraft  are owned by AFT  Trust-Sub  I. Two of these  aircraft  are
leased by AFT Trust-Sub I to Aircraft Finance Trust Ireland Limited 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.  subsequently  sold 49.9% of its  beneficial  interest  in Aircraft
Finance to third party financial services companies.  UniCapital Air Group, Inc.
entered into an agreement to sell its interest in UniCapital  AFT-I, Inc. to one
of the financial  services  companies.  As a result,  these  financial  services
companies  own  51% of  Aircraft  Finance,  and  UniCapital  Air  Group,  Inc.'s
subsidiary, UniCapital, AFT-II, Inc. owns 49%.

     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. As
of October  22,  1999,  all of the 36 initial  aircraft  had been  delivered  to
Aircraft Finance. At December 31, 1999, 35 of the initial aircraft were on lease
to 22  lessees  based  in 12  countries.  One  aircraft  was off  lease  and was
subsequently re-leased.  For a detailed discussion of the value of the aircraft,
see "The Aircraft Portfolio".

     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

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<PAGE>

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,  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,  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,  it 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.  UniCapital has indicated that it may at some point sell additional
aircraft to Aircraft Finance.

     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>


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.  Actual results could differ  materially  from
those anticipated in these forward-looking  statements.  These statements relate
to  our  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."  Our  actual  results  may differ  materially  from those
discussed in this Form 10-K.

     References in this Form 10-K to the appraised value of aircraft at December
31, 1999 means the average of three  appraisals  of the  aircraft as of December
31, 1999. For further discussion of the appraisals,  see "The Aircraft Portfolio
- Appraisal of Aircraft".

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.

     Inadequate performance and 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

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<PAGE>

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,
ReSource/Phoenix, Inc. as the administrative agent, Bankers Trust Company as the
financial  advisor,  Lehman  Brothers  Inc. as the capital  markets  advisor and
perhaps  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.

     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.

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<PAGE>


     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,
         representing  11.6% of the  aggregate  appraised  value at December 31,
         1999, 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.

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<PAGE>


    (3)  THE PURCHASE OF ADDITIONAL  AIRCRAFT.  UniCapital has indicated that it
         may at  some  point  sell  additional  aircraft  to  Aircraft  Finance.
         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 RELEASE 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,  you should
expect  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 you,  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 IT'S ABILITY TO RE-LEASE
THE AIRCRAFT.

     Oil prices have  increased  significantly  over the previous year, 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.

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<PAGE>


     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
our 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, 1999,  lessees based in Europe
account for aircraft  having 57.3% of the aggregate  appraised value at December
31, 1999,  with 52.1% based in  "developed"  European  markets and 5.2% based in
"emerging"  European  markets.  Commercial  airlines in Europe face,  and can be
expected to  continue to face,  increased  competitive  pressures,  in part as a
result of the deregulation of the airline industry by the EU. European countries
generally have relatively  strict  environmental  regulations  that can restrict
operational flexibility and decrease aircraft productivity.  The effect of these
restrictions is illustrated by the noise curfews and environmental slot controls
for some of the  larger  European  airports,  as well as  higher  landing  fees.
Meeting these tougher standards could significantly  increase aircraft operating
costs of Aircraft Finance's aircraft.

     ASIA PACIFIC REGION  CONCENTRATION.  As of December 31, 1999, lessees based
in the Asia  Pacific  region,  including  China and India,  account for aircraft
having about 9.3% of the aggregate appraised value at December 31, 1999. Trading
conditions in the civil aviation  industry in Asia have been adversely  affected

                                       9
<PAGE>

by the severe economic and financial  difficulties  experienced  recently in the
region.  The economies of Indonesia,  Thailand,  Japan,  Korea and Malaysia have
experienced particularly acute difficulties resulting in many business failures,
and in many cases significant depreciation of local currencies and downgrades of
sovereign and  corporate  credit  ratings.  The regional  economic  downturn has
undermined business confidence,  reduced demand for air travel and has adversely
impacted the results of operations of Aircraft  Finance's lessees in the region.
Several  airlines in the region  have  recently  announced  their  intention  to
reschedule their aircraft purchase obligations, eliminate some routes and reduce
employees.  The downturn in Asia is likely to be exacerbated by the large number
of aircraft  currently on order by Asian airlines.  The recessionary  conditions
that are now expected to prevail in large parts of the region for a  significant
period of time may also have a  significant  adverse  impact on global  aircraft
demand.

     LATIN  AMERICAN  CONCENTRATION.  As of December 31, 1999,  lessees based in
Latin America account for aircraft having 7.8% of the aggregate  appraised value
at December 31, 1999.  Although some countries in Latin America have experienced
in the past several  years  increased  political  stability,  overall  increased
economic growth, lower inflation rates and revitalized  economies,  the progress
has not been regionwide and may not be maintained or furthered.

     For example,  in 1994, Mexico  experienced  lower capital inflows,  a large
current account  deficit leading to diminishing  foreign  exchange  reserves,  a
devaluation of the peso and dampened investor  confidence.  Those  circumstances
resulted in lower levels of foreign investment in Latin America in general. More
recently, Brazil has experienced significant downturns in its financial markets,
and, as a result, on January 13, 1999,  Brazil devalued its currency.  Continued
weakness in Brazil can affect not only leases with Brazilian lessees (accounting
for 7.8% of the  aggregate  appraised  value at  December  31,  1999) but,  more
importantly,   could  spread  throughout  Latin  America  and  other  "emerging"
economies and affect other lessees of Aircraft Finance.

     NORTH  AMERICAN  CONCENTRATION.  As of December 31, 1999,  lessees based in
North America account for aircraft having 23.0% of the aggregate appraised value
at December 31, 1999. Over the last decade, a number of the major North American
passenger  airlines  have filed Chapter 11  bankruptcy  proceedings  and several
major United States airlines have ceased operations  altogether.  Two lessees of
aircraft  delivered to Aircraft  Finance have recently  emerged from  bankruptcy
proceedings.  While airline  profitability  in the region has improved since its
cyclical low in the 1990-1992 period,  increasing  competition from low-cost air
carriers and an inability to reduce labor and other costs to sustainable  levels
continues to put pressure on North American airline margins.  Further bankruptcy
or  similar  proceedings  by  low-cost  or other  North  American  carriers  may
adversely  affect the ability of North American  lessees to make timely and full
rental payments.

     OFF LEASE AIRCRAFT. As of December 31, 1999, one aircraft representing 2.6%
of the  aggregate  appraised  value at  December  31,  1999 was off lease.  This
aircraft was re-leased in February 2000 to Philippine Airlines, Inc.

LEASE DEFAULTS WILL RESULT IN ADDITIONAL COSTS FOR AIRCRAFT FINANCE.

     Although  Aircraft  Finance  has the  right to  repossess  aircraft  and to
exercise  remedies upon a lease default,  it may incur  significant costs in the
process.  Those  costs  include  legal  and  other  expenses  of  court or other
governmental   proceedings,   particularly  if  the  lessee  is  contesting  the
proceeding or is in bankruptcy,  to obtain possession and re-registration of the
aircraft  and flight  and export  permissions.  Delays  resulting  from any such
proceedings  would also  increase  the period of time during  which the relevant

                                       10
<PAGE>

aircraft are not productively under lease. Aircraft Finance may, moreover, incur
substantial  maintenance or repair costs that a defaulting  lessee has failed to
pay and may need to pay off liens and  governmental  charges on the  aircraft to
obtain clear possession and to re-market the aircraft effectively. Any such cost
or delays may  adversely  affect the amounts  available to pay to the holders of
the Notes.

PAYMENT OF 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 or
its subsidiary 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  of $52  million on May 5,  1999,  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.

PAYMENT OF 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, 2004 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,  including  expirations  of anticipated
leases that are currently  represented by existing letters of intent.  The table
illustrates that the leases for 28 of the aircraft,  representing  approximately
74.9% of the aggregate  appraised  value at December 31, 1999,  are scheduled to
expire or permit early  termination  on or before  December 31, 2004.  The table

                                       11
<PAGE>

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.  Aircraft Finance has one
aircraft  off  lease at  December  31,  1999 due to an early  termination.  This
aircraft was re-leased in February 2000 to Philippine Airlines, Inc.

                                         Year Ending December 31,
                                         ------------------------
Aircraft Type                 2000      2001      2002       2003        2004
-------------                 ----      ----      ----       ----        ----
B737-300.....................   -         1          3         -           3
B737-400.....................   -         -          2         -           2(e)
B767-300ER...................   1(d)      -          1(a)      -           1
A310-300.....................   -         -          -         1           -
A320-200.....................   -         -          -         2           5
DC-10-30.....................   -         -          2         -           -
MD-83........................   1(c)      1(a)       2(b)      -           -
                              ------    ------    -------    ---        ----
Total........................   2         2         10         3          11

(a)  Assuming an early termination option is exercised.
(b) Includes an aircraft for which an early termination  option is assumed to be
exercised.
(c) A letter of intent has been signed  with the  current  lessee to
extend this lease through  October 2001.
(d) A letter of intent has been signed
with a Canadian  lessee for a three year lease  following the  expiration in May
2000.
(e) The  lessee  for one of these  aircraft  is  expected  to return  the
aircraft early in 2000. A letter of intent has been signed by a new lessee based
in Belgium for a three year lease.

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 over supply 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, 1999 of the portfolio;

                                       12
<PAGE>


    (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

    (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,  1999,   with  Boeing  737-300s
constituting  28.6%,  Boeing 767-300ERs  constituting 23.8% and Airbus A320-200s
constituting 17.8% of that aggregate value. Also, narrowbody aircraft constitute
65.3% of the aggregate appraised value at December 31, 1999.

The Aircraft Portfolio

     The following  tables set forth  details of the aircraft  owned by Aircraft
Finance as of  December  31,  1999.  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, 1999.

     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, 1999
------------         --------    --------   ---------       -----------------
Boeing             B737-300         11      Narrowbody             28.6%
                   B737-400          5      Narrowbody             11.9%
                   B767-200ER        2      Widebody                5.2%
                   B767-300ER        4      Widebody               23.8%
Airbus             A310-300          1      Widebody                2.7%
                   A320-200          7      Narrowbody             17.8%
McDonnell Douglas  DC-10-30          2      Widebody                3.0%
                   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, 1999.

                                                             % of Aircraft by
                                          Number of        Appraised Value as of
Country                                   Aircraft           December 31, 1999
-------                                   --------           -----------------
U.K......................................     7                      22.0%
U.S......................................     6                      15.8%
Italy....................................     2                       9.0%
Brazil...................................     3                       7.8%
Canada...................................     3                       7.2%
France...................................     2                       6.3%
Turkey...................................     2                       5.2%
China....................................     2                       5.2%
Ireland..................................     2                       5.0%
Spain....................................     3                       5.1%
Sweden...................................     1                       4.7%
India....................................     2                       4.1%
Off Lease................................     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, 1999.

                                                             % of Aircraft by
                                          Number of        Appraised Value as of
Region                                    Aircraft           December 31, 1999
------                                    ---------        ---------------------

Developed Markets
     Europe..............................     17                     52.1%
     North America.......................      9                     23.0%
Emerging Markets
     Asia................................      4                      9.3%
     Europe and the Middle East..........      2                      5.2%
     Latin America.......................      3                      7.8%
Off Lease................................      1                      2.6%
                                            ----                 ---------
Total....................................     36                    100.0%

                                       14
<PAGE>


     The  following  table  identifies  the current  lessees of the 36 aircraft,
calculated as of December 31, 1999.

                                                             % of Aircraft by
                                               Number of   Appraised Value as of
Lessee                                         Aircraft      December 31, 1999
------                                         --------      -----------------
Air 2000 Limited............................       1                  7.0%
Airtours International Airways Limited......       2                  4.6%
Linee Aeree Italiane S.p.A..................       1                  7.1%
America West Airlines, Inc..................       1                  2.7%
Britannia Airways Limited...................       1                  4.7%
British Airways.............................       1                  2.6%
British Midland Airways PLC.................       3                  7.7%
Canadian Airlines International Ltd.........       2                  4.5%
China Eastern Airlines Corporation Limited..       2                  5.2%
Continental Airlines, Inc...................       2                  3.0%
Eurofly S.p.A...............................       1                  1.9%
Frontier Airlines, Inc......................       1                  2.6%
Istanbul Hava Yollari A.S...................       2                  5.2%
Jet Airways (India) Limited.................       2                  4.1%
Royal Aviation, Inc.........................       1                  2.7%
Spanair S.A.................................       3                  5.1%
Societe de Transport Aerien Regional........       2                  6.3%
TransBrasil S.A. Linhas Aereas..............       1                  2.7%
TransMeridian Airlines, Inc.................       1                  2.4%
TWA.........................................       1                  5.0%
VARIG.......................................       2                  5.2%
Virgin Express S.A. N.V.....................       2                  5.1%
Off Lease...................................       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, 1999
-------------        --------------             --------     -----------------
121-170              B737-300, B737-400, MD-83     20                47.5%
135-180                               A320-200      7                17.8%
171-240       A310-300, B767-200ER, B767-300ER      7                31.7%
240+                                  DC-10-30      2                 3.0%
                                                  ---            ---------
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, 1999
is approximately 5.5 years.

                                                             % of Aircraft by
                                            Number of      Appraised Value as of
Year of Manufacture                         Aircraft         December 31, 1999
-------------------                         --------         -----------------
1980.....................................       1                     1.4%
1982.....................................       1                     1.6%
1986.....................................       1                     1.5%
1987.....................................       2                     5.2%
1988.....................................       1                     2.7%
1989.....................................       1                     1.7%
1991.....................................       6                    15.7%
1992.....................................       4                    11.1%
1993.....................................       1                     2.4%
1996.....................................       5                    12.8%
1997.....................................      10                    27.1%
1998.....................................       1                     2.7%
1999.....................................       2                    14.1%
                                             ----                ---------
Total....................................      36                   100.0%


     Further particulars of the 36 aircraft, calculated as of December 31, 1999,
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         1999
------       -----------------      ------              ----              ----        ------    -------         ----
<S>          <C>                 <C>                   <C>              <C>           <C>       <C>        <C>

Europe (Developed)                                                                                             ($000)
             France              STAR Airlines         A320-200         CFM56-5B4       737      9/97         $39,404
             France              STAR Airlines         A320-200         CFM56-5B4       749      9/97          39,401
             Ireland             Virgin Express        B737-300         CFM56-3C1     28333      8/96          30,721
             Ireland             Virgin Express        B737-400         CFM56-3C1     28489     11/96          32,640
             Italy               Alitalia              B767-300ER       CF6-80C2B7F   30008      3/99          88,549
             Italy               Eurofly S.p.A.        MD-83            JT8D-219      53199      3/92          24,288
             Spain               Spanair S.A.          MD-83            JT8D-219      49398     11/86          18,829
             Spain               Spanair S.A.          MD-83            JT8D-219      49791      9/89          21,674
             Spain               Spanair S.A.          MD-83            JT8D-219      53198      4/91          22,882
             United Kingdom      Air 2000              B767-300ER       CF6-80C2B7F   29617      3/99          88,308
             United Kingdom      Airtours              A320-200         CFM56-5A3       221      9/91          29,019
             United Kingdom      Airtours              A320-200         CFM56-5A3       222     10/91          29,053
             Sweden              Britannia(1)          B767-300ER       CF6-80C2B6F   25221      7/91          59,513
             United Kingdom      British Airways       B737-300         CFM56-3C1     28548     12/97          33,207
             United Kingdom      British Midland       B737-300         CFM56-3C1     28554     12/96          31,282
             United Kingdom      British Midland       B737-300         CFM56-3C1     28557      3/97          32,447
             United Kingdom      British Midland       B737-300         CFM56-3C1     28558      4/97          32,518
North America (Developed)
             United States       America West          B737-300         CFM56-3C1     28740      6/98          34,467

                                       16
<PAGE>

             United States       Continental           DC-10-30         CF6-50C2      46584      2/80          18,070
             United States       Continental           DC-10-30         CF6-50C2      48292      2/82          19,966
             United States       Frontier Airlines     B737-300         CFM56-3C1     28563      8/97          32,874
             United States       TransMeridian         A320-200         V2500-A1        373      1/93          30,623
                                 Airlines
             United States       TWA                   B767-300ER       PW4060        25403      1/92          62,950
             Canada              Canadian Airlines     A320-200         CFM56-5A1       210      7/91          27,962
             Canada              Canadian Airlines     A320-200         CFM56-5A1       231      9/91          28,330
             Canada              Royal Aviation        A310-300         CF6-80C2A2      448      2/88          34,087
Asia (Emerging)
             China               China Eastern         B737-300         CFM56-3C1     28561      6/97          32,424
             China               China Eastern         B737-300         CFM56-3C1     28562      7/97          32,538
             India               Jet Airways           B737-400         CFM56-3C1     25663     11/92          25,913
             India               Jet Airways           B737-400         CFM56-3C1     25664     11/92          26,071
Europe & Middle East (Emerging)
             Turkey              Istanbul              B737-400         CFM56-3C1     28490     11/96          32,510
             Turkey              Istanbul              B737-400         CFM56-3C1     28491     11/96          32,550
Latin America (Emerging)
             Brazil              TransBrasil           B737-300         CFM56-3C1     28564     11/97          33,321
             Brazil              VARIG                 B767-200ER       CF6-80C2B     23805      7/87          32,515
             Brazil              VARIG                 B767-200ER       CF6-80C2B     23806      7/87          32,527
Off Lease                                              B737-300         CFM56-3C1     28559      5/97          32,701
                                                                                                           ----------
Total                                                                                                      $1,256,134
</TABLE>

(1)  Leased to Britannia (United Kingdom) and subleased to Britannia Airways AB
     (Sweden).

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, 1999.  The  appraisals  assume 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, 1999 is  $1,256,133,667.  The  aggregate of the
appraised  values at December 31, 1998 was  $1,322,643,333.  You should not rely
upon these base  values 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, 1999,  and the base values of the  aircraft,  if  determined  as of any date

                                       17
<PAGE>

subsequent  to December  31,  1999,  would be expected to be lower than the base
values in the appraisals.

     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.  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.  In addition,  the appraised  base values of the initial
aircraft  will likely  decline  over time due to aging,  increasing  maintenance
expenses and similar factors.  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,  1999,  there  were 22  lessees  under  leases for the
aircraft in 12 different  countries.  One aircraft was off lease at December 31,
1999, but was subsequently re-leased in February 2000. The following description
relates to the leases for the  aircraft  in effect on  December  31,  1999.  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. You should expect varying numbers
of lessees at any point in time to 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, RISK OF LOSS.

     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 or its subsidiary. 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 three of the leases for the initial aircraft,  the lessee has
provided security deposits to secure its obligations.  In fifteen of the leases,
the lessee has provided  cash  security  deposits.  In seven of the leases,  the
lessee has provided a letter of credit.  One aircraft is currently  off lease at
December 31, 1999. In the remaining ten leases, the lessee provided both letters
of credit and cash.

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.  The  Britannia  lease,  however,  permits a sublease to
Britannia Airways GmbH, and TWA permits it to sublease to a pre-approved list of
major U.S. airlines. 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

                                       19
<PAGE>

under the lease.  The  lessor's  ability to  repossess  the aircraft or engines,
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  significant  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 11.6% of the aggregate appraised value at December
31,  1999  of  the  aircraft,  grant  purchase  options  to  the  lessee  or its
affiliates.  None of the purchase  options were  exercisable  as of December 31,
1999.  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.

     Nine 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.  Six 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 and its subsidiaries also have in place their
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 or its subsidiary may be liable, as
owner of an aircraft, for obligations that may be insured against by the lessees
even if Aircraft Finance or that subsidiary 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 it's 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.

                                       21
<PAGE>


     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
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 the 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  eight  beneficial   interest  holders  of  Aircraft  Finance's
beneficial interest certificates at December 31, 1999.

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.

     The beneficial  interest in Aircraft  Finance was  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,  on May 5, 1999 for $39.1  million in a
private sale exempt from  registration  under section 4(2) of the Securities Act
of 1933, as amended.

     On May 5, 1999,  Aircraft  Finance  issued $1,209  million of  asset-backed
notes (the Initial Notes) in a Rule 144A/Regulation S offering.  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  remaining  outstanding  Initial  Notes  and  the
outstanding Exchange Notes are together referred to as the Notes.

     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.

                                       23
<PAGE>


     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.


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,
                                                                    1999
                                                                    ----
                                                               (in thousands)

Balance Sheet Data:
   Aircraft, net                                                 $ 1,170,564
   Total assets                                                    1,266,974
   Notes payable                                                   1,176,195
   Total liabilities                                               1,219,430
   Total beneficial interest holders' equity                          47,544

Statement of Income Data (1):
   Rental and other income from operating leases                     100,331
   Interest expense                                                   51,482
   Depreciation expense                                               28,488
   Net income                                                          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  "Notes").  The Notes were issued in five classes;  Class A-1,  Class
A-2,  Class  B,  Class C and  Class  D.  The  Asset  Backed  Notes  were  issued
simultaneously  with the execution of an agreement to acquire 36 commercial  jet
aircraft from General Electric Capital Corporation and certain of its affiliates
(collectively  referred to as the Seller) for $1,196 million.  As of October 22,
1999, all 36 of the initial aircraft had been delivered to Aircraft Finance.

     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.  Aircraft  Finance's  cash  flows  from  such
activities  will be used to service the interest and  principal on the Notes and
make distribution of remaining amounts to the holders of the beneficial interest
certificates, only after the payment of expenses incurred by Aircraft Finance.

                                       24
<PAGE>


     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
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  provides for Aircraft  Finance to maintain a cash reserve  balance on
deposit in the Collections  Account and allows for Aircraft Finance to establish
a credit  facility,  in order to  provide a source  of  liquidity  for  Aircraft
Finance's obligations.

     Aircraft Finance may acquire  additional  aircraft in the future,  financed
through  the  issuance of  additional  notes.  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 Notes as a result.

Recent Developments

     Under the terms of the  indenture,  Aircraft  Finance is required to obtain
annual appraisals of its aircraft.  In February 2000,  Aircraft Finance received
appraisals  of the adjusted  base values of the aircraft as of December 31, 1999
from three independent  appraisers that are members of the International Society
of Transport  Aircraft Trading,  as required by the Indenture.  The aggregate of
the  average  of the  three  appraisals  (the  current  appraised  value) of the
aircraft at December 31, 1999 was $1,256.1  million.  The appraisals at December
31, 1999 did not  indicate a decline in value of the  aircraft  sufficiently  in
excess of the value decline  assumed under the terms of the indenture to require
excess cash flows to be redirected to the Class A notes.

     In February 2000, the 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 at a lower rental rate than the former lease.

     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.

     During 1999,  Aircraft Finance entered into a non-binding  letter of intent
to extend the lease of one MD-83 aircraft  currently leased to an Italian lessee
for eighteen  months beyond its current  expiration in April 2000.  The aircraft
with  respect to this  lessee  represents  approximately  1.9% of the  aggregate
appraised value at December 31, 1999.

     The B767-300ER  aircraft  currently on lease with a Swedish  lessee,  has a
lease expiration date in May 2000. Aircraft Finance has entered into a letter of
intent to lease this aircraft to a Canadian lessee for a lease term of 36 months
with an anticipated delivery date in May 2000.

     During 1999, two existing lessees were experiencing  financial difficulties
and became  delinquent in their rental payments for a period of 90 days or more.
As a result,  both of these  lessees were placed on  non-accrual  status  during
1999.  The total amount of rental  payments  and  maintenance  reserve  payments
outstanding  under the leases  for the three  aircraft  from these two  existing
lessees amounted to approximately $3.7 million. One of these two lessees,  based
in Brazil,  owed  approximately $0.9 million for outstanding rental payments and

                                       25
<PAGE>

maintenance  reserve  payments at December  31,  1999.  Aircraft  Finance  holds
security  deposits of $0.9 million against these  arrearages.  The aircraft with
respect to this lessee represents  approximately 2.7% of the aggregate appraised
value  at  December  31,  1999.  The  other  lessee,   based  in  Turkey,   owed
approximately  $2.8 million for  outstanding  rental  payments  and  maintenance
reserve payments at December 31, 1999.  Aircraft Finance holds security deposits
and letters of credit in the aggregate of $1.1 million against these arrearages.
The two aircraft with respect to this lessee  represents  approximately  5.2% of
the aggregate  appraised  value at December 31, 1999.  Recently,  the lessee has
reached an agreement  with the Servicer,  for the early return of one of the two
aircraft.  A  non-binding  letter  of  intent  has  been  entered  into  for the
re-delivery of this aircraft to a new lessee (based in Belgium) in April 2000.

     In  November  1999,  an  administrator  was  appointed  to one of  Aircraft
Finance's Dutch lessees and the aircraft was returned to Aircraft Finance.  Upon
return  of  the  aircraft,  the  security  deposits  were  applied  towards  the
outstanding rent and maintenance amounts due from this lessee. The aircraft with
respect to this lessee represents  approximately 2.6% of the aggregate appraised
value at December 31, 1999.

Results of Operations

     Aircraft Finance reported net income of $8.5 million during the period from
inception  (April 13,  1999) to December  31,  1999,  on total  revenues of $103
million.  Aircraft  Finance's revenues consisted of rental income from operating
leases and interest income earned on cash balances.  Aircraft  Finance Trust was
formed on April 13, 1999 and began  significant  operations on May 5, 1999. As a
result,  the financial results for 1999 are not representative of a full year of
operations.

     Rental  income from  aircraft  subject to operating  leases during 1999 was
$100.3  million.  The lease default and return of the aircraft by a Dutch lessee
discussed  previously did not impact rental income from operating  leases during
1999.  The  defaults  of the two leases  based in Brazil  and Turkey  negatively
impacted  rental and other income from operating  leases by  approximately  $3.7
million during 1999. Included in rental income from operating leases during 1999
were  supplemental  rental income of $11.6 million.  These payments are variable
based on aircraft flight hours or cycles.

     Interest income during 1999 was $2.7 million.  Interest income is earned on
Aircraft  Finance's cash balances which are invested in short-term highly liquid
investments as permitted by the Trust  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.

     Interest expense,  including interest rate swap costs of $1.2 million,  was
$51.5  million  during  1999.  Interest  expense is paid on  Aircraft  Finance's
outstanding  Notes issued on May 5, 1999. The weighted  average interest rate on
the Notes  during  1999 was 6.47% and the  outstanding  balance  of the Notes at
December 31, 1999 was $1,176.2  million.  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 1999 was $28.5 million. Depreciation expense is
anticipated to be higher in 2000 since Aircraft Finance did not own the aircraft
throughout all of 1999.

     Operating  expense  during  1999  was  $10.6  million.   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.  Reserves are  maintained at amounts  considered  adequate to
cover those expected payments for maintenance costs.

                                       26
<PAGE>


     Administrative  and other  expenses  during 1999 were $4.0  million.  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. A significant  portion of the fees
paid  to  the  Servicer   correspond  to  rental   payments  due  and  received.
Accordingly, these fees will vary with rental income of Aircraft Finance.

Liquidity

     Aircraft  Finance  held 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, 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.

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 whether
Aircraft Finance will be able to refinance certain subclasses of Notes that have
not been repaid with lease cash flows.

     Net cash  provided by operating  activities  for the period from  inception
(April 13,  1999) to December  31, 1999  amounted  to $56.5  million,  which was
generated  primarily from security and other  deposits,  lease cash flows net of
operating expense and interest expense on the 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 period from inception (April
13, 1999) to December  31, 1999  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  provided by financing  activities  for the period from  inception
(April 13,  1999) to December 31, 1999  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  off set by $32.8  million of principal  repayment on the Notes.  As a
result,  the balance of these Notes were $1,176.2  million at December 31, 1999.
Generally,  principal  and interest is repaid on these 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.

     Aircraft Finance is a party to five interest rate swap agreements.  The net
aggregate  amounts due to be paid or received  by Aircraft  Finance  under these
agreements  are  determined  monthly and are due on the same day as the payments
under the  Notes.  The net  economic  effect of these  interest  rate  swaps was
intended 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.

                                       27
<PAGE>


Year 2000 Computer Issues

     Because  Aircraft  Finance has no  computer  systems of its own, it was not
directly  exposed to the  millennium  (Y2K)  computer  problem  and  incurred no
Y2K-related expenses.  Aircraft Finance has, however, engaged the administrative
agent to perform its internal  corporate  functions,  the servicer to manage its
aircraft portfolio,  and Bankers Trust Company to perform financial advisory and
banking services.  In addition,  Aircraft Finance's business would have suffered
had  its  lessees  or  governmental   agencies  such  as  the  Federal  Aviation
Administration  failed to be Y2K  compliant.  Consequently,  prior to January 1,
2000, Aircraft Finance made inquiries of the administrative  agent, the servicer
and Bankers Trust Company,  as to their state of readiness and their contingency
plans. Since January 1, 2000,  Aircraft Finance has not experienced any material
Y2K-related  disruptions  and is not aware that any of these other  parties have
either.

     Aircraft Finance will continue to monitor the situation,  however,  for the
unlikely  appearance of Y2K-related  complications  or disruptions  and will, if
necessary, seek to replace problematic third-party service providers or lessees.

New Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards No. 133 ("SFAS 133"),  "Accounting
for  Derivative  Instruments  and Hedging  Activities",  which is effective  for
fiscal years beginning after June 15, 1999. SFAS 133 establishes  accounting and
reporting standards for derivative instruments and for hedging activities and it
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at 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.  The  accounting  for  changes  in the fair value of such
derivatives will vary based on the intended use of the derivative. In June 1999,
the FASB issued Statement of Financial Accounting Standard No. 137 ("SFAS 137"),
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133".  SFAS 137 deferred the effective date
of SFAS 133 for one year to fiscal years beginning after June 15, 2000. Aircraft
Finance plans to adopt SFAS 133 beginning in the year 2001. Adoption of SFAS 133
is not expected to have a significant  impact on Aircraft  Finance's  results of
operations, cash flows or financial position.


Item 7A.       Quantitative and Qualitative Disclosures about Market Risk

     Interest  incurred by Aircraft  Finance on the Notes and the rental  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.

     Aircraft  Finance is a party to five classes of Notes.  The estimated  fair
value of these Notes at December 31, 1999 was approximately  $1,167 million. The
terms of each class of the Notes,  including the outstanding principal amount at
December 31, 1999, are as follows:

                                       28
<PAGE>


                  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    368,896,643    LIBOR + 0.50%    June 15, 2008    May 15, 2024
     Class B      124,798,361    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 five 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 LIBOR.  On
December 31, 1999,  the estimated  fair values of these  interest rate swaps was
approximately $34 million.

     The  following  table  presents,  as of  December  31,  1999,  the terms of
Aircraft Finance's interest rate swap agreements:

                   Rate to be   Rate to be
        Fixed       paid by     received by
      Notional      Aircraft      Aircraft        Maturity         Estimated
       Amount       Finance       Finance           Date          fair value
       ------       -------       -------           ----          ----------
    $ 80,000,000     5.23%          LIBOR       April 15, 2000    $  247,349
      60,000,000     5.50%          LIBOR     January 15, 2002     1,395,868
     175,000,000     5.56%          LIBOR     October 15, 2002     5,542,080
     345,000,000     5.65%          LIBOR     January 15, 2004    15,157,012
     230,000,000     5.71%          LIBOR    November 15, 2004    11,741,234

     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.  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.

                                       29
<PAGE>

Item 8.       Financial Statements and Supplementary Data















                     Aircraft Finance Trust and Subsidiaries


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



                                       30
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Trustees:

In our opinion,  the  accompanying  consolidated  balance  sheet 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  at December  31,  1999,  and the
results of their  operations  and their cash flows for the period from inception
(April 13, 1999) to December 31, 1999, in conformity with accounting  principles
generally  accepted in the United  States.  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 audit. We conducted our audit
of these statements in accordance with auditing standards  generally accepted in
the United  States,  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
audit provides a reasonable basis for the opinion expressed above.




PricewaterhouseCoopers LLP

Fort Lauderdale, Florida
February 3, 2000



                                       31
<PAGE>


                     Aircraft Finance Trust and Subsidiaries

                           Consolidated Balance Sheet

                             (dollars in thousands)

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

                                     Assets

Cash and cash equivalents                                             $   72,682
Restricted cash                                                           19,468
Rents and other receivables                                                4,122
Aircraft, net                                                          1,170,564
Other assets                                                                 138
                                                                      ----------

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

              Liabilities and Beneficial Interest Holders' Equity

Accounts payable and accrued liabilities                              $    5,819
Deferred rental income                                                     7,031
Security and other deposits                                               30,385
Notes payable:
     Class A-1                                                           512,500
     Class A-2                                                           368,897
     Class B                                                             124,798
     Class C                                                             106,000
     Class D                                                              64,000
                                                                      ----------
     Total Notes payable                                               1,176,195
                                                                      ----------

     Total liabilities                                                 1,219,430
                                                                      ----------

Commitments and contingencies (Note 9)                                      --

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

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


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

                                       32
<PAGE>


                     Aircraft Finance Trust and Subsidiaries

                        Consolidated Statement of Income

                             (dollars in thousands)



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

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

      Total revenues                                               103,010
                                                                  --------

Expenses:
   Interest expense                                                 51,482
   Depreciation expense                                             28,488
   Operating expense                                                10,632
   Administration and other                                          3,951
                                                                  --------

      Total expenses                                                94,553
                                                                  --------

Net Income                                                        $  8,457
                                                                  ========

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


                                       33
<PAGE>


                     Aircraft Finance Trust and Subsidiaries

                      Consolidated Statement of Cash Flows

                             (dollars in thousands)

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

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

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

     Net cash used in investing activities                       (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                                          (32,805)
                                                                -----------

     Net cash provided by financing activities                    1,215,282
                                                                -----------

Net Increase in Cash and Cash Equivalents                            72,682

Cash and Cash Equivalents at Beginning of Period                       --
                                                                -----------

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

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


                                       34
<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
                                                                      =======


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


                                       35
<PAGE>

                     Aircraft Finance Trust and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 1999


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,  selling
commercial jet aircraft and related  activities.  All of the beneficial interest
of Aircraft Finance was initially  purchased by UniCapital AFT-I, Inc. (51%) and
UniCapital  AFT-II,  Inc.  (49%),  both  wholly-owned  indirect  subsidiaries of
UniCapital  Corporation.  During 1999,  UniCapital AFT-I, Inc. sold 49.9% of the
beneficial  interest of Aircraft Finance to several financial services companies
and UniCapital Corporation sold its remaining interest in UniCapital AFT-I, Inc.
to one of these financial services companies. As a result, at December 31, 1999,
these financial  services  companies own 51% of Aircraft  Finance and UniCapital
Corporation owns 49%.

         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 and
simultaneously  paid for 36  commercial  jet aircraft  which were  acquired from
General  Electric Capital  Corporation and certain of its affiliates  (together,
the "Seller").  Aircraft Finance's obligations,  including its debt obligations,
are not obligations of, or guaranteed by, the Seller,  UniCapital AFT-II,  Inc.,
UniCapital  Corporation  or any of its other  subsidiaries,  other owners of the
beneficial interest or any person other than Aircraft Finance.


Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

         The accompanying  consolidated  financial statements have been prepared
in accordance  with generally  accepted  accounting  principles 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 generally
accepted  accounting  principles  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

                                       36
<PAGE>

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.

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.  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.  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

                                       37
<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, 1999, 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
of expenses, swap payments and interest on certain classes of notes. Expenses of

                                       38
<PAGE>

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.  Certain lessee reserve accounts  consists of 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 at
December 31, 1999 were $12.72 million and $6.75 million, 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.  As of October 22, 1999, all
36 of Aircraft  Finance's  aircraft had been delivered to Aircraft  Finance.  At
December  31, 1999,  Aircraft  Finance had 35 aircraft on lease and one aircraft
off-lease, as follows:


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

         Aircraft under operating lease                    $ 1,167,431
         Accumulated depreciation                              (27,842)
                                                           -----------
         Aircraft under operating lease, net                 1,139,589

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

         Aircraft, net                                     $ 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, 1999,  35 of
Aircraft Finance's 36 aircraft, were on lease to 22 airlines in 12 countries. An
analysis  of  the  various  lessee  expiration  periods  of the  aircraft  under
operating leases is as follows at December 31, 1999:

         On lease for a further period of:
         ---------------------------------
         More than five years..........................................  8
         From one to five years........................................ 25
         Less than one year............................................  2
         Not on Lease..................................................  1
                                                                        --

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

                                       39
<PAGE>



         At December 31, 1999 future scheduled  minimum lease contract  payments
to be received  under  operating  leases for the years ended December 31, are as
follows: (dollars in thousands)

         2000.................................................$    123,933
         2001.................................................     121,086
         2002.................................................     110,533
         2003.................................................      87,686
         2004.................................................      55,897
         Thereafter...........................................      62,706
                                                              ------------

         Total................................................$    561,841
                                                              ============

         Additional  contingent  rentals are earned by Aircraft Finance based on
certain lessee's usage.  Contingent rentals in the amount of $11.56 million were
earned by Aircraft  Finance during the period from inception (April 13, 1999) to
December 31, 1999.

         Aircraft  Finance may acquire  additional  aircraft and related  leases
from the Seller,  UniCapital Corporation or their affiliates using proceeds from
the issuance of additional notes and equity.  Any such acquisition of additional
aircraft by Aircraft Finance will be subject to the terms of the Trust Indenture
and will require written  confirmation from the rating agencies rating the notes
that they will not  lower,  qualify  or  withdraw  any  rating on the notes as a
result.


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.

         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)

                    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
                 ===========

                                       40
<PAGE>


         The one-month LIBOR rate with respect to these notes as of December 31,
1999 was 6.46%.

         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").

         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.

         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, 1999 the estimated fair value of the
Notes was approximately $1,167 million.

         Cash paid for interest,  which includes  interest rate swaps  accounted
for as a hedge,  during the period  from  inception  (April  13,  1999)  through
December 31, 1999 amounted to $47.9 million.


Note 6 - Derivative Financial Instruments

Interest Rate Swaps

         At December 31,  1999,  Aircraft  Finance was a party to five  interest
rate swap agreements which it entered into on May 5, 1999. 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, 1999, the fair
values of these interest rate swaps was approximately $34 million.

         The following table presents, as of December 31, 1999, a summary of the
terms of the  Aircraft  Finance's  interest  rate  swap  agreements:(dollars  in
thousands)

                                       41
<PAGE>

                   Rate to be   Rate to be
        Fixed       paid by     received by
      Notional      Aircraft      Aircraft        Maturity         Estimated
       Amount       Finance       Finance           Date          fair value
       ------       -------       -------           ----          ----------

     $ 80,000        5.23%        LIBOR        April 15, 2000      $   247
       60,000        5.50%        LIBOR      January 15, 2002        1,396
      175,000        5.56%        LIBOR      October 15, 2002        5,542
      345,000        5.65%        LIBOR      January 15, 2004       15,157
      230,000        5.71%        LIBOR     November 15, 2004       11,741


Note 7 - New Accounting Pronouncements

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards No. 133 ("SFAS 133"),  "Accounting
for  Derivative  Instruments  and Hedging  Activities",  which is effective  for
fiscal years beginning after June 15, 1999. SFAS 133 establishes  accounting and
reporting standards for derivative instruments and for hedging activities and it
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at 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.  The  accounting  for  changes  in the fair value of such
derivatives will vary based on the intended use of the derivative. In June 1999,
the FASB issued Statement of Financial Accounting Standard No. 137 ("SFAS 137"),
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133".  SFAS 137 deferred the effective date
of SFAS 133 for one year to fiscal years beginning after June 15, 2000. Aircraft
Finance plans to adopt SFAS 133 beginning in the year 2001. Adoption of SFAS 133
is not expected to have a significant  impact on Aircraft  Finance's  results of
operations, cash flows or financial position.


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.

         One of the  three  Controlling  Trustees,  the  Equity  Trustee,  is an
employee of UniCapital Air Group,  Inc. a wholly-owned  subsidiary of UniCapital
Corporation and the parent company of UniCapital AFT-II, 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.  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.

                                       42
<PAGE>



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.


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,  Aircraft  Finance
recognized  $100  million  of rental and other  income  from  operating  leases,
comprised of $14 million from lessees based in the United States and $86 million
from lessees  based  outside the United  States.  At December  31,  1999,  35 of
Aircraft  Finance's  36  aircraft  were on lease to 22 lessees in 12  countries,
while one aircraft was off lease after being repossessed.  Also, on December 31,
1999,  nine of the  aircraft  are being  leased to lessees  domiciled in certain
emerging  markets,  including those located in Eastern Europe,  the Middle East,
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,  1999,  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
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.


                                       43
<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            45          Independent Controlling Trustee
     Richard E. Cavanagh         53          Independent Controlling Trustee
     Wayne D. Lippman            52          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
University.  Before  that,  he was a partner of  McKinsey &  Company,  Inc.,  an

                                       44
<PAGE>

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, the BlackRock Mutual Fund family, Arch Chemicals (formerly
Olin),  The Fremont Group (formerly  Bechtel  Investments) and The Guardian Life
Insurance Company.

     WAYNE D.  LIPPMAN -- Mr.  Lippman is the Vice  Chairman of  UniCapital  Air
Group,  Inc., a wholly-owned  subsidiary of UniCapital  Corporation,  a New York
Stock  Exchange  listed  company.  Mr.  Lippman  has held the  position  of Vice
Chairman  and Chief  Operating  Officer of Cauff,  Lippman  Aviation,  Inc.  and
affiliated  aircraft leasing and trading  companies since 1981.  Cauff,  Lippman
Aviation,  Inc. and some of its  affiliates  were  acquired by UniCapital in May
1998. In May 1999 Mr. Lippman was appointed President of UniCapital's Big Ticket
Leasing Division.

     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),
ReSource/Phoenix,  Inc.,  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
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

                                       45
<PAGE>

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
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.

                                       46
<PAGE>


     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

    (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.

                                       47
<PAGE>


     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.

     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,

                                       48
<PAGE>

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,  ReSource/Phoenix,  Inc., the financial advisor,  Bankers
Trust  Company,  the owner  trustee,  Wilmington  Trust  Company and the capital
markets advisor, Lehman Brothers Inc.

ADMINISTRATIVE AGENT

     ReSource/Phoenix,  Inc.  will act as the  initial  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;

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<PAGE>


    (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.  ReSource/Phoenix'  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;

    (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.

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<PAGE>


     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.


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.             49%
                                   10800 Biscayne Boulevard
                                   Miami, Florida 33161

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<PAGE>


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           *11%
                                   11130 Sunrise Valley Drive
                                   Reston, VA 20191

* TransCapital  Corporation  owns 9.9% 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.

b) Certain business relationships.

     Wayne D.  Lippman,  the  equity  trustee  and one of the three  controlling
trustees of Aircraft  Finance,  is an employee of UniCapital Air Group,  Inc., a
wholly-owned  subsidiary of UniCapital Corporation and the parent company of one
of the holders of Aircraft  Finance's  beneficial  interest.  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. Though it had
been contemplated that Mr. Lippman would at some point resign as equity trustee,
Mr. Lippman now plans to stay on indefinitely.


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<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............31
             Consolidated Balance Sheet....................................32
             Consolidated Statement of Income..............................33
             Consolidated Statement of Cash Flows..........................34
             Consolidated Statement of Changes in Beneficial Interest......35
             Notes to Consolidated Financial Statements....................36

b.       Current Reports on Form  8-K.

         No  Current  Reports on Form 8-K were filed  during the  quarter  ended
         December 31, 1999.

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.**
23.2     Consent of BK Associates, Inc.**

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<PAGE>

23.3     Consent of Morton, Beyer & Agnew.**
27.1     Financial Data Schedule.**
99.1     Appraisal of Aircraft Information Sercices, Inc.**
99.2     Appraisal of BK Associates, Inc.**
99.3     Appraisal of Morton, Beyer & Agnew.**

*        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.
**       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.


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<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, 2000             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, 2000
-----------------------                                         ----------------
David H. Treitel


/S/RICHARD E. CAVANAGH     Independent Controlling Trustee      March 22, 2000
-----------------------                                         ----------------
Richard E. Cavanagh


/S/WAYNE D. LIPPMAN        Equity Trustee and                   March 22, 2000
-----------------------    Controlling Trustee                  ----------------
Wayne D. Lippman


/S/CHARISSE L. RODGERS     Owner Trustee                        March 22, 2000
-----------------------                                         ----------------
Wilmington Trust Company,
not in its individual
capacity but solely as
the Owner Trustee



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