<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

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

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

                      FOR THE YEAR ENDED DECEMBER 31, 1999

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

      For the transition period ___________________ to ___________________.
                        Commission file number 000-22249

                        INTERNATIONAL AIRCRAFT INVESTORS
             (Exact name of registrant as specified in its charter)

          CALIFORNIA                                       95-4176107
(State or other jurisdiction of                     (I.R.S. Employer ID No.)
 incorporation or organization)

   3655 TORRANCE BOULEVARD,                                   90503
SUITE 410, TORRANCE, CALIFORNIA                             (Zip Code)
  (Address of registrant's
 principal executive offices)

       Registrant's telephone number, including area code: (310) 316-3080

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period 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 (section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to Form 10-K. [X]

The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant at March 16, 2000 was approximately $20,987,070
(based on the closing price on Nasdaq National Market as reported by the Wall
Street Journal on such date).

At March 16, 2000, the registrant had issued and outstanding an aggregate of
4,166,784 shares of its common stock.

                       Documents Incorporated by Reference

Certain information included in the registrant's definitive proxy statement
("Proxy Statement") to be filed with the Securities and Exchange Commission for
the Annual Meeting of Stockholders of the registrant is incorporated by
reference into Part III hereof.

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                        INTERNATIONAL AIRCRAFT INVESTORS
                           ANNUAL REPORT ON FORM 10-K
                      FOR FISCAL YEAR END DECEMBER 31, 1999


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

  ITEM                                  PART I                              PAGE
  ----                                                                      ----
<S>       <C>                                                               <C>
    1     Business                                                            3

    2     Properties                                                         14

    3     Legal Proceedings                                                  14

    4     Submission of Matters to a Vote of Securities Holders              14

                                        PART II

    5     Market for Registrant's Common Equity and Related
          Stockholder Matters                                                15

    6     Selected Financial Data                                            16

    7     Management's Discussion and Analysis of Financial Condition
          and Results of Operation                                           18

    7A    Quantitative and Qualitative Disclosures About Market Risk         21

    8     Financial Statements and Supplementary Data                        21

    9     Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure                                           21

                                        PART III

    10    Directors and Executive Officers of the Registrant                 22

    11    Executive Compensation                                             22

    12    Security Ownership of Certain Beneficial Owners and
          Management                                                         22

    13    Certain Relationships and Related Transactions                     22

                                         PART IV

    14    Exhibits, Financial Statement Schedules and Reports on Form 8-K    22
</TABLE>



                                  2
<PAGE>   3

                                PART I

ITEM 1. BUSINESS.

GENERAL

      We are primarily engaged in the acquisition of used, single-aisle jet
aircraft for lease and sale to domestic and foreign airlines and other
customers. As of December 31, 1999, we had sixteen aircraft on lease to fifteen
airlines worldwide. We lease aircraft under "triple net" operating leases where
the lessee is responsible for all operating costs (i.e., crew, fuel, insurance,
taxes, licenses, landing fees, navigation charges, maintenance, repairs and
associated expenses) and we retain the potential benefit and risk of the
residual value of the aircraft, as distinct from finance leases where the full
cost of the aircraft is recovered over the term of the lease at generally lower
lease rates.

      The Company was incorporated in California in 1988. Our principal
executive offices are located at 3655 Torrance Boulevard, Suite 410, Torrance,
California 90503 and our telephone and facsimile numbers are (310) 316-3080 and
(310) 316-8145, respectively.

STRATEGY

      Our strategy is to focus on entering into operating leases of used,
single-aisle jet aircraft to a diversified base of customers worldwide, while
employing strict risk management criteria. Key elements of our business strategy
include the following:

      Focus on Operating Leases. We believe that airlines are aware of the
benefits of financing their fleet equipment on an operating lease basis,
including preservation of cash flow and flexibility regarding fleet size and
composition. We believe the operating lease of jet aircraft, especially used jet
aircraft, offers the potential for a higher rate of return to us than other
methods of aircraft financing, such as finance leases.

      Focus on Used Commercial Jet Aircraft with a Broad Market Acceptance. We
lease used, single-aisle jet aircraft which generally range between five and 15
years old at the time the aircraft is acquired by us. We currently focus on the
acquisition and lease of single-aisle jet aircraft, primarily aircraft with a
seating capacity of 121 to 240 passengers. According to the 1999 Current Market
Outlook published by the Boeing Commercial Airplane Group in 1999, that type of
aircraft accounted for approximately 40% of the world fleet at December 31,
1998. The Boeing Report estimates that the commercial replacement cycle for this
type of aircraft is 25 to 28 years from manufacture date. This category of jet
aircraft includes the Boeing 737-300/-400, the Boeing Model 757-200, the
McDonnell Douglas MD80 series and the Airbus A320.

      Optimize Relationship with ILFC. We have had a long and continuous
relationship with International Lease Finance Corporation. ILFC was an initial
investor in us and currently owns approximately 1.6% of our common stock. ILFC
is a major owner-lessor of commercial jet aircraft and has contacts with most
airlines worldwide, the aircraft and engine manufacturers and most of the
significant participants in the aircraft industry worldwide. We intend to use
our relationship with ILFC to gain access, where appropriate, to various
airlines and other participants in the market to facilitate the purchase, lease,
re-lease and sale of aircraft. ILFC's primary focus is the acquisition and
leasing of new, rather than used, commercial jet aircraft. Thus, we believe that
our business complements rather than competes with ILFC. See "Relationship With
ILFC" below.

      Leverage Management Experience. The successful purchase and leasing of
used commercial jet aircraft requires skilled management in order to evaluate
the condition and price of the aircraft to be purchased and the current and
anticipated market demand for that aircraft. Our management and our Board of
Directors have significant experience in the aviation industry, with an average
of more than 20 years of experience, especially in the purchase, sale and
financing of commercial jet aircraft, and have extensive contacts with airlines
worldwide.

      Access a Diversified Global Customer Base. Our objective is to diversify
our customer base to avoid dependence on any one lessee, geographic area or
economic trend.



                                  3
<PAGE>   4

      Employ Strict Risk Management Criteria. We will only purchase aircraft
that are currently under lease or are subject to a contractual commitment for
lease or purchase. We currently seek to finance our aircraft using a
non-recourse loan structure. We will not purchase aircraft on speculation. We
evaluate carefully the credit risk associated with each of our lessees and the
lessee's ability to operate and properly maintain the aircraft. We also evaluate
the return conditions in each lease since the condition of an aircraft at the
end of a lease can significantly impact the amount we will receive on the
re-lease or sale of an aircraft.

AIRCRAFT LEASING

      All of our current leases are operating leases rather than finance leases.
Under an operating lease, we retain title to the aircraft, thereby retaining the
potential benefits and assuming the risk of the residual value of the aircraft.
Operating leases allow airlines greater fleet and financial flexibility due to
their shorter-term nature, the relatively small initial capital outlay necessary
to obtain use of the aircraft and off-balance sheet treatment. Operating lease
rates are generally priced higher than finance lease rates, in part because of
the risks to the lessor associated with the residual value. See "Cautionary
Statements."

      We target the medium-term operating lease market, which generally consists
of three to eight year initial noncancelable lease terms. Our leases are "triple
net leases" whereby the lessee is responsible for all operating costs (i.e.,
crew, fuel, insurance, taxes, licenses, landing fees, navigation charges,
maintenance, repairs and associated expenses). In addition, our leases contain
extensive provisions regarding our remedies and rights in the event of a default
by the lessee. The leases have payment clauses that require the lessee to
continue to make the lease payments regardless of circumstances, including
whether or not the aircraft is in service. Certain of our leases limit the
lessee's obligation to make lease payments if we violate the covenant of quiet
enjoyment regarding the aircraft or if we enter bankruptcy and do not assume the
lease. During the term of the lease, we are required to be named as an
additional insured on the lessee's aviation hull and liability insurance
policies. Also, the leases contain very specific criteria for the maintenance
and regulatory status of the aircraft, as well as the return conditions for the
airframe, engines, landing gears, auxiliary power unit and associated
components.

      Generally, the lessee provides us with an initial security deposit that is
returnable at the expiration of the lease if all lease return conditions are met
by the lessee and there is no default under the lease. Depending on the
creditworthiness of a lessee, in some instances the lessee will also pay into a
maintenance reserve account a certain amount monthly for each hour the aircraft
and/or engine has flown. The lessee may draw upon these maintenance reserves to
reimburse the cost of periodic scheduled overhaul and maintenance checks. At the
termination of the lease, the lessee is required to return the aircraft to us in
the same condition as it was received, normal wear and tear excepted, so the
aircraft is in a proper condition for re-lease or sale. See "Cautionary
Statements."

      We make an analysis of the credit risk associated with each lease before
entering into a lease. We obtain extensive financial information regarding the
lessee. We evaluate the prospective lessee's available financial statements and
trade and banking references, and working with our lender evaluate country and
political risk, insurance coverage, liability and expropriation risk. The
process for credit approval is a joint undertaking between us and the senior
lender providing the debt financing for the leased aircraft. See "Cautionary
Statements."

      Upon termination of a lease, our objective is to re-lease or sell the
aircraft. Our leases generally require that the lessee notify us six to nine
months prior to the termination of the lease as to whether the lessee intends to
exercise any option to extend the lease. This allows us to commence our
remarketing efforts well in advance of the termination of a lease. We generally
negotiate lease extensions with our lessees. However, since January 1, 1997,
aircraft which came off lease were re-leased to four new customers.



                                  4
<PAGE>   5

CUSTOMERS

      At December 31, 1999, our lessees included:

            Domestic Customers:               Foreign Customers:

            -  Delta Air Lines, Inc.          -  Air Liberte S.A.

            -  ILFC (subleased to Copmania    -  Air Transat A.T. Inc.
               Panamenia de Aviacon, S.A.
               (COPA))

            -  Southwest Airlines Co.         -  Asiana Airlines, Inc.

            -  Trans World Airlines, Inc.     -  British Airways Plc

                                              -  Canada 3000 Airlines Limited

                                              -  COPA

                                              -  Flying Colours Airlines Limited

                                              -  GB Airways Limited

                                              -  Islandsflug, HF

                                              -  New Zealand International
                                                 Airlines Ltd.

                                              -  TransAer International Airlines
                                                 Limited

                                              -  Transportes Aereos Ejecutivos,
                                                 S.A. de C.V. (TAESA)

      During the years ended December 31, 1997, 1998 and 1999, lease revenues
from flight equipment generated from foreign customers accounted for
approximately 61%, 68% and 76%, respectively, of total revenues.

      Many foreign countries have currency and exchange laws regulating the
international transfer of currencies. We attempt to minimize our currency and
exchange risks by negotiating all of our aircraft leases in U.S. Dollars. We
require, as a condition to any foreign transaction, that the lessee in a foreign
country first obtain, if required, written approval of the appropriate
government agency, finance ministry or central bank for the remittance of all
funds contractually owed to us in U.S. Dollars. Although we have attempted to
minimize the foreign currency risk, to the extent that significant currency
fluctuations result in materially higher rental costs to a foreign lessee, the
foreign lessee may be unable or unwilling to make the required lease payments.

      The following customers accounted for more than 10% of our total revenues
in one or more of the three years ended December 31, 1999:

            Air Belgium International N.V.    British Airways Plc.
              1998-10%                          1998-12%
                                                1997-11%

            Air Transat A.T. Inc.             Shanghai Airlines
              1999-11%                          1998-11%
              1998-15%                          1997-13%

            Alaska Airlines, Inc.             Southwest Airlines Co.
              1997-17%                          1997-13%

We lease aircraft to British Airways and two of its affiliates (Air Liberte and
GB Airways). Revenues from British Airways and its affiliates accounted for 11%,
16% and 19% in 1997, 1998 and 1999, respectively.



                                       5
<PAGE>   6

FINANCING/SOURCE OF FUNDS

      We purchase used aircraft and aircraft engines on lease to airlines
directly from other leasing companies or from airlines for leasing back to the
airlines. Our typical purchase requires both secured debt and an equity
investment by us. We generally make an equity investment of approximately 5% to
15% of the purchase price of aircraft and engines from internally generated and
other cash and seller financing (primarily from ILFC). We typically finance the
balance of the purchase price with the proceeds of borrowings from banks or
other financial institutions secured by the aircraft being financed (to date
with the support of ILFC as the seller of the flight equipment).

      We maintain banking relationships primarily with four commercial banks
providing long-term secured equipment financing to us in an aggregate amount of
$127.9 million at December 31, 1999. ILFC has provided certain guarantees and
other financial support with respect to our borrowings which have allowed us to
finance our aircraft at more favorable leverage than we could have obtained
without ILFC's support. See Notes 5 and 6 to Consolidated Financial Statements.

      At December 31, 1999, $262.9 million (or 96.7%) of our borrowings to
finance aircraft purchases were on a non-recourse basis. Non-recourse loans are
structured as loans to special purpose subsidiaries which only own the assets
which secure the loan. Only the relevant special purpose subsidiary is liable
for the repayment of the non-recourse loan. We are only liable if we breach
certain limited representations and warranties under the applicable loan
documentation. The lender assumes the credit risk of each lease, and its only
recourse upon a default under the lease is against the lessee, the leased
equipment and the special purpose subsidiary. Interest rates under this type of
financing are negotiated on a transaction-by-transaction basis and reflect the
financial condition of the lessee, the terms of the lease, any guarantees and
the amount of the loan. The remaining $9.1 million of our borrowings are on a
recourse basis. ILFC has agreed to indemnify us for any payments under this
recourse loan not funded by lease or sale payments.

      The terms of all of our current non-ILFC bridge borrowings end within 30
to 60 days after the minimum noncancelable period under the related lease, after
which we will be required to renegotiate the loan or obtain other financing in
connection with the re-lease of the aircraft. See "Cautionary Statements."

      Notes payable due within one year totaled $102.4 million at December 31,
1999, of which $101.3 million represents balloon payments and $1.1 million
represents installment payments. We intend to refinance all of the balloon
payments due in 2000. During 1997, 1998 and 1999, we refinanced $40.4 million,
$29.7 million and $46 million of balloon payments, respectively.

      At December 31, 1999, our borrowings had interest rates ranging from 6.0%
to 7.96% per annum, with a weighted average interest rate of 7% per annum. At
December 31, 1999, approximately 10% of our borrowings accrued interest on a
floating rate basis.

      We have previously provided for all of our financing needs through
internally generated funds, borrowings and equity capital. There is no assurance
that those sources will provide us with additional capital resources. Our future
growth is dependent upon raising additional capital. See "Cautionary
Statements."

RELATIONSHIP WITH ILFC

      ILFC was an initial investor in the Company, and owns approximately 1.6%
of our common stock. Fourteen of our sixteen present aircraft were acquired from
ILFC and ILFC has provided certain guarantees and other financial support with
respect to our borrowings. See "Financing/Source of Funds" above. ILFC has also
paid various fees to us for consulting and remarketing services. We have entered
into an agreement with ILFC pursuant to which ILFC has agreed to assist us in
the remarketing of our aircraft if requested by us. See "Aircraft Leasing"
above, "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations," and Note 5 to Consolidated
Financial Statements. ILFC is a wholly owned subsidiary of American
International Group, Inc. and is a major owner-lessor of commercial jet
aircraft.



                                       6
<PAGE>   7

COMPETITION

      The aircraft leasing industry is highly competitive. The level of
competition depends in part upon the type of aircraft being leased and
prospective lessees for the aircraft. Competition is primarily based upon the
availability of the aircraft required by the customer and the lease rate. We
believe that only a few comparably sized companies focus primarily on the same
segment of the aircraft leasing market as we do. In addition, a number of
aircraft manufacturers, airlines and other operators, distributors, equipment
managers, leasing companies (including ILFC), financial institutions and other
parties engaged in leasing, managing, marketing or remarketing aircraft compete
with us, although their primary focus is not on the same market segment on which
we focus. Many of these periodic competitors have significantly greater
financial resources than we have. Our competitors may lease aircraft at lower
rates than we do and provide benefits, such as direct maintenance, crews,
support services and trade-in privileges, which we do not intend to provide. We
believe that we are able to compete in the leasing of used jet aircraft due to
our experience in the industry and our reputation and expertise in acquiring and
leasing aircraft. See "Cautionary Statements."

GOVERNMENT REGULATION

      The Federal Aviation Administration ("the FAA"), the Department of
Transportation and the Department of State exercise regulatory authority over
the air transportation industry in the United States. Most other countries have
similar regulatory agencies. The FAA has regulatory jurisdiction over
registration and flight operations of aircraft operating in the United States,
including equipment use, ground facilities, maintenance, communications and
other matters.

      The FAA regulates the operation and maintenance of all aircraft operated
in the United States. Its regulations are designed to ensure that all aircraft
and aviation equipment are continuously maintained in proper condition to ensure
safe operation of the aircraft. Similar rules apply in most other countries. All
aircraft must be maintained under a continuous condition monitoring program and
must periodically undergo thorough inspection and maintenance. The inspection,
maintenance and repair procedures for the various types of aircraft equipment
are prescribed by regulatory authorities and can be performed only by certified
repair facilities utilizing certified technicians. The FAA can suspend or revoke
the authority of air carriers or their licensed personnel for failure to comply
with its regulations and can ground aircraft if their airworthiness is in
question.

      The Department of State and the Department of Transportation, in general,
have jurisdiction over economic regulation of air transportation, but since we
do not operate our aircraft for public transportation of passengers and
property, we are not directly subject to their regulatory jurisdiction.

      To export aircraft from the U.S. to a foreign destination, we are required
to obtain an export license from the United States Department of Commerce. To
date, we have not experienced any difficulty in obtaining the required
certificates, licenses and approvals either from the FAA, the Department of
Commerce or any other regulatory agency or their foreign counterparts.

      Member countries of the United Nations are signatories to the
International Civil Aviation Organization. Each signatory has agreed to comply
with airworthiness directives of the country of manufacture of the aircraft. We
will not lease our aircraft to any carrier domiciled in a country which is not a
member of ICAO. We also require our lessees to comply with the most restrictive
standards of either the FAA or its foreign equivalent. For older aircraft, a
special group of airworthiness directives require extensive inspections and
repairs to bring the aircraft into compliance, which are required to be paid by
the lessee. In some instances, we may have to share in the cost of complying
with regulatory airworthiness directives.

      The FAA and the civil aviation authorities of most countries and
international entities issue regulations limiting permitted noise and other
emissions from aircraft. In most instances, older non-complying aircraft may be
brought into compliance by modifying the engines. Fourteen of our aircraft
currently comply with these regulations. Our remaining two aircraft, currently
on lease to 2001, are leased in areas not requiring modification. These two
aircraft may require modification if moved to a jurisdiction requiring
compliance. Currently, these modifications range in cost from $1.2 million to $2
million per aircraft. In some instances, it is necessary to perform noise
compliance work to lease the aircraft into a new jurisdiction. For example,
Western Europe and the United States have non-addition rules which state that an
aircraft which does not meet specified noise compliance regulations cannot be
brought into the region and operated by an



                                       7
<PAGE>   8

airline licensed by one of these governments. A non-complying aircraft can only
be leased or sold into a market that does not require compliance with the
stricter standards. See "Cautionary Statements."

INSURANCE

      We require our lessees to carry those types of insurance which are
customary in the air transportation industry, including comprehensive third
party liability insurance and aircraft hull insurance. We are named as an
additional insured on both the liability and hull policies carried by our
lessees. All policies contain a breach of warranty endorsement so that our
interests are not prejudiced by any act or omission of the operator-lessee.

      Insurance premiums are prepaid by the lessee on a periodic basis, with
payment acknowledged to us through an independent insurance broker. The
territorial coverage is, in each case, suitable for our lessee's area of
operations and the policies contain, among other provisions, a "no co-insurance"
clause and a provision prohibiting cancellation or material change without at
least 30 days advance written notice to us. Furthermore, the insurance is
primary and not contributory and all insurance carriers are required to waive
rights of subrogation against us.

      The stipulated loss value schedule under aircraft hull insurance policies
is on an agreed value basis, which usually exceeds the book value of the
aircraft. Aircraft hull policies contain standard clauses covering aircraft
engines with deductibles required to be paid by the lessee. Furthermore, the
aircraft hull policies contain full war risk endorsements, including, but not
limited to, confiscation, seizure, hijacking and similar forms of retention or
terrorist acts, subject to certain specified exclusions. All losses under such
policies are payable in U.S. Dollars.

      The comprehensive liability insurance policies include provisions for
bodily injury, property damage, passenger liability, cargo liability and such
other provisions reasonably necessary in commercial passenger and cargo airline
operations with minimal deductibles. These policies generally have combined
comprehensive single liability limits of not less than $200 million and require
all losses to be paid in U.S. Dollars.

      Insurance policies are generally placed or reinsured in the Lloyds of
London or U.S. markets. The insurance carrier under the insurance policies must
be approved by us.

EMPLOYEES

      As of December 31, 1999, we had seven employees. None of our employees is
covered by a collective bargaining agreement and we believe our employee
relations are good.

CAUTIONARY STATEMENTS

      This Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and are intended to be
covered by the safe harbors created thereby. The cautionary statements made in
this Report on Form 10-K should be read as being applicable to all related
forward-looking statements wherever they appear in this Report on Form 10-K. Our
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include those discussed below, as
well as those discussed elsewhere in this Report.



                                       8
<PAGE>   9

We retain the residual value risk and the risk of the re-lease or sale of the
aircraft.

      We lease our portfolio of aircraft under operating leases rather than
finance leases. Under an operating lease, we retain title to the aircraft and
assume the risk of not recovering our entire investment in the aircraft through
the re-leasing and remarketing process. Operating leases require us to re-lease
or sell aircraft in our portfolio in a timely manner upon termination of the
lease in order to minimize off-lease time and recover our original investment in
the aircraft. Numerous factors, many of which are beyond our control, may have
an impact on our ability to re-lease or sell an aircraft on a timely basis or to
re-lease at a satisfactory lease rate. Among the factors are:

      -     the demand for various types of aircraft

      -     general market and economic conditions

      -     regulatory changes, including those imposing environmental,
            maintenance or operational requirements

      -     changes in supply or cost of aircraft

      -     technological developments

      In addition, the success of an operating lease depends in significant part
upon having the aircraft returned by the lessee in marketable condition as
required by the lease. Consequently, we cannot assure you that our estimated
residual value for aircraft will be realized. If we are unable to re-lease or
resell aircraft on favorable terms, our business, financial condition and
results of operations could be adversely affected.

We depend on the airline industry.

      We are in the business of providing leases of commercial jet aircraft to
international and domestic airlines. Consequently, we are affected by downturns
in the air transportation industry in general. We could be negatively impacted
by any of the following factors affecting the air transportation industry:

      -     substantial increases in fuel costs or interest rates

      -     fare competition

      -     slower growth in traffic

      -     the number and quality of available aircraft

      -     significant downturn in the general economy

      In recent years, a number of commercial airlines have experienced
financial difficulties, in some cases resulting in bankruptcy proceedings. While
we believe that our lease terms protect our aircraft and our investment in our
aircraft, we cannot assure you that the financial difficulties experienced by
airlines will not have an adverse effect on our business, financial condition
and results of operations.

We have a limited number of aircraft and lessees.

      We currently own and lease sixteen aircraft to fifteen lessees. The loss
of any one aircraft or the financial difficulty of or lease default by any one
lessee could have a material adverse effect on our business, financial condition
and results of operations.

We depend upon ILFC.

      Fourteen of our current sixteen aircraft were acquired from ILFC. See
"Relationship With ILFC". In connection with all of our aircraft, ILFC has
provided guarantees or other financial support which have allowed us to finance
the aircraft at more favorable leverage than we could have obtained without the
guarantees and financial support of ILFC. In addition, ILFC has provided a
portion of the consulting fees reported by us. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We cannot assure you
that we will be able to continue to acquire from ILFC or from other entities
aircraft and leases of the type and on terms as favorable as or better than the
aircraft and leases acquired from ILFC. If aircraft and leases are acquired from
ILFC or others, we cannot assure you that guarantees or financial support will
be given by the seller or whether we will be able to receive as favorable
leverage and interest rates from its lenders. If we are unable to acquire
aircraft and leases and to finance the acquired aircraft at competitive rates,
our business, financial condition and results of operations could be adversely
affected. See "Relationship With ILFC," and Note 5 to Consolidated Financial
Statements.



                                       9
<PAGE>   10

We are exposed to our lessees' credit risk.

      Certain of our existing and prospective customers are smaller domestic and
foreign passenger airlines which, together with major passenger airlines, may
suffer from the factors which have historically affected the airline industry.
See "We depend on the airline industry" above. A lessee may default in
performance of its lease obligations and we may be unable to enforce our
remedies under a lease. A number of airlines have experienced financial
difficulties, and certain airlines have filed for bankruptcy. A number of these
airlines have ceased operations. In most cases where a debtor seeks protection
under Chapter 11 of the United States Bankruptcy Code, creditors are stayed
automatically from enforcing their rights. In the case of United States
certificated airlines, Section 1110 of the Bankruptcy Code provides certain
relief to lessors of aircraft. Specifically, the airline has 60 days from the
date the lessor makes its claim to agree to perform its obligations and to cure
any defaults before the lessor may repossess the aircraft. The scope of Section
1110 has been the subject of significant litigation and we cannot assure you
that the provisions of Section 1110 will protect our investment in an aircraft
in the event of a lessee's bankruptcy. In addition, Section 1110 does not apply
to lessees located outside of the United States and applicable foreign laws may
not provide comparable protection.

We face special risks because of the number of foreign customers.

      Leases to foreign customers may present greater risks to us because
certain foreign laws, regulations and judicial procedures may not be as
protective of lessor rights as those which apply in the United States. We are
subject to the timing and access to courts and the remedies local laws impose in
order to collect our lease payments and recover our assets. Political
instability abroad and changes in international policy also present risks
associated with expropriation of our leased aircraft. We cannot assure you that
we will not experience problems in collecting amounts due under leases to
foreign customers or reacquiring aircraft from customers in the future.
International collection problems and problems in recovering aircraft could have
a material adverse effect on our business, financial condition and results of
operations.

      Many foreign countries have currency and exchange laws regulating the
international transfer of currencies. We attempt to minimize currency and
exchange risks by negotiating all of our aircraft leases in U.S. Dollars. We
require, as a condition to any foreign transaction, that the lessee in a foreign
country first obtain, if required, written approval of the appropriate
government agency, finance ministry or central bank for the remittance in U.S.
Dollars of all funds contractually owed to us. Although we have attempted to
minimize the foreign currency risk, to the extent that significant currency
fluctuations result in materially higher rental costs to a foreign lessee, the
foreign lessee may be unable or unwilling to make the required lease payments.

      Our revenues and income may be affected by political instability abroad,
changes in national policy and other political or economic events adversely
affecting world or regional trading markets or impacting a particular customer.

      Our aircraft can be subject to certain foreign taxes and airport fees.
Unexpected liens on an aircraft could be imposed in favor of a foreign entity,
such as Eurocontrol or the airports of the United Kingdom.

We may need to comply with certain aircraft noise requirements for some of our
aircraft.

      The Airport Noise and Capacity Act of 1990 requires the phaseout of Stage
2 aircraft (defined as aircraft that comply with the Stage 2 noise levels
prescribed in Part 36 of the Federal Aviation Regulations) by December 31, 1999,
subject to certain exceptions. Similar rules exist in other countries, including
the countries in Western Europe, Australia, New Zealand and Japan, which either
require compliance with regulations substantially identical to Stage 3 or which
forbid the operation of additional non-Stage 3 aircraft by carriers based in
those jurisdictions. This has the effect of limiting our ability to place our
Stage 2 aircraft on lease in those jurisdictions until they have been modified
to meet Stage 3 requirements.

      Fourteen of our aircraft currently meet Stage 3 requirements. Our
remaining two aircraft are currently leased in areas not imposing Stage 3
requirements. These two aircraft may require modification if moved to a
jurisdiction requiring Stage 3 compliance. Currently, these modification costs
range from $1.2 million to $2 million per aircraft. See "Government Regulation."
We cannot assure you that we will be able to obtain financing for any of these
modifications.

      The ANCA also recognizes the right of airport operators with special noise
problems to implement local noise abatement procedures as long as these
procedures do not interfere unreasonably with the interstate and foreign
commerce



                                       10
<PAGE>   11

of the national air transportation system. ANCA generally requires FAA approval
of local noise restrictions on Stage 3 aircraft and establishes a regulatory
notice and review process for local restrictions on Stage 2 aircraft first
proposed after October 1990. As the result of litigation and pressure from
airport area residents, airport operators have taken local actions over the
years to reduce aircraft noise. These actions have included regulations
requiring aircraft to meet prescribed decibel limits by designated dates,
curfews during night time hours, restrictions on frequency of aircraft
operations and various operational procedures for noise abatement.

      The imposition of and the cost of compliance by us with statutory and
regulatory requirements concerning noise restriction and abatement could have a
material adverse effect on our business, financial condition and results of
operations.

We depend on our ability to obtain financing.

      The operating lease business is a capital intensive business. Our typical
operating lease transaction requires a cash investment by us of approximately 5%
to 15% of the aircraft purchase price, commonly known as an "equity investment."
Our equity investments have historically been financed from internally generated
funds and other cash, seller financing (primarily from ILFC) and proceeds from
our initial public offering. The balance of the purchase price of an aircraft is
typically financed with the proceeds of non-recourse, secured borrowings from
banks or other financial institutions (to date with the support of ILFC as the
seller of the flight equipment). Accordingly, our ability to successfully
execute our business strategy and to sustain our operations is dependent, in
part, on the availability of debt and equity capital.

      In addition, the terms of our loans generally require a substantial
balloon payment at the end of the noncancelable portion of the lease of the
related aircraft, at which time we will be required to re-lease the aircraft and
renegotiate the loan with the lender or obtain other financing. Refinancing the
balloon amount of the loan is dependent upon our re-leasing the related
aircraft. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." We cannot assure you
that the necessary amount of capital will continue to be available to us on
favorable terms, or at all. If we are unable to continue to obtain any portion
of required financing on favorable terms, our ability to add new leases to our
lease portfolio, renew leases, re-lease an aircraft, repair or recondition an
aircraft if required or retain ownership of an aircraft on which financing has
expired could be limited, which could have a material adverse effect on our
business, financial condition and results of operations. In addition, our
financing arrangements to date have been dependent in part upon ILFC. See
"Reliance Upon ILFC" above and "Relationship With ILFC," and Note 5 to
Consolidated Financial Statements.

We face risks of changes in interest rates.

      Our leases are generally structured at fixed rental rates for specified
terms. See "Lease Portfolio" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." We cannot assure you that we will be able to finance or refinance
our borrowings at fixed rates which result in acceptable interest rate spreads
to the applicable leases, or at fixed rates at all. Increases in interest rates
could narrow or eliminate the spread, or result in a negative spread, between
the lease rates we realize under our leases and the interest rate that we pay
under our loans. Our business, financial condition and operating results could
be adversely affected during any period of increases in interest rates.

We face actual and potential competition from many sources.

      The aircraft leasing industry is highly competitive. The level of
competition depends in part upon the type of aircraft being leased and
prospective lessees for the aircraft. We believe that only a few comparably
sized companies on a worldwide basis focus primarily on the same segment of the
aircraft leasing market as we do. In addition, a number of aircraft
manufacturers, airlines and other operators, distributors, equipment managers,
leasing companies (including ILFC), financial institutions and other parties
engaged in leasing, managing, marketing or remarketing aircraft compete with us,
although their primary focus is not on the market segment on which we focus.
Many of these periodic competitors have significantly greater financial
resources than we have. Our competitors may lease aircraft at lower rates than
we do and provide benefits, such as direct maintenance, crews, support services
and trade-in privileges, which we do not intend to provide. We cannot assure you
that we will continue to compete effectively against present and future
competitors or that competitive pressures will not have a material adverse
effect on our business, financial condition and results of operations.



                                       11
<PAGE>   12

Foreign ownership of companies owning U.S. registered aircraft is limited.

      We intend to maintain United States registration of some of the aircraft
which we own. Aircraft may not be registered in the United States unless the
registered owner is a citizen of the United States or other permissible persons
under the Federal Aviation Act. If a corporation is the registered owner of an
aircraft, the corporation must be organized under the laws of the United States
or any State, and the president and two-thirds or more of the board of directors
and at least 75% of the voting interest of the corporation must be controlled by
persons who are citizens of the United States. Non-U.S. citizens may hold stock
in a U.S. corporation through an appropriate voting trust. Any failure to meet
the registration requirements of the FAA may result in substantial penalties,
including the forced sale of the aircraft, the potential for uninsured
casualties to the aircraft, the loss of the benefits of the central recording
system under federal law (thereby leaving the aircraft exposed to liens or other
interests not of record with the FAA), and a breach by us of any leases or
financing agreements with respect to the aircraft.

The limits on liability of lessors are uncertain.

      Section 44112 of Title 49 of the United States Code provides that a lessor
of aircraft generally will not be liable for any personal injury or death, or
damage to or loss of property, provided that the lessor is not in actual
possession or control of the aircraft at the time of such injury, death or
damage. Under certain circumstances, however, courts have interpreted Section
44112 narrowly, limiting its protection to certain aircraft lessors and have
held that state common law remedies may apply, notwithstanding the limitations
on liability under Section 44112. Under common law, the owner of an aircraft may
be held liable for injuries or damage to passengers or property, and damage
awards can be substantial. Because there is little case law interpreting Section
44112, we cannot assure you that the provisions of Section 44112 would fully
protect us from all liabilities in connection with any injury, death, damage or
loss that may be caused by any aircraft we own. For example, Section 44112 may
not preempt state law with respect to liability for third party injuries arising
from a lessor's or owner's own negligence. It is anticipated that each lessee
under the terms of each lease to be entered into by us will be obligated to
indemnify us for, or insure us against, virtually all claims by third parties;
however, in the event that Section 44112 were not applicable, we cannot assure
you that the lessees could fulfill their indemnity obligations under any such
leases or that any insurance obtained will be sufficient.

We could be subject to substantial costs if lessees do not properly maintain
their leased aircraft.

      The maintenance and operation of aircraft are strictly regulated by the
FAA and foreign aviation authorities. The cost of complying with these
requirements is significant. We will seek to lease our aircraft to lessees that
agree to bear all or a significant portion of the costs of complying with
governmental regulations. All of our current leases require the lessee to bear
all of the costs of complying with governmental regulations. However, in the
event a lessee fails to maintain aircraft in accordance with the terms of a
lease or a lease terminates shortly before a major required overhaul, we may be
required to spend substantial sums to repair or recondition the aircraft and may
be required to borrow funds for the purpose. The FAA issued several
Airworthiness Directives in 1990 mandating changes to the maintenance programs
for older aircraft. These ADs were issued to ensure that the oldest portion of
the United States' transport aircraft fleet remains airworthy. The FAA is
requiring that these aircraft undergo extensive structural modifications. These
modifications are required upon accumulation of 20 years' time in service or
prior to the accumulation of a designated number of flight-cycles, whichever
occurs later. Future regulatory changes may also increase the cost of operating
or maintaining the aircraft and may adversely affect the residual value of the
aircraft. The failure of a lessee to comply with lease maintenance and operation
obligations or the imposition of governmental requirements involving substantial
compliance costs could have a material adverse effect on our business, financial
condition and results of operations.

Changes in tax laws or accounting principles could adversely affect us.

      Our leasing activities generate significant depreciation allowances that
provide us with substantial tax benefits on an ongoing basis. In addition, some
of our lessees currently enjoy favorable accounting and tax treatment by
entering into operating leases. Any change to current tax laws or accounting
principles that make operating lease financing less attractive could adversely
affect our business, financial condition and results of operations.



                                       12
<PAGE>   13

We are dependent on key management

      Our business operations are dependent in part upon the expertise of
certain key employees. The loss of the services of those employees, particularly
William E. Lindsey and Michael P. Grella, would have a material adverse effect
on our business, financial condition and results of operations.

Our quarterly operating results fluctuate.

      We have experienced fluctuations in our quarterly operating results and
anticipate that these fluctuations may continue. The factors causing
fluctuations include:

      -     the timing of purchases or sales of aircraft

      -     the timing and extent of consulting and remarketing fees

      -     unanticipated early lease terminations

      -     termination of a lease and the subsequent re-lease of an aircraft at
            a different lease rate

      -     default by a lessee

      Given the possibility of fluctuations, we believe that comparisons of the
results of our operations for preceding quarters are not necessarily meaningful
and that results for any one quarter should not be relied upon as an indication
of future performance. In the event our revenues or earnings for any quarter are
less than the level expected by securities analysts or the market in general,
the shortfall could have an immediate and significant adverse impact on the
market price of our common stock.



                                       13
<PAGE>   14

ITEM 2. PROPERTIES

FLIGHT EQUIPMENT

      We review opportunities to acquire suitable jet aircraft that meet our
portfolio strategy based on market demand and customer airline requirements, as
well as our portfolio mix and planning strategies. Before committing to purchase
an aircraft, we take into consideration factors such as estimates of future
values, potential for remarketing, trends in supply and demand for the
particular type, make and model of aircraft and engines and anticipated
obsolescence. As a result, certain types and vintages of aircraft do not meet
the profile for inclusion in our portfolio of aircraft. At December 31, 1998 and
1999, the average age of our flight equipment was 12.5 and 12.6 years,
respectively. As of December 31, 1998 and 1999, our portfolio contained ten and
fourteen aircraft, respectively that were Stage 3 compliant. See "Item 1.
Business--Cautionary Statements."

      The following table shows the scheduled lease terminations (for the
minimum noncancellable period) by aircraft type for our lease portfolio at
December 31, 1999:

<TABLE>
<CAPTION>
AIRCRAFT TYPE            2000    2001    2002    2003    2004    2005    TOTAL
-------------            ----    ----    ----    ----    ----    ----    -----
<S>                      <C>     <C>     <C>     <C>     <C>     <C>     <C>
A320-200 ...........       1      --      --       1      --      --       2
727-200 ............      --      --      --       1      --      --       1
737-200 ............      --       3      --      --      --      --       3
737-300 ............      --      --       3      --      --      --       3
737-400 ............      --       2      --       1      --      --       3
757-200 ............      --      --       1       1      --      --       2
MD-82 ..............      --      --      --      --       1      --       1
MD-83 ..............      --       1      --      --      --      --       1
                         ---     ---     ---     ---     ---     ---     ---
      Total ........       1       6       4       4       1      --      16
                         ===     ===     ===     ===     ===     ===     ===
</TABLE>

      We are in the process of terminating a lease with TAESA, a Mexican
airline. The airline recently had an accident on one of its DC-9 aircraft and
the Mexican government subsequently grounded its entire fleet. As a result,
TAESA defaulted on its lease of a Boeing Model 737-300, and we are currently in
the process of repossessing the aircraft. The lease was due to terminate June
2002.

FACILITIES

      Our principal offices are located at 3655 Torrance Boulevard, Suite 410,
Torrance, California. We occupy space in Torrance under a lease that covers
approximately 3,254 square feet of office space and expires on May 31, 2004. We
believe that our current facilities are adequate for our needs and do not
anticipate any difficulty replacing those facilities or locating additional
facilities, if needed. See Note 7 to Consolidated Financial Statements.


ITEM 3. LEGAL PROCEEDINGS.

      We are not currently involved in any litigation.


ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITIES HOLDERS.

      None.



                                       14
<PAGE>   15

                                     PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.

      Our common stock is listed on the National Association of Securities
Dealers Automated Quotation National Market (Nasdaq National Market) under the
trading symbol "IAIS." The high and low sale prices, as reported by The Nasdaq
Stock Market, Inc., for the years ended December 31, 1998 and 1999 were as
follows:

<TABLE>
                                   1998                     1999
                          ---------------------      -------------------
                            HIGH          LOW         HIGH         LOW
                          --------       ------      ------      -------
<S>                       <C>            <C>         <C>         <C>
First Quarter             $10 7/8        $9 1/8      $8 1/4      $6 1/8
Second Quarter            $10 5/8        $8 5/8      $7 1/8      $6 3/16
Third Quarter             $9 13/16       $6 3/4      $7 3/4      $6 7/16
Fourth Quarter            $7             $5 3/8      $7 1/4      $5 11/16
</TABLE>

      On March 16, 2000, the number of holders of record of our common stock was
57.

      We have not paid any cash dividends on our capital stock. The payment of
cash dividends in the future will be made at the discretion of the Board of
Directors and will depend on a number of factors, including future earnings,
capital requirements, our financial condition and future prospects and such
other factors as the Board of Directors may deem relevant. We intend to retain
all available funds for use in our business. Accordingly, we do not anticipate
declaring or paying any dividends on our common stock in the foreseeable future.



                                       15
<PAGE>   16

ITEM 6. SELECTED FINANCIAL DATA

      The following selected consolidated financial and operating data should be
read in conjunction with the accompanying Consolidated Financial Statements and
the related notes thereto and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this Form
10-K.

<TABLE>
<CAPTION>
                                                                    AT AND FOR THE YEAR ENDED DECEMBER 31,
                                                    -------------------------------------------------------------------------
                                                      1995             1996           1997             1998            1999
                                                    ---------       ---------       ---------       ---------       ---------
<S>                                                 <C>             <C>             <C>             <C>             <C>
STATEMENT OF INCOME DATA                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND OTHER DATA)
  Revenues:
    Rental of flight equipment....................  $   7,765       $  12,681       $  15,433       $  26,985       $  38,088
    Consulting fees...............................        491             461             212             605             200
    Gain on sale of aircraft equipment............         --             141              --              --              --
    Interest income...............................        118             169             483           1,727           1,454
                                                    ---------       ---------       ---------       ---------       ---------
         Total revenues...........................      8,374          13,452          16,128          29,317          39,742
  Expenses........................................      7,656          12,380          15,028          24,596          33,686
  Equity in earnings of affiliates................        183              --              --              --              --
                                                    ---------       ---------       ---------       ---------       ---------
  Income before income taxes and
      cumulative effect of accounting change
      and extraordinary loss......................        901           1,072           1,100           4,721           6,056
  Income tax expense..............................         30              37             433           1,542           2,263
                                                    ---------       ---------       ---------       ---------       ---------
  Net income before cumulative effect
      of accounting change and extraordinary
      loss........................................        871           1,035             667           3,179           3,793
  Cumulative effect of accounting change..........         --              --              --             209              --
  Extraordinary loss on debt extinguishment.......         --              --              --              --            (214)
                                                    ---------       ---------       ---------       ---------       ---------
  Net income......................................  $     871       $   1,035       $     667       $   3,388       $   3,579
                                                    =========       =========       =========       =========       =========
  Basic earnings per share(1):
    Net income before cumulative effect
         of accounting change and
         extraordinary loss.......................  $   17.77       $   14.79       $     .88       $     .72       $     .90
    Cumulative effect of accounting change........         --              --              --             .04              --
    Extraordinary loss on debt extinguishment.....         --              --              --              --            (.05)
                                                    ---------       ---------       ---------       ---------       ---------
    Net income....................................  $   17.77       $   14.79       $     .88       $     .76       $     .85
                                                    =========       =========       =========       =========       =========
  Diluted earnings per share(1):
    Net income before cumulative effect
         of accounting change and
         extraordinary loss.......................  $     .48       $     .56       $     .30       $     .70       $     .88
    Cumulative effect of accounting change........         --              --              --             .05              --
    Extraordinary loss on debt extinguishment.....         --              --              --              --            (.05)
                                                    ---------       ---------       ---------       ---------       ---------
    Net income....................................  $     .48       $     .56       $     .30       $     .75       $     .83
                                                    =========       =========       =========       =========       =========
  Weighted average number of common
      shares outstanding..........................         49              70             754           4,430           4,212
  Weighted average number of common
      shares outstanding-assuming dilution........      1,826           1,837           2,207           4,545           4,323

BALANCE SHEET DATA
  Flight equipment under operating lease..........  $  95,450       $  89,885       $ 172,506       $ 236,909       $ 314,083
  Total assets....................................     96,779          92,620         204,552         267,891         342,497
  Debt financing..................................     87,825          82,710         154,720         208,002         271,971
  Shareholders' equity............................      4,048           5,084          33,095          34,751          38,296
OTHER DATA
  Aircraft equipment owned at period end(2).......         8               7              10              13              16
</TABLE>



                                       16
<PAGE>   17

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

(1)   The earnings per share amounts have been restated as required to comply
      with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
      Per Share." For further discussion of earnings per share and the impact of
      SFAS No. 128, see Note 1 to Consolidated Financial Statements.

(2)   Aircraft equipment owned at December 31, 1995 includes one auxiliary power
      unit which was purchased in 1995 and sold for a gain of $141 in December
      1996.



                                       17
<PAGE>   18

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION. (DOLLARS IN THOUSANDS)

      We are primarily engaged in the acquisition of used, single-aisle jet
aircraft for lease and sale to domestic and foreign airlines and other
customers. We lease aircraft under short-term to medium-term operating leases
where the lessee is responsible for all operating costs and we retain the
potential benefit or risk of the residual value of the aircraft. This is
distinct from finance leases where the full cost of the aircraft is generally
recovered over the term of the lease.

      Rental amounts are accrued evenly over the lease term and are recognized
as revenue from the rental of flight equipment. Our flight equipment is recorded
on the balance sheet at cost and is depreciated on a straight-line basis over
the estimated useful life to our estimated salvage value. Revenue, depreciation
expense and resultant profit for operating leases are recorded evenly over the
life of the lease. Initial direct costs related to the origination of leases are
capitalized and amortized over the lease terms.

EXTRAORDINARY ITEM

      In May 1999, we repaid a note with a principal amount of $15,745 prior to
maturity. The note was due May 2000 with a rate of 7.96%. The repayment resulted
in an extraordinary charge of $214, net of a $131 income tax benefit.

ACCOUNTING CHANGE

      Effective January 1, 1998, we changed our method of accounting for income
recognition for ancillary payments under lease agreements to a full accrual
method from recognition upon lease termination. This new method, which was
accounted for as a change in accounting method, was made to better reflect the
earnings process under lease agreements. The effect of this change on net
earnings, before cumulative effect of accounting change, for the years ended
December 31, 1998 and 1999, were increases of $983 and $2,055, respectively. The
cumulative effect on retained earnings at January 1, 1998 of the accounting
change was an increase of approximately $209, net of related income taxes of
$139.

RESULTS OF OPERATIONS

Years Ended December 31, 1997, 1998 and 1999

      Revenues from rental of flight equipment increased by 74.8% to $26,985 in
1998 from $15,433 in 1997 primarily as a result of the acquisition of three
aircraft under lease in 1998, as well as the change in accounting method
discussed above. Our lease portfolio increased from ten aircraft with a book
value of $172,506 at December 31, 1997 to thirteen aircraft with a book value of
$236,909 at December 31, 1998. The 41% increase in rental revenues in 1999 to
$38,088 from $26,985 in 1998 was primarily the result of the acquisition of
three aircraft under lease in 1999. Our lease portfolio increased from thirteen
aircraft with a book value of $236,909 at December 31, 1998 to sixteen aircraft
with a book value of $314,083 at December 31, 1999.

      We are in the process of terminating a lease with TAESA, a Mexican
airline. The airline recently had an accident on one of its DC-9 aircraft and
the Mexican government subsequently grounded its entire fleet. As a result,
TAESA defaulted on its lease of a Boeing Model 737-300, and we are currently in
the process of repossessing the aircraft. The lease was due to terminate June
2002. We are aggressively marketing the aircraft to several airlines. Because of
the current softness in the leasing market, any new lease will likely be at a
reduced rate. In addition, we will not recognize rental revenue on this aircraft
for at least the first three months of 2000. We will incur additional charges
related to the repossession. We have two notes payable to ILFC related to the
aircraft of $14,996 bearing interest at 7.96% due April 2000 and $402 bearing
interest at 6.0% due May 2000. We intend to refinance the notes payable as they
come due.

      In 1997, consulting revenues totaled $212, including $12 paid by Great
Lakes Holdings (which is owned by our Chief Executive Officer and our
President), $25 from ILFC and $175 from unrelated parties. No further consulting
fees are expected to be received from Great Lakes. In 1998 and 1999, consulting
fee revenues totaled $605 and $200, respectively paid from unrelated parties.

      Interest income increased to $1,727 in 1998 from $483 in 1997 principally
as a result of a full year of interest earned on increased cash from our initial
public offering and on increased restricted cash balances. Interest income
decreased from $1,727 in 1998 to $1,454 in 1999 primarily as a result of lower
average interest rates.



                                       18
<PAGE>   19

      Expenses as a percent of total revenues were 93.2%, 83.9% and 84.7% in
1997, 1998 and 1999, respectively. The decrease in the percent of total revenues
from 1997 to 1998 was due to the effect of an 82% increase in total revenues and
only a 64% increase in total expenses. The increase in the percent of total
revenues from 1998 to 1999 was due to the effect of a 36% increase in total
revenues and a 37% increase in total expenses.

      Interest expense increased from $7,480 in 1997 to $12,120 in 1998 and
$16,525 in 1999. Interest expense increased in 1998 as a result of interest on
financing related to the acquisition of three additional aircraft, offset by
loan paydowns and lower interest rates on new financings. Interest expense
increased in 1999 as a result of interest on financing related to the
acquisition of three additional aircraft and a charge related to the early
termination of a lease, offset by loan paydowns. Our weighted average interest
rate was 7.1% and 7% at December 31, 1998 and 1999, respectively.

      Depreciation expense increased from $6,550 in 1997 to $10,697 in 1998 and
$15,029 in 1999. The increase of $4,147 in 1998 from 1997 resulted from the
acquisition of three additional aircraft in 1998. The increase of $4,332 in 1999
from 1998 resulted from the acquisition of three additional aircraft in 1999.
General and administrative expenses were $747, $1,529 and $1,882 in 1997, 1998
and 1999, respectively. The increase from 1997 to 1998 was primarily the result
of additional compensation expense as the result of new employment agreements
with our Chief Executive Officer and with our President, as well as the
additional costs associated with maintaining our status as a public company. The
increase from 1998 to 1999 was primarily the result of additional compensation.
In 1997, 1998 and 1999, we incurred $250 of non-cash compensation expense
related to the vesting of options. We expect to incur $250 of non-cash
compensation expense related to the vesting of these options in 2000. See Note 8
to Consolidated Financial Statements.

      We recognized income tax expense of $433, $1,542 and $2,263, representing
effective income tax rates of 40% and 33% and 37%, during 1997, 1998 and 1999,
respectively. The $1,109 increase in income tax expense in 1998 primarily
represents a non-cash provision for deferred income taxes. Our effective tax
rate decreased to 33% as a result of an increasing number of foreign aircraft in
our portfolio and tax planning associated with our federal net operating loss
carryforwards. The $721 increase in income tax expense in 1999 primarily
represents a non-cash provision for deferred income taxes as our effective tax
rate increased to 37%. During 1999, we continued to generate substantial federal
net operating loss carryforwards. At December 31, 1999, we had $21,608 of
federal net operating loss carryforwards. See Note 3 to Consolidated Financial
Statements.

      Net income increased from $667 in 1997 to $3,388 in 1998 and $3,579 in
1999 due to the factors described above and the effects of the extraordinary
item and the change in accounting method.

LIQUIDITY AND CAPITAL RESOURCES

      Our principal external sources of funds have been term loans from banks
and seller financing secured by aircraft. As a result, a substantial amount of
our cash flow from the rental of flight equipment is applied to principal and
interest payments on secured debt. The terms of our loans generally require a
substantial balloon payment at the end of the noncancellable portion of the
lease of the related aircraft, at which time we will be required to re-lease the
aircraft and renegotiate the balloon amount of the loan or obtain other
financing. Refinancing of the balloon amount is dependent upon re-leasing the
related aircraft. Accordingly, we begin lease remarketing efforts well in
advance of the lease termination. See "Item 1. Business -- Financing/Source of
Funds." The principal use of cash is for financing the acquisition of our
aircraft portfolio, which are financed by loans secured by the applicable
aircraft. We entered into a $5,000 line of credit with a bank in February 2000.
The line of credit bears interest at LIBOR plus 2.5% and expires June 30, 2001.
No borrowings have been made against the line of credit.

      At December 31, 1998 and 1999, we had cash and cash equivalents of $15,924
and $13,045, respectively.

      Net cash provided by operating activities increased from $12,776 in 1997
to $15,900 in 1998 and to $25,639 in 1999. The increase of $3,124 in 1998 was
primarily the result of the acquisition of three aircraft and their related
leases. The increase of $9,739 in 1999 was primarily the result of the
acquisition of three additional aircraft and their related leases.

      In 1997, the $89,171 of net cash used in investing activities was
primarily used to purchase three aircraft. In 1998, cash of $75,100 was used in
investing activities to purchase three additional aircraft. In 1999, cash of
$92,203 was used primarily in investing activities to purchase three additional
aircraft.



                                       19
<PAGE>   20

      In 1997, net cash provided by financing activities was $99,059 including
the proceeds of borrowings of $80,463 primarily to finance the acquisition of
three aircraft, offset by repayments of notes of $7,768, as well as $26,365 from
both the issuance of 2,680,000 shares in our initial public offering and the
issuance of 488,501 shares upon the exercise of stock options. In 1998, net cash
provided by financing activities was $51,285, including proceeds from borrowings
of $64,384 to finance the purchase of three aircraft, offset by repayments of
$11,116 and $1,983 of common stock repurchases. In 1999, net cash provided by
financing activities was $63,686, including proceeds from borrowings of $110,127
to finance the purchase of three aircraft and refinance existing borrowings,
offset by repayments of $46,159 and $283 of common stock repurchases.

      Cash and cash equivalents vary from year to year principally as a result
of the timing of the purchase and sale of aircraft.

      We use interest rate swap arrangements to reduce the potential impact of
increases in interest rates on floating rate long-term debt and do not use swap
arrangements for trading purposes. Premiums paid for purchased interest rate
swap agreements are amortized to interest expense over the terms of the swap
agreements.

      Our ability to execute our business strategy successfully and to sustain
our operations is dependent, in part, on our ability to obtain financing and to
raise equity capital. We cannot assure you that the necessary amount of capital
will continue to be available to us on favorable terms or at all. If we are
unable to continue to obtain any portion of required financing on favorable
terms, our ability to add new aircraft to our lease portfolio, renew leases,
re-lease aircraft, repair or recondition aircraft if required, or retain
ownership of aircraft on which financing has expired would be impaired, which
could have a material adverse effect on our business, financial condition and
results of operations. In addition, our financing arrangements to date have been
dependent in part upon ILFC. See "Item 1. Business--Cautionary Statements."

IMPACT OF YEAR 2000 ISSUE

      The Year 2000 issue results from computer programs written using two
digits to identify the year in the date field. These computer programs were
designed and developed without consideration of the impact of the change in the
century. If not corrected, these programs could create erroneous information.

      The effects of the Year 2000 issue did not materially affect our financial
results or financial condition. We have incurred no additional costs associated
with the Year 2000 issue and estimate that no additional costs will be incurred.

      Failure by our lessees, manufacturers of our aircraft and business
partners to properly comply with Year 2000 issues could result in lost revenues
and increased expenses. We have not experienced, nor do we expect to experience
a material effect on our financial results or our financial position.

      We will continue assessing our internal and external risk as we acquire
additional information systems and enter into business relationships with
additional lessees, manufacturers of aircraft and other business partners.

MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT

      This analysis presents the hypothetical loss in earnings, cash flows or
fair value of the financial instruments which we held at December 31, 1999 and
are sensitive to changes in interest rates. In the normal course of business, we
also face risks that are either nonfinancial or non-quantifiable. These risks
principally include country risk, credit risk and legal risk and are not
included in the following analysis. See "Item 1. Business--Cautionary
Statements."

      From time to time, we enter into interest rate swaps with financial
institutions under terms that provide payment of interest on the notional amount
of the swap. In accordance with these arrangements, we pay interest at a fixed
rate and the financial institution pays interest at variable rates pursuant to
terms of the loans. We had no swap agreements at December 31, 1999.

      The carrying amounts of cash and cash equivalents approximate fair market
value because of the short-term nature of these items. Market risk was estimated
as the potential decrease in fair value resulting from a hypothetical 10%
increase in interest rates for our cash equivalents and was not materially
different from the year-end carrying value.



                                       20
<PAGE>   21

      The fair values of the our debt instruments, including the related AVGs,
approximate the carrying values because (1) the rates currently offered to us
are similar to the rates for these items, or (2) the yields to maturity
approximate the rates for these items. Market risk associated with our debt
instruments primarily results from our ability to refinance balloon payments at
comparable or lower interest rates. Market risk was estimated as the potential
increase in interest expense in 2000 resulting from a hypothetical 10% increase
in our weighted average borrowing rate at December 31, 1999 or $1,904.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      See Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Market-- Sensitive Instruments and Risk Management.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The response to this item is submitted as a separate section of this
report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      During the two fiscal periods prior to the date of our most recent
financial statements, we have not reported a change in accountants nor have
there been any disagreements reported on any matter of accounting principles or
practices or financial statement disclosure.



                                       21
<PAGE>   22

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      The section entitled "Election of Directors" in the Proxy Statement is
incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION.

      The section entitled "Executive Compensation" in the Proxy Statement is
incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The section entitled "Beneficial Ownership of Shares" in the Proxy
Statement is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The section entitled "Certain Relationships and Related Transactions" in
the Proxy Statement is incorporated herein by reference.



                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

FINANCIAL STATEMENTS:

      See Index to Consolidated Financial Statements on page 24 of this report.

FINANCIAL STATEMENT SCHEDULES:

      None.


    EXHIBITS:

<TABLE>
      NUMBER                              DESCRIPTION
      ------                              -----------
<S>               <C>
        3.1       Amended and Restated Articles of Incorporation of the Company.
                  Filed as Exhibit 3.1 to Form 10-Q for the quarterly period
                  ended September 30, 1997, and incorporated herein by reference

        3.2       Amended and Restated Bylaws of the Company. Filed as Exhibit
                  3.2 to Form 10-Q for the quarterly period ended September 30,
                  1997, and incorporated herein by reference

        4.1       Senior Term Loan Agreement, dated December 10, 1997, between
                  IAI V, Inc. and City National Bank. Filed as Exhibit 4.11 to
                  Form 10-Q for the quarterly period ended September 30, 1997,
                  and incorporated herein by reference

        4.2       The Company hereby agrees to furnish to the Commission upon
                  request a copy of any instrument with respect to long-term
                  debt where the total amount of securities authorized
                  thereunder does not exceed 10% of the consolidated assets of
                  the Company
</TABLE>



                                       22
<PAGE>   23

<TABLE>
      NUMBER                              DESCRIPTION
      ------                              -----------
<S>               <C>
*       10.1      Employment Agreement with William E. Lindsey. Filed as Exhibit
                  10.1 to Form 10-Q for the quarterly period ended September 30,
                  1997, and is incorporated herein by reference

*       10.2      Employment Agreement with Michael P. Grella. Filed as Exhibit
                  10.2 to Form 10-Q for the quarterly period ended September 30,
                  1997, and is incorporated herein by reference

*       10.3      1997 Stock Option and Award Plan. Filed as Exhibit 6 to
                  Registration Statement No. 333-46411, and incorporated herein
                  by reference

*       10.4      1997 Eligible Director Stock Option Plan. Filed as Exhibit 6
                  to Registration Statement No. 333-46413, and incorporated
                  herein by reference

*       10.5      Form of Indemnity Agreement. Filed as Exhibit 10.3 to
                  Registration Statement No. 333-19875, and incorporated herein
                  by reference

        23.1      Consent of KPMG LLP, independent certified public accountants

        27        Financial Data Schedule for the year ended December 31, 1999
</TABLE>

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

* Management contracts.

REPORTS ON FORM 8-K:

During the quarter ended December 31, 1999, we did not file any reports on Form
8-K.



                                       23
<PAGE>   24

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Independent Auditors' Report................................................ 25

Consolidated Balance Sheets as of December 31, 1999 and 1998................ 26

Consolidated Statements of Income for the years ended December 31,
1999, 1998 and 1997......................................................... 27

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1998 and 1999............................................ 29

Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 30 1997...................................................... 30

Notes to Consolidated Financial Statements.................................. 31
</TABLE>



                                  24
<PAGE>   25

                     INDEPENDENT AUDITORS' REPORT

The Board of Directors
International Aircraft Investors:

We have audited the accompanying consolidated balance sheets of International
Aircraft Investors and subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

      As discussed in note 1 to the consolidated financial statements, the
Company changed its method of accounting for income recognition for ancillary
payments under lease agreements effective January 1, 1998.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Aircraft Investors and subsidiaries as of December 31, 1999 and
1998 and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.


                                          KPMG LLP

Los Angeles, California
  January 21, 2000,
  Except for Note 9
  which is as of March 21, 2000



                                       25
<PAGE>   26

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                 DECEMBER 31,
                                                      ---------------------------------
                                                           1999               1998
                                                      -------------       -------------
<S>                                                   <C>                 <C>
Cash and cash equivalents ......................      $  13,045,392       $  15,923,982
Flight equipment, at cost, net .................        314,083,293         236,908,773
Deferred fees ..................................          1,061,924           1,180,681
Cash, restricted ...............................         13,908,097          13,387,878
Other assets ...................................            398,294             489,702
                                                      -------------       -------------
                                                      $ 342,497,000       $ 267,891,016
                                                      =============       =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Accrued interest and other accrued expenses ....      $   1,727,635       $   1,000,291
Notes payable ..................................        271,970,620         208,001,908
Lease and other deposits .......................         23,282,834          18,629,524
Deferred rent ..................................          2,624,534           3,030,812
Deferred taxes, net ............................          4,594,927           2,477,876
                                                      -------------       -------------
                                                        304,200,550         233,140,411
Commitments and contingencies
Shareholders' equity :
  Preferred stock, $.01 par value
    Authorized 15,000,000 shares; none
    issued and outstanding .....................                 --                  --
  Common stock, $.01 par value
    Authorized 20,000,000 shares;
    issued and outstanding 4,173,784 shares
    at December 31, 1999 and 4,216,284 shares
    at December 31, 1998 .......................             41,738              42,163
  Additional paid-in capital ...................         31,009,749          31,292,324
  Deferred stock compensation ..................           (250,000)           (500,000)
  Retained earnings ............................          7,494,963           3,916,118
                                                      -------------       -------------
      Net shareholders' equity .................         38,296,450          34,750,605
                                                      -------------       -------------
                                                      $ 342,497,000       $ 267,891,016
                                                      =============       =============
</TABLE>

           See accompanying notes to consolidated financial statements

                                       26

<PAGE>   27

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                      -------------------------------------------------
                                                                          1999               1998              1997
                                                                      ------------       ------------      ------------
<S>                                                                   <C>                <C>                 <C>
Revenues:
  Rental of flight equipment ...................................      $ 38,088,180       $ 26,985,395      $ 15,432,631
  Consulting fees...............................................           200,000            605,000           212,000
  Interest income...............................................         1,453,726          1,727,480           482,842
                                                                      ------------       ------------      ------------
    Total revenues .............................................        39,741,906         29,317,875        16,127,473
Expenses:
  Interest .....................................................        16,525,291         12,119,746         7,480,490
  Depreciation .................................................        15,028,867         10,697,484         6,550,000
  General and administrative....................................         1,881,867          1,529,200           747,287
  Stock compensation ...........................................           250,000            250,000           250,000
                                                                      ------------       ------------      ------------
    Total expenses .............................................        33,686,025         24,596,430        15,027,777
Income before income taxes and cumulative effect of
  accounting change and extraordinary loss .....................         6,055,881          4,721,445         1,099,696
Income tax expense .............................................         2,262,773          1,541,906           433,000
                                                                      ------------       ------------      ------------
Net income before cumulative effect of accounting change
  and extraordinary loss .......................................         3,793,108          3,179,539           666,696
Cumulative effect of accounting change, net of income tax
  of $139,000 ..................................................                --            209,000                --
Extraordinary loss on debt extinguishment, net of income tax
  benefit of $131,322 ..........................................          (214,263)                --                --
                                                                      ------------       ------------      ------------
Net income .....................................................      $  3,578,845       $  3,388,539      $    666,696
                                                                      ============       ============        ==========
Basic earnings per share:
  Net income before cumulative effect of accounting change
       and extraordinary loss ..................................      $        .90       $        .72      $        .88
  Cumulative effect of accounting change .......................                --                .04                --
  Extraordinary loss on debt extinguishment ....................              (.05)                --                --
                                                                      ------------       ------------      ------------
  Net income ...................................................      $        .85       $        .76      $        .88
                                                                      ============       ============        ==========
Diluted earnings per share:
  Net income before cumulative effect of accounting change
       and extraordinary loss ..................................      $        .88       $        .70      $        .30
  Cumulative effect of accounting change .......................                --                .05                --
  Extraordinary loss on debt extinguishment ....................              (.05)                --                --
                                                                      ------------       ------------      ------------
  Net income ....................................................      $       .83       $        .75      $        .30
                                                                      ============       ============      ============
Weighted average common shares outstanding ......................        4,211,534          4,430,183           754,131
                                                                      ============       ============      ============
Weighted average common shares -- assuming dilution .............        4,322,711          4,545,191         2,206,863
                                                                      ============       ============      ============
</TABLE>



                                       27
<PAGE>   28

<TABLE>
<S>                                                                   <C>                <C>                 <C>
Pro forma effect assuming the change in accounting
  principle is retroactively applied:
     Net income .................................................     $  3,578,845       $  3,179,539      $    706,696
     Earnings per share:
        Basic ...................................................     $        .85       $        .72      $        .94
        Diluted .................................................     $        .83       $        .70      $        .32
</TABLE>

           See accompanying notes to consolidated financial statements



                                       28
<PAGE>   29

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                      Retained
                                   Convertible        Common Stock        Additional     Deferred     Earnings
                                   Preferred      ---------------------    Paid-in        Stock     (Accumulated
                                     Stock        Shares        Amount     Capital     Compensation    Deficit)        Net
                                   ---------      -------     ---------  ------------  ------------  ------------  ------------
<S>                                <C>            <C>         <C>        <C>           <C>           <C>           <C>
Balance at December 31, 1996 ...   $  49,410      315,000     $   3,150  $  5,170,098  $         --  $   (139,117) $  5,083,541
Reverse stock split ............          --     (245,000)       (2,450)        2,450            --            --            --
                                   ---------      -------     ---------  ------------  ------------  ------------  ------------
Adjusted Balance at December
  31, 1996 .....................      49,410       70,000           700     5,172,548            --      (139,117)    5,083,541
  Issuance of common stock
     from exercise of stock
     options ...................          --      488,501         4,885     2,418,374            --            --     2,423,259
  Issuance of common stock
     from conversion of
     convertible preferred stock     (49,410)   1,103,528        11,035        38,375            --            --            --
  Issuance of common stock
     from conversion of
      convertible note payable..          --      155,555         1,556       727,844            --            --       729,400
  Issuance of common stock, net
     of stock issuance costs ...          --    2,680,000        26,800    23,915,294            --            --    23,942,094
  Deferred stock compensation ..          --           --            --     1,000,000    (1,000,000)           --            --
  Stock compensation ...........          --           --            --            --       250,000            --       250,000
  Net income ...................          --           --            --            --            --       666,696       666,696
                                   ---------      -------     ---------  ------------  ------------  ------------  ------------
Balance at December 31, 1997 ...          --    4,497,584        44,976    33,272,435      (750,000)      527,579    33,094,990
  Repurchase of common stock ...          --     (281,300)       (2,813)   (1,980,111)           --            --    (1,982,924)
  Stock compensation ...........          --           --            --            --       250,000            --       250,000
  Net income ...................          --           --            --            --            --     3,388,539     3,388,539
                                   ---------      -------     ---------  ------------  ------------  ------------  ------------
Balance at December 31, 1998 ...          --    4,216,284        42,163    31,292,324      (500,000)    3,916,118    34,750,605
  Repurchase of common stock ...          --      (42,500)         (425)     (282,575)           --            --      (283,000)
  Stock compensation ...........          --           --            --            --       250,000            --       250,000
  Net income ...................          --           --            --            --            --     3,578,845     3,578,845
                                   ---------      -------     ---------  ------------  ------------  ------------  ------------
Balance at December 31, 1999 ...   $      --    4,173,784     $  41,738  $ 31,009,749  $   (250,000) $  7,494,963  $ 38,296,450
                                   =========    =========     =========  ============  ============  ============  ============
</TABLE>

           See accompanying notes to consolidated financial statements



                                       29
<PAGE>   30

               INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                               --------------------------------------------------
                                                                   1999               1998              1997
                                                               ------------       ------------       ------------
<S>                                                            <C>                <C>                <C>
Cash flow from operating activities:
Net income ..............................................      $  3,578,845       $  3,388,539       $    666,696
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Cumulative effect of accounting change ................                --            209,000                 --
  Depreciation of flight equipment ......................        15,028,867         10,697,484          6,550,000
  Amortization of deferred fees .........................           624,511            257,647            235,653
  Deferred taxes, net of effect of accounting change ....         2,117,051          1,654,076            423,800
  Stock compensation ....................................           250,000            250,000            250,000
  Increase in assets:
     Cash, restricted ...................................          (520,219)        (6,410,904)        (6,766,147)
     Other assets .......................................          (414,346)          (683,191)           (72,277)
  Increase (decrease) in liabilities:
     Accrued interest and other accrued expenses ........           727,344           (343,386)           515,984
     Lease deposits and other deposits ..................         4,653,310          7,184,411          9,933,053
     Deferred rent ......................................          (406,278)          (303,188)         1,039,000
                                                               ------------       ------------       ------------
       Net cash provided by operating activities ........        25,639,085         15,900,488         12,775,762
Cash flows from investing activities:
  Purchase of flight equipment ..........................       (92,203,387)       (75,100,000)       (89,171,283)
                                                               ------------       ------------       ------------
     Net cash used in investing activities ..............       (92,203,387)       (75,100,000)       (89,171,283)
Cash flows from financing activities:
  Repayment of notes payable ............................       (25,254,014)        (8,152,498)        (6,293,592)
  Repayment of notes payable to ILFC ....................       (20,904,747)        (2,880,390)        (1,274,803)
  Repayment of notes payable to GLH .....................                --            (83,000)          (200,000)
  Proceeds from notes payable ...........................        14,600,000         31,250,000         52,500,000
  Proceeds from notes payable to ILFC ...................        95,527,473         33,134,000         27,762,500
  Proceeds from notes payable to GLH ....................                --                 --            200,000
  Issuance of common stock ..............................                --                 --         26,365,353
  Repurchase of common stock ............................          (283,000)        (1,982,924)                --
                                                               ------------       ------------       ------------
     Net cash provided by (used in) financing activities         63,685,712         51,285,188         99,059,458
                                                               ------------       ------------       ------------
     Net increase (decrease) in cash and cash equivalents        (2,878,590)        (7,914,324)        22,663,937
Cash and cash equivalents at beginning of year ..........        15,923,982         23,838,306          1,174,369
                                                               ------------       ------------       ------------
Cash and cash equivalents at end of year ................      $ 13,045,392       $ 15,923,982       $ 23,838,306
                                                               ============       ============       ============
Supplemental disclosure of cash flow information --
     Cash paid for interest .............................      $ 15,298,845       $ 12,205,485       $  6,772,358
                                                               ============       ============       ============
     Cash paid for taxes ................................      $     12,800       $     26,830                 --
                                                               ============       ============       ============
</TABLE>

Supplemental disclosure of noncash investing and financing activities:
During 1997, a 5% convertible note with a balance of $729,400 was converted to
common stock.

           See accompanying notes to consolidated financial statements




                                       30
<PAGE>   31

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997


(1)   THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

      International Aircraft Investors (the Company) is primarily engaged in the
acquisition of used, single-aisle jet aircraft for lease and sale to domestic
and foreign airlines and other customers. The Company leases aircraft under
short-term to medium-term operating leases where the lessee is responsible for
all operating costs and the Company retains the potential benefit and risk of
the residual value of the aircraft, as distinct from finance leases where the
cost of the aircraft is generally recovered over the term of the lease.

      Fourteen of the Company's sixteen aircraft at December 31, 1999 were
acquired from International Lease Finance Corporation (ILFC), a 1.6% shareholder
of the Company. In connection with certain of these aircraft acquisitions, ILFC
has provided loan guarantees or other financial support which have provided more
favorable borrowing arrangements than the Company could otherwise have obtained.
Additionally, the Company has derived certain consulting fees from ILFC for
providing remarketing and other services.

      The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. Certain
reclassifications have been made to prior year amounts to conform to current
year presentation.

Extraordinary Item

      In May 1999, the Company repaid a note with a principal amount of
$15,745,473 prior to maturity. The note was due May 2000 with a rate of 7.96%.
The repayment resulted in an extraordinary charge of $214,263, net of a $131,322
income tax benefit.

Accounting Change

      Effective January 1, 1998, the Company changed its method of accounting
for income recognition for ancillary payments under lease agreements to a full
accrual method from recognition upon lease termination. This new method, which
was accounted for as a change in accounting method, was made to better reflect
the earnings process under lease agreements. The effect of this change on net
earnings and earnings per share, before cumulative effect of accounting change,
for the years ended December 31, 1999 and 1998, were increases of $2,055,000
($.30 per basic and diluted share) and $983,000 ($.22 per basic and diluted
share), respectively. The cumulative effect on retained earnings at January 1,
1998 of the accounting change was an increase of approximately $209,000 ($.04
per basic share and $.05 per diluted share), net of related income taxes of
$139,000. The pro forma amounts shown on the consolidated statements of income
have been adjusted for the effect of retroactive application.

Cash and Cash Equivalents

      Cash and cash equivalents includes cash and highly liquid investments
purchased with an original maturity of less than 90 days. Certain cash and
short-term investments for the repayment of a security deposit and maintenance
reserves are restricted pursuant to certain loan agreements. Such security
deposit and maintenance reserves mature through November 2004.



                                       31
<PAGE>   32

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred Fees

      The direct costs related to purchase and lease agreements are capitalized
and amortized to expense using the straight-line method, which approximates the
effective interest method, over the term of the related lease.

      The costs related to asset value guarantees (AVGs) are capitalized and
amortized to expense using the straight-line method over the term of the AVG,
generally ten years. At December 31, 1999 and 1998, deferred fees related to
AVGs were $247,890 and $255,106, respectively.

Rentals

      The Company leases flight equipment under operating leases. Accordingly,
income is recognized over the life of noncancelable lease terms under the
straight-line method.

Flight Equipment and Depreciation

      Flight equipment is stated at cost. Major additions and modifications are
capitalized. Depreciation of flight equipment is generally computed on a
straight-line method over the estimated remaining useful lives (25 year original
life less years in service at the date of acquisition) assuming a 15% estimated
residual value.

Maintenance Reserves and Interest Income

      Normal maintenance and repairs of flight equipment on lease are provided
by and paid for by the lessee. Maintenance reserves received under certain
leases amounted to $13,197,538, $5,959,306 and $7,672,043 during the years ended
December 31, 1999, 1998 and 1997, respectively. Additionally, one of the
Company's lessees held a related maintenance reserve with ILFC in accordance
with an agreed-upon arrangement. The Company received interest earned on this
reserve held with ILFC which amounted to $40,699 during 1997. The lease and
related arrangement expired April 1997.

Impairment of Long-Lived Assets

      Statement of Financial Accounting Standards No. 121 (SFAS No. 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," issued in March 1995 and effective for fiscal years beginning
after December 15, 1995, establishes accounting standards for the recognition
and measurement of impairment of long-lived assets, certain identifiable
intangibles and goodwill either to be held or disposed of. The Company adopted
SFAS No. 121 during 1996. The adoption of SFAS No. 121 did not have a material
impact on the Company's financial position or results of operations.

      The Company evaluates the carrying value of its flight equipment using
undiscounted operating cash flows and when required will provide for any
permanent impairment of long-lived assets.

Interest Rate Swap Agreements

      The Company uses interest rate swap arrangements to reduce the potential
impact of increases in interest rates on certain floating rate long-term debt
and does not use them for trading purposes. Premiums paid for purchased interest
rate swap agreements are amortized to interest expense over the terms of the
swap agreements.

      All outstanding swap agreements are hedges and, therefore, are not marked
to market.



                                       32
<PAGE>   33

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Values of Financial Instruments

      The carrying amounts of cash and cash equivalents and accrued interest and
other accrued expenses approximate fair market value because of the short-term
nature of these items.

      The fair values of the Company's interest rate swaps approximate
unamortized costs as the remaining amortization periods are short-term. The fair
value of the amount due from ILFC approximates the carrying value as the fair
value was determined using the present value method with the Company's internal
rate of return. The fair values of the Company's debt instruments, including the
related AVGs, approximate the carrying values because (1) the rates currently
offered to the Company are similar to the rates for these items, or (2) the
yields to maturity approximate the rates for these items.

Management Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These affect the reported amounts of assets, liabilities, revenues
and expenses and the amount of any contingent assets or liabilities disclosed in
the financial statements. Actual results could differ from the estimates made.

      The Company leases aircraft to various commercial airlines, on short-term
to medium-term operating leases, generally three to five years. The related
aircraft are generally financed by borrowings that become due at or near the end
of the lease term through a balloon payment. As a result, the Company's
operating results depend on management's ability to roll over debt facilities,
renegotiate favorable leases and realize estimated salvage values.

Stock Compensation

      Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation," issued in October 1995 and effective
for fiscal years beginning after December 15, 1995, encourages, but does not
require, a fair-value-based method of accounting for employee stock options or
similar equity instruments. SFAS No. 123 allows an entity to elect to continue
to measure compensation cost under Accounting Principles Board Opinion No. 25
(APBO No. 25), "Accounting for Stock Issued to Employees," but requires pro
forma disclosures of net earnings and earnings per share as if the fair-value
based method of accounting had been applied. The Company elected to continue to
measure compensation cost under APBO No. 25. Had compensation cost been
determined using the fair value at the grant date for awards during 1998 and
1997, consistent with the provisions of SFAS No. 123, the Company's net earnings
and earnings per share for 1999 would have been reduced to the pro forma amount
as indicated below.

<TABLE>
<S>                                                      <C>
            Net earnings as reported ..............      $3,578,845

            Pro forma net earnings ................       3,251,167

            Net earnings per share, as reported:
                 Basic ............................             .85
                 Diluted ..........................             .83
            Pro forma net earnings per share:
                 Basic ............................             .77
                 Diluted ..........................      $      .75
                                                         ==========
</TABLE>



                                       33
<PAGE>   34

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

      The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the period ended December 31, 1999; dividend
yield of 0%; expected volatility of 46%; risk-free interest rate of between
4.57% and 4.62% and expected lives of five years.

      The weighted average fair value per share of options granted during the
periods ended December 31, 1999 is $3.12.

Income Taxes

      The Company accounts for income taxes under the asset and liability method
whereby deferred tax assets and liabilities are recognized for the future tax
consequences for differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years when such temporary differences are expected to be recovered
or settled. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in income at the enactment date.

Comprehensive Income

      In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income" which established standards for reporting and display of comprehensive
income and its components. The Company has no items of comprehensive income and
as a result SFAS. No. 130 has no impact on the Company's financial reporting.

Earnings per Share

      In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings per Share." SFAS No. 128 replaced the calculation of primary and
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to SFAS No. 128 requirements.



                                       34
<PAGE>   35

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


      The following table sets forth the computation of the weighted average
number of shares used to calculate basic and diluted earnings per share:

<TABLE>
                                                             YEARS ENDED DECEMBER 31,
                                                      ---------------------------------------
                                                         1999           1998           1997
                                                      ---------      ---------      ---------
<S>                                                   <C>            <C>              <C>
Basic earnings per share-weighted average
  shares outstanding ...........................      4,211,534      4,430,183        754,131
Effect of dilutive securities:
  Employee stock options .......................        109,842        115,008        187,267
  Non-employee stock options ...................          1,335             --        202,580
  Convertible preferred stock ..................             --             --        931,196
  Convertible note payable .....................             --             --        131,689
                                                      ---------      ---------      ---------
Dilutive potential common shares ...............        111,177        115,008      1,452,732
Diluted earnings per share-adjusted
  average shares and assumed conversions .......      4,322,711      4,545,191      2,206,863
                                                      =========      =========      =========
</TABLE>

      The Company issued to its underwriters warrants to purchase 260,000 shares
of its common stock at $12 per share in connection with its initial public
offering. These warrants were excluded from the compensation computation of
diluted net income per common share because they were anti-dilutive. The
warrants are exercisable through November 10, 2001.

      In 1998, the Company issued options to purchase 25,000 shares of common
stock at $10.25 per share under its Eligible Directors Option Plan. These
options were excluded from the compensation computation of diluted net income
per common share because they were anti-dilutive. The options are exercisable
through May 21, 2003.

Significant Customers

      The Company currently owns and leases sixteen aircraft to fifteen lessees.
The loss of any one aircraft or the financial difficulty of or lease default by
any one lessee could have a material adverse effect on its business, financial
condition and results of operations.

      The Company is in the process of terminating a lease with TAESA, a Mexican
airline. The airline recently had an accident on one of its DC-9 aircraft and
the Mexican government subsequently grounded its entire fleet. As a result,
TAESA defaulted on its lease of a Boeing Model 737-300, and the Company is
currently in the process of repossessing the aircraft. The lease was due to
terminate June 2002. The Company is aggressively marketing the aircraft to
several airlines. Because of the current softness in the leasing market, any new
lease will likely be at a reduced rate. In addition, the Company will not
recognize rental revenue on this aircraft for at least the first three months of
2000 and the Company will incur additional charges related to the repossession.
The Company has two notes payable to ILFC related to the aircraft of $14,995,794
bearing interest at 7.96% due April 2000 and $401,757 bearing interest at 6.0%
due May 2000. The Company intends to refinance the notes payable as they come
due.

      The following customers individually accounted for 10% or more of
revenues:

<TABLE>

                                          NUMBER OF        PERCENTAGE OF
                                         SIGNIFICANT        REVENUES BY
                                          CUSTOMERS    SIGNIFICANT CUSTOMERS
                                         -----------   ---------------------
<S>                                      <C>           <C>
        Year ended December 31:
          1999......................          1        11%
          1998......................          4        10%, 11%, 12% and 15%
          1997......................          4        11%, 13%, 13% and 17%
</TABLE>



                                       35
<PAGE>   36

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Segment Information

      In 1998, the Company adopted SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." SFAS No. 131 supersedes previous
reporting requirements for reporting on segments of a business enterprise. The
Company's operations are generally limited to the aircraft leasing industry.
These operations included the acquisition of used single-aisle jet aircraft and
engines for lease and sale to domestic and foreign airlines and other customers.
Revenues include rentals of flight equipment to foreign airlines of $30,306,055,
$19,824,984 and $9,407,081 in 1999, 1998 and 1997, respectively.

      The following table sets forth the dollar amount and percentage of rentals
of flight equipment attributable to the indicated geographic areas for the years
indicated:

<TABLE>
                                      1999          1998           1997
                                  -----------    -----------    -----------
<S>                               <C>            <C>            <C>
 United States and Canada ....    $14,075,897    $11,624,832    $ 6,167,050
 Europe ......................     14,322,696      7,797,163      3,668,181
 Central America and Mexico ..      3,636,187      2,112,000      2,112,000
 Asia and the Pacific ........      6,053,400      5,451,400      3,485,400
                                  -----------    -----------    -----------
                                  $38,088,180    $26,985,395    $15,432,631
                                  ===========    ===========    ===========
</TABLE>

(2)   FLIGHT EQUIPMENT

The Company's investment in flight equipment (primarily purchased from ILFC) as
of December 31, 1999 and 1998 is as follows:

<TABLE>
                                                 DECEMBER 31,
                                       -------------------------------
                                            1999             1998
                                       -------------     -------------
<S>                                    <C>               <C>
       Flight equipment, at cost ..    $ 365,211,644     $ 273,008,257
       Accumulated depreciation ...      (51,128,351)      (36,099,484)
                                       -------------     -------------
       Flight equipment, net ......    $ 314,083,293     $ 236,908,773
                                       =============     =============
</TABLE>

(3)   INCOME TAXES

      Provision for taxes on income consisted of the following:

<TABLE>
                                     TOTAL       CURRENT       DEFERRED
                                  ----------    ----------    ----------
<S>                               <C>            <C>          <C>
Year ended December 31:
  1999:
     Federal .................    $1,941,500     $      --    $1,941,500
     State ...................       189,951        12,800       177,151
                                  ----------    ----------    ----------
                                  $2,131,451    $   12,800    $2,118,651
                                  ==========    ==========    ==========
  1998:
     Federal .................    $1,184,560    $   16,430    $1,168,130
     State ...................       357,346        10,400       346,946
                                  ----------    ----------    ----------
                                  $1,515,076    $   26,830    $1,515,076
                                  ==========    ==========    ==========
  1997:
     Federal .................    $  423,800         $  --    $  423,800
     State ...................         9,200         9,200            --
                                  ----------    ----------    ----------
                                  $  433,000    $    9,200    $  423,800
                                  ==========    ==========    ==========
</TABLE>



                                       36
<PAGE>   37

      As of December 31, 1999, the Company had net operating loss carryforwards
("NOL") for Federal and state income tax purposes as follows:

<TABLE>
     EXPIRES                       FEDERAL NOL        STATE NOL
                                   -----------       ----------
<S>                                <C>              <C>
      2000 ..................               --      $   136,000
      2001 ..................               --          435,000
      2002 ..................               --          167,000
      2003 ..................               --          445,000
      2004 ..................               --          613,000
      2005-2009 .............      $11,052,000               --
      2010-2014 .............        1,124,000               --
      2015-2019 .............        9,432,000               --
                                   -----------       ----------
                                   $21,608,000       $1,796,000
                                   ===========       ==========
</TABLE>

      Temporary differences which give rise to net deferred tax liabilities
result primarily from timing differences for depreciation and net operating
losses. The net deferred tax liabilities are comprised of the following:

<TABLE>
                                                   DECEMBER 31,
                                         -------------------------------
                                             1999               1998
                                         ------------       ------------
<S>                                      <C>                <C>
Net operating loss carryforward ...      $  8,076,666       $  6,453,075
Deferred and advanced rent ........      $  1,203,507       $  1,085,933
Flight equipment, principally due
  to differences in depreciation ..       (14,006,504)       (10,103,117)
Other .............................           339,108            291,401
                                         ------------       ------------
                                           (4,387,223)        (2,272,708)
Valuation allowance ...............          (207,704)          (205,168)
                                         ------------       ------------
                                         $ (4,594,927)      $ (2,477,876)
                                         ============       ============
</TABLE>

      Management believes it is more likely than not that the results of future
operations will generate sufficient taxable income to realize deferred tax
assets net of the valuation allowance.

      A reconciliation of total income tax expense with the expected amount
computed by applying the Federal and state statutory tax rates to earnings
before income taxes and cumulative effect of accounting change follows:

<TABLE>

                                           YEAR ENDED DECEMBER 31,
                                 -------------------------------------------
                                     1999            1998            1997
                                 -----------     -----------     -----------
<S>                              <C>             <C>             <C>
Computed "expected" Federal
   tax expense ..............    $ 1,931,544     $ 1,605,291     $   375,000
State taxes, net of Federal
   income tax benefit .......        198,835          86,391          64,000
Expiration of state net
   operating loss
   carryforwards ............         31,587           7,407         207,000
Change in valuation allowance         (2,536)        (47,726)       (126,000)
Other .......................        (27,979)       (109,457)        (87,000)
                                 -----------     -----------     -----------
                                 $ 2,131,451     $ 1,541,906     $   433,000
                                 ===========     ===========     ===========
</TABLE>



                                       37
<PAGE>   38

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(4)   LONG-TERM DEBT

      Long-term debt as of December 31, 1999 and 1998 is summarized as follows:

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                            ----------------------------
                                                                                1999            1998
                                                                            ------------    ------------
<S>                                                                          <C>             <C>
Note payable to bank bearing interest at 7% on $4,500,000 and LIBOR
   plus 1.125% (6.46% at December 31, 1999) on $1,195,976, secured by
   flight equipment, 33 1/3% guaranteed by ILFC, payable in monthly
   installments of $130,000 including interest, balloon payment of
   $3,907,919, due August 2001 .........................................     $ 5,695,976     $ 6,900,431

Note payable to bank bearing interest at 7.125% on $3,000,000 and
   LIBOR plus 1.125% (6.56% at December 31, 1999) on $411,060, secured
   by flight equipment, 33 1/3% guaranteed by ILFC, payable in monthly
   installments of $30,000 including interest, balloon payment of
   $3,235,813, due June 2001 ...........................................       3,411,061       3,695,297

Notes payable to bank bearing interest at 7.1% secured by flight
   equipment, payable in monthly installments of $40,000 including
   interest, balloon payment of $1,740,120, due May 2003 ...............       2,795,392       3,470,668

Notes payable to bank bearing interest at 7%, secured by flight
   equipment, 50% guaranteed by ILFC, payable in quarterly
   installments of $276,000 including interest, balloon payment of
   $1,557,246, due April 2001 ..........................................       2,738,256       3,612,093

Note payable to bank bearing interest at 7.96%, repaid June 1999 .......              --      16,414,944

Note payable to bank, bearing interest at LIBOR plus 1.2 (6% at
   December 31, 1999), secured by flight equipment, 100% guaranteed by
   ILFC, payable in quarterly installments of $445,000 including
   interest, balloon payment of $7,354,276, due January 2003 ...........      10,908,835      11,940,979

Note payable to bank, bearing interest at 7.75% to May 18, 2001, then
   8.375%, secured by flight equipment, guaranteed up to $2,600,000 by
   ILFC, payable in monthly installments of $160,000 including
   interest, balloon payment of $4,904,929, due November 2004 ..........      10,970,234      12,181,112

Note payable to bank bearing interest at 7.6%, secured by flight
   equipment, guaranteed up to $5,000,000 by ILFC, payable in
   quarterly installments of $598,000 including interest, balloon
   payment of $19,806,718, due May 2001 ................................      20,854,601      21,437,596

Note payable to bank bearing interest at 7.3%, secured by flight
   equipment, guaranteed up to $6,000,000 by ILFC, payable in monthly
   installments including interest of $259,000 through April 2000,
   $263,000 through April 2001, $266,000 through April 2002, and
   $270,000 thereafter, balloon payment of $22,536,481, due May 2003 ...      27,078,538      28,154,495

Note payable to bank bearing interest at 6.7%, secured by flight
   equipment, payable in monthly installments of $180,000 including
   interest, balloon payment of $10,026,502, due April 2002 ............      12,992,149      14,227,700

Note payable to bank bearing interest at 7.1%, secured by flight
   equipment, payable in monthly installments of $152,000 including
   interest, balloon payment of $14,470,694, due November 2001 .........      15,836,259      16,500,000

Note payable to bank bearing interest at LIBOR plus 1.5%% (6.125% at
   December 31, 1999), secured by flight equipment, guaranteed up to
   $3,000,000 by ILFC, payable in monthly installments of $50,000 plus
   interest, balloon payment of $13,800,000, due May 2001 ..............      14,600,000              --

Note payable to ILFC bearing interest at 7.25%, secured by flight
   equipment, payable in quarterly installments of $10,000 through
   October 2000, $12,000 through October 2001 and $13,000 through
   October 2002 plus interest, balloon payment of $3,320,000, due
   January 2003 ........................................................       3,464,000       3,504,000

Note payable to ILFC bearing interest at 6.0%, secured by flight
   equipment, payable in quarterly installments of $50,000 plus
   interest, balloon payment of $301,757, due May 2000 .................         401,757         601,757

Note payable to ILFC bearing interest at 6.0% repaid in August 1999 ....              --         616,845
</TABLE>



                                  38
<PAGE>   39

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>


                                                                                      DECEMBER 31,
                                                                              ----------------------------
                                                                                  1999            1998
                                                                              ------------    ------------
<S>                                                                             <C>             <C>


Note payable to ILFC bearing interest at 7.8%, to December 2000, then 8%
   payable, secured by flight equipment, in monthly installments of
   $35,000 including interest, balloon payment of $3,188,123, due
   November 2004 .........................................................       3,845,733       3,985,164

Note payable to ILFC bearing interest at 7%, secured by flight equipment,
   payable in monthly installments of $180,000, including interest,
   balloon payment of $15,370,978, due September 2000 ....................      15,617,687      16,734,673

Note payable to ILFC bearing interest at an effective rate of 6.9%,
   secured by flight equipment, payable in monthly installments of
   $20,000, including interest, balloon payment of $1,394,891, due
   September 2002 ........................................................       1,732,557       1,856,839

Note payable to ILFC bearing interest at an effective rate of 6.93%,
   secured by flight equipment, payable in monthly installments of
   $32,000, including interest, balloon payment of $2,361,994, due May
   2003 ..................................................................       3,003,157       3,177,146

Note payable to ILFC bearing interest at 7.25%, secured by flight
   equipment, payable in quarterly installments of $126,500, including
   interest, balloon payment of $3,725,840, due May 2001 .................       3,999,383       4,153,373

Note payable to ILFC bearing interest at 6.5%, secured by flight
   equipment, payable in monthly installments of $30,000, including
   interest, balloon payment of $1,750,025, due May 2002 .................       2,277,813       2,479,536

Note payable to ILFC bearing interest at 7%, secured by flight equipment,
   payable in monthly installments of $181,200, including interest,
   balloon payment of $16,391,671, due June 30 ...........................      16,710,403      17,971,526

Note payable to ILFC bearing interest at 6%, secured by flight
   equipment, payable in monthly installments of $30,000, including
   interest, balloon payment of $122,362, due February 2007 ..............       2,146,696       2,368,734

Note payable to ILFC bearing interest at 6.15%, secured by flight
   equipment, payable in monthly installments of $92,000, including
   interest, balloon payment of $7,253,151, due December 2003 ............       9,510,954      10,000,000

Note payable to ILFC bearing interest at 7.96%, secured by flight
   equipment, payable in monthly installments of $220,000, including
   interest, balloon payment of $14,732,199, due April 2000 ..............      14,995,794              --

Note payable to ILFC bearing interest at 6.25%, secured by flight
   equipment, payable in monthly installments of $47,489, including
   interest, balloon payment of $3,416,505, due July 2004 ................       4,795,926              --

Note payable to ILFC bearing interest at 6.5%, secured by flight
   equipment, payable in monthly installments of $325,450, including
   interest, balloon payment of $28,969,076, due April 2000 ..............      29,463,901              --

Note payable to ILFC bearing interest at 6.25%, secured by flight
   equipment, payable in monthly installments of $40,308, including
   interest, balloon payment of $2,663,073, due August 2004 ..............       3,924,558              --

Note payable to ILFC bearing interest at 6.5%, secured by flight
   equipment, payable in monthly installments of $224,228, including
   interest, balloon payment of $23,062,523, due August 2000 .............      23,182,000              --

Note payable to ILFC bearing interest at 6.25%, secured by flight
   equipment, payable in monthly installments of $29,000, including
   interest, balloon payment of $2,088,634, due December 2004 ............       3,000,000              --

Note payable to Great Lakes Holdings (affiliated company) bearing
   interest at 6.5%, due June 2000 .......................................         672,000         672,000

Notes payable to Great Lakes Holdings (affiliated company) bearing
   interest at 6.5%, due June 2000 .......................................       1,345,000       1,345,000
                                                                              ------------    ------------
          Total ..........................................................    $271,970,620    $208,001,908
                                                                              ============    ============
</TABLE>

      The terms of the Company's aircraft financing loans generally require a
substantial balloon payment at the end of the noncancellable portions of the
lease of the related aircraft, at which time the Company will be required to
re-lease the aircraft and renegotiate the balloon amount of the loan on a
long-term basis or obtain other long-term financing. Refinancing of



                                       39
<PAGE>   40

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


the balloon amount is dependent upon the Company re-leasing the related
aircraft; accordingly, the Company begins lease remarketing efforts well in
advance of the lease termination. Notes payable due within one year totaled
$102,388,582 at December 31, 1999, of which $101,304,379 represents balloon
payments and $1,084,203 represents installment payments due within one year. The
Company intends to refinance all of the balloon payments due in 2000. During
1999, 1998 and 1997, the Company refinanced $45,979,203, $29,725,000 and
$40,382,963 of balloon payments, respectively.

      Scheduled future repayments of notes payable subsequent to December 31,
1999 are as follows:

<TABLE>
<S>                                                           <C>
            YEAR ENDING DECEMBER 31:
               2000.....................................      $113,988,878
               2001.....................................        70,153,991
               2002.....................................        19,808,437
               2003.....................................        48,748,509
               2004.....................................        18,460,218
               Thereafter ..............................           810,587
                                                              ------------
                                                              $271,970,620
                                                              ============
</TABLE>

      Certain notes payable contain various financial covenants including
maintaining specified minimum tangible net worth and delivery of audited
financial statements. The Company was in compliance with these covenants at
December 31, 1999.

      From time to time, the Company enters into interest rate swaps with
financial institutions under terms that provide payment of interest on the
notional amount of the swap. In accordance with these arrangement, the Company
pays interest at a fixed rate and the financial institution pays interest at
variable rates pursuant to terms of the loans. The Company had no swap
agreements at December 31, 1999.

(5)   RELATED PARTY TRANSACTIONS

      During 1999, 1998 and 1997, the Company purchased aircraft from ILFC
aggregating $91,700,000, $75,100,000 and $89,090,000, respectively. At December
31, 1999 and 1998, 94% and 91%, respectively, of the Company's gross fleet cost
was comprised of aircraft acquired from ILFC. The Company financed these
acquisitions through bank loans, partially guaranteed by ILFC, as well as loans
from ILFC. ILFC provides these guarantees to lenders through an AVG. ILFC's
financial support has allowed the Company to finance aircraft purchases at more
favorable leverage than the Company could otherwise obtain. The Company's
typical operating lease transaction with an AVG requires a cash investment by
the Company of approximately 5% to 15% of the aircraft purchase price while the
industry standard ranges from 20% to 30%. At December 31, 1999 and 1998,
$31,913,643 or 12% and $39,219,482 or 19%, of long-term debt was covered by AVGs
and $142,072,319, or 52%, and $67,450,465, or 32%, was due to ILFC,
respectively.

      The Company had one aircraft leased to ILFC which is subleased to an
airline at December 31, 1999 and 1998. The Company recognized rental income of
$942,500, $960,000 and $960,000 from this lease in each of the years ended 1999,
1998 and 1997, respectively. The lease expires in August 2001.

      During 1999 and 1998, the Company leased an aircraft to a third party for
a three-year period for which ILFC guaranteed certain rental revenue. In
connection with the lease, ILFC also guaranteed repayment of the related lease
deposit to the lessee of $1,632,000 included in the accompanying consolidated
balance sheet. During 1998, the Company purchased an aircraft from ILFC for
which ILFC guaranteed certain rental revenue.

      The Company has an agreement with ILFC related to the December 1995
purchase of an aircraft which provides for recovery of an operating loss, as
defined, in the acquired lease. The Company estimates this loss will be incurred
through 1999. Accordingly, the Company reduced the purchase price of the related
aircraft and recognized a receivable for the



                                       40
<PAGE>   41

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


present value of the estimated recovery aggregating $579,000. The balance was
paid at December 31, 1999. The amount due from ILFC at December 31, 1998 was
$61,600. The loss stems from a stated lease rate which was less than the market
lease rate at the date of acquisition. Accordingly, the Company allocated
additional cost to the purchase price and recognized deferred rent aggregating
$1,747,000 for the present value of the difference between the market and stated
rent. Deferred rent will be amortized on the straight-line method over the
remaining lease term. At December 31, 1999 and 1998, deferred rent from the
lease was $747,000 and $1,008,000, respectively.

      The Company realized consulting fee revenues of $25,000 during 1997, for
services to ILFC. The Company's Chairman and President collectively own Great
Lakes Holdings (GLH), an affiliated company. From time to time, these officers
provide consulting services to GLH. GLH paid the Company $12,000 during 1997
from Great Lakes.

(6)   RENTAL INCOME

      Minimum future rental income on noncancelable operating leases of flight
equipment at December 31, 1999 is as follows:

<TABLE>
<S>                                                           <C>
            YEAR ENDING DECEMBER 31:
                2000...................................       $39,115,776
                2001...................................        32,107,614
                2002...................................        20,714,097
                2003...................................         5,503,334
                2004...................................         2,507,000
                Thereafter.............................                --
                                                              -----------
                                                              $99,947,821
                                                              ===========
</TABLE>

      The Company's aircraft are leased under short-term to medium-term leases
with remaining terms expiring within one to four years.

(7)   COMMITMENTS AND CONTINGENCIES

Operating Leases

      The Company leases offices from a third party under a noncancelable
operating lease. Future minimum lease payments are:

<TABLE>
            YEAR ENDING DECEMBER 31:
<S>                                                           <C>
                2000 ..................................       $ 59,083
                2001 ..................................         59,966
                2002 ..................................         62,688
                2003 ..................................         64,928
                2004 ..................................         27,220
                Thereafter ............................             --
                                                              --------
                                                              $273,885
                                                              ========
</TABLE>

      Total rent expense under operating leases for the years ended December 31,
1999, 1998 and 1997 was $40,559, $33,107 and $27,285, respectively.



                                       41
<PAGE>   42

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Government Regulations

      The maintenance and operation of aircraft are regulated by the Federal
Aviation Administration (FAA) and foreign aviation authorities which oversee
such matters as aircraft certification, inspection, maintenance, certification
of personnel, and record-keeping. All current leases require the lessee to bear
the costs of complying with governmental regulations. However, in the event a
lessee fails to maintain aircraft in accordance with the terms of a lease, the
Company could be required to repair or recondition the aircraft. Failure of a
lessee to fulfill lease maintenance and operation obligations could have a
material adverse effect on the Company's financial condition and results of
operations.

      The FAA and civil aviation authorities of most countries and international
entities issue regulations limiting permitted noise and other emissions from
aircraft. Older non-complying aircraft can be brought into compliance by
modifying the engines. One of the Company's aircraft had noise compliance work
performed at a cost of approximately $2.4 million during 1994 (all of which was
paid by the Company). One of the Company's aircraft will be modified to meet
noise compliance regulations as a condition of an existing lease at the lessee's
expense. At December 31, 1999, two of the Company's aircraft were on lease to
airlines which operate in jurisdictions which do not require these
modifications. These two aircraft may require this work to be performed after
their leases expire unless the aircraft are re-leased and operated in an area
that does not require the modification.

(8)   SHAREHOLDERS' EQUITY

      In September 1998, the Company's Board of Directors authorized the
repurchase of up to 449,758 shares of the Company's common stock. During 1999
and 1998, the Company repurchased 42,500 and 281,300 shares, respectively of its
common stock.

      In November 1997, the Company issued 2.6 million shares of common stock in
an initial public offering (IPO) at $10.00 per share. In connection with the
IPO, the Company effected a 1-for-4.5 reverse stock split of its common stock
which has been applied retroactively in the accompanying consolidated financial
statements. In accordance with the underwriting agreement, the Company granted
the underwiters warrants to purchase 260,000 shares of common stock at $12 per
share exercisable through November 10, 2001 and an overallotment option
exercisable through December 20, 1997 to purchase 390,000 additional shares of
common stock of which 80,000 shares were exercised. After underwriting discount
and other offering costs, net proceeds to the Company were $23,942,094 for these
issuances. Concurrent with the Company's IPO, all of the outstanding convertible
preferred stock was converted to 1,103,528 shares of common stock.

      Through March 1993, the Company granted options to purchase 647,493 shares
of common stock at management's estimated fair value, $4.50 per share. During
1997, 139,717 options were exercised. Through May 1991, the Company also granted
options to purchase 348,784 shares of convertible preferred stock at
management's estimate of fair value, primarily $5.18 per share. Concurrent with
the Company's IPO, all of these options were exercised and converted to common
stock.

      During March 1997, the Company extended the expiration date on 496,664
employee stock options described in the preceding paragraph to March 31, 2007,
which vest 25% in 1997 and 25% in each of the following three years.
Accordingly, the Company will recognize aggregate compensation expense of
approximately $1 million for the difference between the value of the options on
the extension date and the exercise price. The Company recognized $250,000 in
stock compensation during the years ended December 31, 1999, 1998 and 1997
related to the amortization of such cost. If the related employee is terminated,
the respective stock options will vest in full. At December 31, 1999, 485,554
options with an exercise price of $4.50 per share were outstanding and 364,165
were exercisable.

      During 1997, the Company adopted the 1997 Employee Stock Option and Award
Plan (the Employee Plan). The Employee Plan was amended in 1999. A maximum of
325,000 shares of common stock (subject to certain anti-dilutive adjustments)
may be issued pursuant to grants and awards under the Employee Plan. The maximum
number of shares that may be subject to qualifying share-based awards, either
individually or in aggregate, that can be granted under the Employee Plan to any
one participant during any calendar year will not exceed 150,000 (subject to
certain anti-dilutive adjustments). During 1999 and 1998, options to purchase
55,000 and 5,000 shares, respectively of the Company's common stock at $7.25



                                       42
<PAGE>   43

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


and $5.875 per share, respectively have been granted under the Employee Plan.
The options are fully vested at December 31, 1999 and expire from 2003 to 2004.

      During 1997, the Company adopted the 1997 Eligible Directors Stock Option
Plan (the Directors Plan). The Directors Plan was amended in 1999. The Directors
Plan provides that annually an Eligible Director will receive an option to
purchase 10,000 shares of common stock at an exercise price equal to the market
price of common stock on the date of grant. Under the Directors Plan 125,000
shares of common stock are authorized for issuance. During 1999 and 1998,
options to purchase 50,000 and 25,000 shares, respectively of the Company's
common stock at $6.38 and $10.25 per share, respectively had been granted under
the Directors Plan. The options vest through June 2002 and expire from 2003 to
2004.

      Changes in outstanding options under the Company's stock option plans
during the three years ended December 31, 1999 and options exercisable at
December 31 1999 are as follows:

<TABLE>
<S>                                                      <C>
            Outstanding at December 31, 1996 .....       974,055
               Granted at $4.50 ..................       496,664
               Exercised at $4.50 to $5.175 ......      (488,501)
               Canceled or expired ...............      (496,664)
                                                        --------
            Outstanding at December 31, 1997 .....       485,554
               Granted at $5.875 to $10.25 .......        30,000
               Exercised .........................            --
               Canceled or expired ...............            --
                                                        --------
            Outstanding at December 31, 1998 .....       515,554
               Granted at $6.375 to $7.25 ........       105,000
               Exercised .........................            --
               Canceled or expired ...............            --
                                                        --------
            Outstanding at December 31, 1999 .....       620,554
                                                        ========
</TABLE>


      In November 1997, a convertible note payable was converted to 155,555
shares of common stock.

(9)   SUBSEQUENT EVENTS

      In January 2000, the Company's Board of Directors authorized the
repurchase of up to 5% of the Company's common stock.

      The Company entered into a $5,000,000 line of credit with a bank in
February 2000. The line of credit bears interest at LIBOR plus 2.5% and expires
June 30, 2001. No borrowings have been made against the line of credit.

      The Company is in the process of terminating a lease with TAESA, a Mexican
airline. The airline recently had an accident on one of its DC-9 aircraft and
the Mexican government subsequently grounded its entire fleet. As a result,
TAESA defaulted on its lease of a Boeing Model 737-300, and the Company is
currently in the process of repossessing the aircraft. The lease was due to
terminate June 2002. The Company is aggressively marketing the aircraft to
several airlines. Because of the current softness in the leasing market, any new
lease will likely be at a reduced rate. In addition, the Company will not
recognize rental revenue on this aircraft for at least the first three months of
2000 and the Company will incur additional charges related to the repossession.
The Company has two notes payable to ILFC related to the aircraft of $14,995,794
bearing interest at 7.96% due April 2000 and $401,757 bearing interest at 6.0%
due May 2000. The Company intends to refinance the notes payable as they come
due.



                                       43
<PAGE>   44

                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


(10)  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                             ---------------------------------------------------------
                                               MARCH 31       JUNE 30       SEPTEMBER 30   DECEMBER 31
                                             -----------    -----------     ------------   -----------
<S>                                          <C>            <C>             <C>            <C>
1999:
Revenues ................................    $ 9,244,625    $ 8,941,682     $10,597,947    $10,957,652
Expenses ................................      7,712,009      7,475,848       8,921,774      9,576,394
                                             -----------    -----------     -----------    -----------
Income before income taxes and
  extraordinary loss ....................      1,532,616      1,465,834       1,676,173      1,381,258
Income taxes ............................        582,389        557,015         636,946        486,423
                                             -----------    -----------     -----------    -----------
Income before extraordinary loss ........        950,227        908,819       1,039,227        894,835
Extraordinary loss on debt extinguishment             --       (214,263)             --             --
                                             -----------    -----------     -----------    -----------
Net income ..............................    $   950,227    $   694,556     $ 1,039,227    $   894,835
                                             ===========    ===========     ===========    ===========
Basic earnings per share:*
  Income before extraordinary loss ......    $       .23    $       .21     $       .25    $       .21
  Extraordinary loss on debt
    extinguishment ......................             --           (.05)             --             --
                                             -----------    -----------     -----------    -----------
  Net income ............................    $       .23    $       .16     $       .25    $       .21
                                             ===========    ===========     ===========    ===========
Diluted earnings per share*
  Income before extraordinary loss ......    $       .22    $       .21     $       .24    $       .21
  Extraordinary loss on debt
    extinguishment ......................             --           (.05)             --             --
                                             -----------    -----------     -----------    -----------
  Net income ............................    $       .22    $       .16     $       .24    $       .21
                                             ===========    ===========     ===========    ===========
Weighted average number of
  common shares outstanding .............      4,212,462      4,212,284       4,211,040      4,196,959
Weighted average number of
  common shares outstanding-
  assuming dilution .....................      4,326,277      4,329,024       4,340,606      4,318,915
</TABLE>



                                       44
<PAGE>   45
                INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                 ----------------------------------------------------
                                                  MARCH 31       JUNE 30    SEPTEMBER 30  DECEMBER 31
                                                 ----------    ----------   ------------  -----------
<S>                                              <C>           <C>           <C>           <C>
1998:
Revenues ....................................    $6,571,968    $6,610,272    $7,307,570    $8,828,065
Expenses ....................................     5,641,801     5,621,080     6,222,143     7,111,406
                                                 ----------    ----------    ----------    ----------
Income before income taxes
  and cumulative effect of
  accounting change .........................       930,167       989,192     1,085,427     1,716,659
Income taxes ................................       373,000       397,200       434,000       337,706
                                                 ----------    ----------    ----------    ----------
Income before cumulative effect of
  accounting change .........................       557,167       591,992       651,427     1,378,953
Cumulative effect of accounting change ......       209,000            --            --            --
                                                 ----------    ----------    ----------    ----------
Net income ..................................    $  766,167    $  591,992    $  651,427    $1,378,953
                                                 ==========    ==========    ==========    ==========
Basic earnings per share:*
  Income before cumulative effect of
     accounting change ......................    $      .12    $      .13    $      .15    $      .33
  Cumulative effect of accounting change ....           .05            --            --            --
                                                 ----------    ----------    ----------    ----------
  Net income ................................    $      .17    $      .13    $      .15    $      .33
                                                 ==========    ==========    ==========    ==========
Diluted earnings per share*
  Income before cumulative effect of
     accounting change ......................    $      .12    $      .13    $      .14    $      .32
  Cumulative effect of accounting change ....           .05            --            --            --
                                                 ----------    ----------    ----------    ----------
  Net income ................................    $      .17    $      .13    $      .14    $      .32
                                                 ==========    ==========    ==========    ==========
Weighted average number of common shares
  outstanding ...............................     4,497,584     4,497,584     4,486,497     4,241,266
Weighted average number of common shares
  outstanding-assuming dilution .............     4,627,244     4,679,055     4,634,132     4,287,125
</TABLE>

*Per share data may not always add up to the total for the year since each
figure is independently calculated.



                                       45
<PAGE>   46



                                   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.


                                          INTERNATIONAL AIRCRAFT INVESTORS

Date: March 27, 2000                      By:   /s/ MICHAEL P. GRELLA
                                             ----------------------------------
                                          Michael P. Grella
                                          President

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.

<TABLE>
<CAPTION>
        SIGNATURE                          TITLE                         DATE
        ---------                          -----                         ----
<S>                            <C>                                   <C>
 /s/ WILLIAM E. LINDSEY           Chairman of the Board,             March 27, 2000
-------------------------      Chief Executive Officer and
   William E. Lindsey               Director (Principal
                                    Executive Officer)

 /s/ MICHAEL P. GRELLA                  President,                   March 27, 2000
-------------------------       Chief Operating Officer and
   Michael P. Grella           Director (Principal Operating
                                         Officer)

  /s/ RICK O. HAMMOND            Vice President--Finance,            March 27, 2000
-------------------------         Chief Financial Officer
    Rick O. Hammond            (Principal Financial Officer)

/s/ ALAN G. STANFORD, JR.       Vice President--Controller           March 27, 2000
-------------------------          (Principal Accounting
  Alan G. Stanford, Jr.                  Officer)

  /s/ MAGNUS GUNNARSSON                  Director                    March 27, 2000
-------------------------
   Magnus Gunnarsson

  /s/ RALPH O. HELLMOLD                  Director                    March 27, 2000
-------------------------
    Ralph O. Hellmold

   /s/ AARON MENDELSOHN                  Director                    March 27, 2000
-------------------------
     Aaron Mendelsohn

    /s/ CHRISTER SALEN                   Director                    March 27, 2000
-------------------------
      Christer Salen

    /s/ KENNETH TAYLOR                   Director                    March 27, 2000
-------------------------
      Kenneth Taylor

   /s/ STUART M. WARREN                  Director                    March 27, 2000
-------------------------
     Stuart M. Warren
</TABLE>



                                       46