<PAGE>
FORM 10K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1999 0-17785
AIRCRAFT INCOME PARTNERS L.P.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3430508
- -------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5 Cambridge Center, 9th Floor, Cambridge, MA 02142
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
---------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether 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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
There is no public market for the Limited Partnership Units.
Accordingly, information with respect to the aggregate market value of Limited
Partnership Units held by non-affiliates of Registrant has not been supplied.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Documents incorporated by reference
-----------------------------------
None
Exhibit Index: page IV-1
<PAGE>
PART I
Item 1. Business
General
Aircraft Income Partners L.P. (the "Registrant") was organized as a Delaware
limited partnership on October 8, 1987. The general partner of the Registrant is
Integrated Aircraft Fund Management Corp. (the "General Partner"). The General
Partner is ultimately a wholly-owned subsidiary of Presidio Capital Corporation,
a British Virgin Islands corporation ("Presidio"). See "Management/Employees"
below.
In 1989, the Registrant sold, pursuant to a registration statement filed with
the Securities Exchange Commission, 385,800 units of limited partnership
interest (the "Units") for gross proceeds aggregating $192,900,000. The
principal business of the Registrant is and has been to hold for investment and
ultimately sell used commercial jet aircraft as wall as related engines and
other aircraft parts. Substantially all of the net proceeds available for
investment had been invested in 18 aircraft (including an undivided 47.92231%
joint venture interest in one aircraft) which were leased to third parties for
various terms. At March 1, 2000, all of Registrant's aircraft had been sold or
otherwise disposed of. See "Disposition of Aircraft" below.
Management/Employees
Registrant does not have any employees. The business of the Registrant is
managed by the General Partner, its affiliates and agents. Through November 2,
1994, the General Partner was a wholly-owned subsidiary of Integrated Resources,
Inc. ("Integrated"). On November 3, 1994, as a result of the consummation of the
reorganization plan relating to Integrated's bankruptcy, indirect ownership of
the General Partner was purchased by Presidio. As a result, the General Partner
became ultimately wholly-owned by Presidio. Presidio, in turn, is controlled by
NorthStar Capital Investment Corp., a Maryland corporation ("NorthStar").
Presidio previously retained Wexford Management LLC ("Wexford") to provide
consulting and administrative services to Presidio and its affiliates, including
the General Partner and Registrant. The agreement with Wexford expired on May 3,
1998 at which time Presidio entered into a management agreement with NorthStar
Presidio Management Company, LLC ("NorthStar Presidio"). Under the terms of the
management agreement, NorthStar Presidio provided the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates.
On October 21, 1999, Presidio entered into a Services Agreement with AP-PCC III,
L.P. (the "Agent") pursuant to which the Agent was retained to provide asset
management and investor relation services to Registrant and other entities
affiliated with Registrant.
As a result of this agreement, the Agent has the duty to direct the day to day
affairs of Registrant, including, without limitation, reviewing and analyzing
potential sale, financing or restructuring proposals regarding the Registrant's
assets, preparation of all reports, maintaining records and maintaining bank
accounts of Registrant. The Agent is not permitted, however, without the consent
of Presidio, or as otherwise required under the terms of the Limited Partnership
Agreement to, among other things, cause Registrant to sell or acquire an asset
or file for bankruptcy protection.
In order to facilitate the Agent's provision of the asset management services
and the investor relation services, effective October 25, 1999, the officers and
directors of the General Partner resigned and nominees of the Agent were elected
as the officers and directors of the General Partner. The Agent is an affiliate
of Winthrop Financial Associates, a Boston based company that provides asset
management services, investor relation services and property management services
to over 150 limited partnerships which own commercial property and other assets.
The General Partner does not believe this transaction will have a material
effect on the operations of Registrant.
I-1
<PAGE>
Disposition of Aircraft
a. Year ended December 31, 1997
On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by Registrant
was sold to an unaffiliated third party for proceeds of approximately $1,982,000
exclusive of selling expenses of approximately $60,000. The aircraft, which was
formerly leased to Aloha Airlines, Inc. ("Aloha"), had been off-lease since
October 15, 1996. At the time of the sale, the aircraft had a net carrying value
of approximately $1,290,000.
b. Year ended December 31, 1998
On March 31, 1998, a Boeing 737-2H4 aircraft owned by Registrant was
sold to an unaffiliated third party for $3,500,000 exclusive of selling expenses
of approximately $106,000. The aircraft, which was formerly leased to Southwest,
had been off-lease since January 1998. At the time of sale, the aircraft had a
net carrying value of approximately $1,141,000.
On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by Registrant
was sold to an unaffiliated third party for proceeds of $4,100,000, exclusive of
selling expenses of approximately $124,000. The aircraft, which was formerly
leased to Aloha had a net carrying value of approximately $2,617,000 at the time
of sale.
Between August 17, 1998 and September 23, 1998, Registrant sold its
interest in two Boeing 737-200 aircraft, four Boeing 727-200 aircraft (inclusive
of an undivided 47.92231% joint venture interest in one aircraft) and one
McDonnell Douglas DC9-51 aircraft. Aside from the DC9-51 aircraft, the six
aircraft had an original cost of approximately $71,235,500, represented 45.03%
of the net carrying value of Partnership's aircraft as of the end of June 30,
1998 and, at the time of sale, had a net carrying value of approximately
$7,744,000. Registrant's interest in the DC9-51 aircraft consisted of the right
to receive deferred payments of $2,529,900 related to a September 1, 1996
installment sale. The sales were made to an unaffiliated third party for gross
sales proceeds, exclusive of closing costs, of $18,000,000.
c. Year ended December 31, 1999
On June 1, 1999, Registrant sold two aircraft to an unaffiliated third
party for sale proceeds of $1,910,000, exclusive of selling expenses of
approximately $86,000. At the time of sale, the aircraft had a net carrying
value of approximately $1,824,000. During the quarter of ended September 30,
1999, Registrant received an additional $111,550 relating to the sale of the
aircraft as a result of Registrant providing the records for the engines.
In June 1999, Registrant and Continental agreed to settle certain
outstanding claims. Pursuant to the settlement, Registrant received $780,000 on
August 24, 1999 as well as 8,684 shares of Continental's Class A stock and
24,179 shares of Continental's Class B stock and an additional $90,861 on
September 22, 1999. On October 6, 1999, Registrant sold all of its Class A and
Class B shares for net proceeds aggregating approximately $1,213,000, which
equaled Registrant's cost basis in the stock. Subject to the resolution of third
party claims against additional stock reserved under Continental's Plan of
Reorganization, Registrant may receive additional shares of Class A and Class B
stock in the future.
d. Subsequent Event
On January 19, 2000, Registrant sold to an unaffiliated third party a
McDonnell Douglas DC9-30 aircraft for gross proceeds of $650,000. Costs
associated with this sale amounted to approximately $77,000. At the time of the
sale the aircraft had a net carrying value of approximately $574,000.
Competition
As a result of the Registrant liquidating all of its aircraft, Registrant is no
longer subject to competitive factors.
I-2
<PAGE>
Foreign Operations
During 1998, Registrant operated three aircraft in foreign countries. Two of
such aircraft were leased to Ladeco S.A., a Chilean airline, and were operated
primarily in South America. A third aircraft was leased to Air Micronesia, a
stand-alone air carrier affiliated with Continental Airlines, Inc., and such
aircraft was operated primarily in Southeast Asia. All of such leases expired in
1998 (See Item 8, "Financial Statements and Supplementary Data - Note 10").
There were no foreign operations during 1999.
Item 2. Properties
None
Item 3. Legal Proceedings
On July 29, 1998, Fieldstone Private Capital Group, L.P. ("Fieldstone")
commenced an action in the Supreme Court of the State of New York, County of New
York, against, among others, Registrant and its General Partner. The complaint
sought, among other things, damages against Registrant and its General Partner
for the alleged failure to pay Fieldstone leasing and sales commissions.
In February 1999, the parties agreed to settle the action. As part of the
settlement Registrant paid Fieldstone leasing commissions aggregating
approximately $347,000 and Registrant entered into a separate remarketing
agreement with Fieldstone with respect to certain aircraft remaining in
Registrant's portfolio.
During 1997, the lease of three McDonnell Douglas Model DC9-32 aircraft owned by
Registrant was extended to September 1998 (2 aircraft) and December 1998 (one
aircraft) at a rental of $52,500 per month, per aircraft. Two of the aircraft
were returned in September 1998 and the third aircraft was returned in December
1998.
Upon return, Registrant conducted inspections of the aircraft to ascertain
whether the return conditions of the lease were satisfied. On May 5, 1999, First
Security Bank, N.A., acting not in its individual capacity, but solely as
trustee under a trust agreement in which Registrant is beneficiary, filed a
complaint in the United States District Court, Southern District of New York.
The complaint seeks damages in an amount to be determined at trial, but believed
to be in excess of $3,000,000 arising out of Continental's i) failure to return
the three DC9-32 aircraft in the return condition required by the lease and ii)
failure to make a rent payment provided for in the lease. Continental has filed
an answer denying the allegations in the complaint.
Item 4. Submission of Matters to a Vote of Security Holders
None
I-3
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) There is no developed public market for the Units of the Registrant.
As of March 1, 2000, there were approximately 14,700 record holders of Units,
owning an aggregate of 385,805 Units.
During the years ended December 31, 1999 and 1998, Registrant has made the
following cash distributions with respect to the Units to holders thereof as of
the dates set forth below in the amounts set forth opposite such dates:
------------------------------------------------------------------
Distribution with respect to Amount of Distribution Per Unit (1)
Quarter Ended 1999 1998
------------------------------------------------------------------
March 31 $ - $ -
June 30 $ - $27.70
September 30 $ - $41.50
December 31 $ - $ -
------------------------------------------------------------------
(1) The amounts listed represent distributions of cash from operations and
cash from sales. (See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", for information
relating to Registrant's future distributions.)
(b) Not applicable.
II-1
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- ---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues (1) $ 1,985,465 $ 4,521,384 $ 8,231,951 $ 10,317,005 $ 12,372,475
Net Income (Loss) (2) (3) $ (1,342,951) $ 11,331,319 $ 1,706,235 $ 5,988,174 $ 1,496,774
Net income (Loss) Per
Net income (Loss) Per
Unit (2) (3) $ (3.13) $ 26.43 $ 3.98 $ 13.97 $ 3.49
Distribution Per Unit $ - $ 69.20 $ 20.50 $ 40.50 $ 32.00
Total Assets $ 8,019,742 $ 9,787,877 $ 30,567,247 $ 40,045,819 $ 52,365,622
Total Partners' Equity $ 7,904,489 $ 9,247,440 $ 27,580,239 $ 34,661,785 $ 46,034,837
</TABLE>
(1) Included in this amount is $346,552, $828,655, $659,851, $582,674 and
$443,904 of interest income for the years ended December 31, 1999, 1998,
1997, 1996 and 1995, respectively. Additionally, revenues include
$1,638,913 in settlement income for the year ended December 31, 1999 and
$108,487 of other income for the year ended December 31, 1995.
(2) Registrant provided allowances for equipment impairments of $2,659,828 and
$1,350,000 for the year ended December 31, 1999 and 1998, respectively, to
recognize the loss in value of certain aircraft. No allowance was
considered necessary for the years ended December 31, 1997, 1996 and 1995.
(3) Included in these amounts are gains on the disposition of various
aircraft(s) of $111,550, $11,126,432, $632,367, and $5,222,948 for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. In
addition, included is a gain of $1,001,731, which resulted from the sale of
marketable securities during the year ended December 31, 1995.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
Registrant had $7,411,200 of cash and cash equivalents at December 31, 1999, as
compared to $4,199,804 at December 31, 1998.
The $3,211,396 increase in cash and cash equivalents at December 31, 1999 as
compared to December 31, 1998, was due to $1,275,419 of cash provided by
operating activities and $1,935,977 of cash provided by investing activities.
The proceeds from the sale of the aircraft provided all investing activity cash
flow.
After the sale of Registrant's final aircraft on January 19, 2000, Registrant is
looking to winding up its business affairs prior to the end of 2000.
Registrant's reserves should be sufficient to pay its operating expenses.
In February 2000, Registrant declared and paid distribution of $4,000,000 of
which the limited partners received $3,600,000 or approximately $9.33 per
limited partnership unit.
On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by Registrant was sold
to an unaffiliated third party for proceeds of approximately $1,982,000
exclusive of selling expenses of approximately $60,000. The aircraft, which was
Aloha had been off-lease since October 15, 1996. At the time
of sale, the aircraft had a net carrying value of approximately $1,290,000.
II-2
<PAGE>
On November 15, 1997, the lease of a Boeing 737-200 Advanced aircraft leased to
Aloha expired in accordance with the terms of the lease. On May 19, 1998, the
aircraft was sold to an unaffiliated third party for proceeds of $4,100,000,
exclusive of selling expenses of approximately $124,000. The aircraft had a net
carrying value of approximately $2,617,000 at the time of sale.
On March 31, 1998, a Boeing 737-2H4 aircraft owned by Registrant was sold to an
unaffiliated third party for proceeds of $3,500,000 exclusive of selling
expenses of approximately $106,000. The aircraft, which was formerly leased to
Southwest, had been off-lease since January 1998. At the time of sale, the
aircraft had a net carrying value of approximately $1,141,000.
Between August 17, 1998 and September 23, 1998, Registrant sold its interest in
two Boeing 737-200 aircraft, four Boeing 727-200 aircraft (inclusive of an
undivided 47.92231% joint venture interest in one aircraft) and one McDonnell
Douglas DC9-51 aircraft. Aside from the DC9-51 aircraft, the six aircraft had an
original cost of approximately $71,235,500, represented 45.03% of the net
carrying value of Registrant's aircraft as of June 30, 1998 and, at the time of
sale, had a net carrying value of approximately $7,744,000. Registrant's
interest in the DC9-51 aircraft consisted of the right to receive deferred
payments of $2,529,900 related to a September 1, 1996 installment sale. The
sales were made to unaffiliated third party for gross sales proceeds, exclusive
of closing costs of $18,000,000.
On June 1, 1999, Registrant sold two aircraft to an unaffiliated third party for
sale proceeds of $1,910,000, exclusive of selling expenses of approximately
$86,000. At the time of sale, the aircraft had a net carrying value of
approximately $1,824,000. In the quarter of ended September 30, 1999, Registrant
received an additional $111,550 relating to the sale of the aircraft as a result
of Registrant providing the records for the engines.
In June 1999, Registrant and Continental agreed to settle the certain
outstanding claims. Pursuant to the settlement, Registrant received $780,000 on
August 24, 1999 as well as 8,684 shares of Continental's Class A stock and
24,179 shares of Continental's Class B stock and an additional $90,861 on
September 22, 1999. On October 6, 1999, Registrant sold all shares of stock for
net proceeds aggregating approximately $1,213,000, which equaled Registrant's
cost basis in the stock. Subject to the resolution of third party claims against
additional stock reserved under Continental's Plan of Reorganization, Registrant
may receive additional shares of Class A and Class B stock.
In September 1996 and July 1998, Registrant received proposed notices of
assessment from the State of Hawaii with respect to general excise tax of
approximately $1,923,000 (including interest and penalties) for the years 1991
through 1997. The state is alleging that Registrant owes GET with respect to
rents received from Aloha and Hawaiian Airlines, Inc. ("Hawaiian") under the
leases between Registrant and each of the airlines.
The leases with both Aloha and Hawaiian provide for full indemnification of
Registrant for such taxes, but the bankruptcy of Hawaiian may relieve Hawaiian
of its indemnification obligation for any periods prior to September 21, 1993,
when Hawaiian and its affiliates sought bankruptcy protection. In any event, it
is Registrant, as taxpayer, which is ultimately liable for the GET, if it is
applicable.
The State of Hawaii has never previously applied the GET to rentals received by
a lessor of aircraft where the lessor's only contact with the State of Hawaii is
the fact that it has leased its aircraft to airlines which are based in the
state. Aloha and Hawaiian, as well as Registrant, have separately engaged tax
counsel and both airlines are cooperating with Registrant to vigorously contest
the proposed assessments.
Final notices of assessment have not yet been issued. Although there can be no
assurance that the contest of the assessments will be successful, Registrant
believes that the state's position on the applicability of GET in this instance
is without merit. Registrant has not recorded any liability as a result of the
proposed notices of assessment.
Inflation has not had any material effect on Registrant's revenues since its
inception nor does Registrant anticipate any material effect on its business
from this factor.
II-3
<PAGE>
Registrant provided allowances for equipment impairment of $2,683,810 and
$1,350,000 for the years ended December 31, 1999 and 1998, respectively. No
allowance was considered necessary for the year ended December 31, 1997.
Results of Operations - 1999 as Compared to 1998
Registrant generated net loss of approximately $1,343,000, as compared to net
income of approximately $11,331,000 for the year ended December 31, 1998. The
change in net income for 1999 compared to 1998 was principally due to the
following:
i.) the gain on sale of aircraft of approximately$112,500 in 1999 compared
to a gain from sale of aircraft of approximately$11,126,000 in 1998.
ii.) reduction of revenue, which was approximately $1,985,000 in 1999,
compared to approximately $4,521,000 in 1998.
iii.) the reduction in costs and expenses, which were approximately
$3,440,000 in 1999, compared to approximately $4,316,000 in 1998.
Registrant revenue decreased by approximately 56% for the year ended December
31, 1999 as compared to the year ended December 31, 1998. The decrease was due
to the following:
i.) rental revenue decrease to zero from approximately $3,693,000 due to
the expiration of all lease agreements in 1997 and due to the sale of
certain aircraft in 1998 and 1999.
ii.) interest income decreases by approximately 42% for 1999 compared to
1998 primarily due to lower cash balances available for investment and
1998 including approximately$141,000 on interest income from an
installment sale.
iii.) increase in revenue as a result of $1,639,000 of settlement income. In
June 1999, Registrant settled a legal claim with Continental Airlines,
where Registrant received cash and stock in Continental Airlines, which
was subsequently sold and totaled approximately $1,639,000.
Costs and expenses decreased overall by approximately 20% for the year ended
December 31, 1999 as compared to the year ended December 31, 1998. The decrease
was primarily due to the following:
i.) a decrease in depreciation expense of approximately $2,103,000 for 1999
compared to 1998 due to Aircraft reaching their salvage value and/or
being sold.
ii.) a reduction in management fees due to no rental income in 1999.
iii.) a decrease in operating expenses as a result of aircraft sales.
iv.) an increase in general and administrative expenses of 67% due to a
$200,000 increase in legal fees associated with the litigation and sale
of 2 DC-9 Airplanes.
v.) an increase in the allowance for equipment impairment.
Results of Operations - 1998 as Compared to 1997
Registrant's net income for the year ended December 31, 1998 was approximately
$11,331,000 as compared to net income of approximately $1,706,000 for the year
ended December 31, 1997. The change in net income for 1998 compared to 1997 was
principally due to the following:
i) the gain on sale of aircraft of approximately $11,126,000 in 1998
compared with a gain from sale of aircraft of approximately $632,000 in
1997;
II-4
<PAGE>
ii) the reduction in costs and expenses which were approximately $4,316,000
in 1998 compared to approximately $7,158,000 in 1997; and
iii) the reduction in revenues, which were approximately $4,521,000 in 1998,
compared to revenues of approximately $8,232,000 in 1997.
Registrant's revenues decreased by approximately 45% for the year ended December
31, 1998 as compared to the year ended December 31, 1997. The decrease was
principally due to the following:
i) rental revenues decreased due to the reduced rentals from a Boeing
737-200 Advanced aircraft leased to Aloha, lower rentals from certain
aircraft leased to Continental (as of December 1, 1997), the expiration
of the lease with Southwest as well as due to the sale of certain
aircraft in 1998;
ii) interest income increased by approximately 83% for 1998 as compared to
1997 primarily due to higher case balances available for investment;
and
iii) in 1998, Registrant recognized interest on the installment sale of an
aircraft leased to Hawaiian of approximately $141,000 as compared to
approximately $284,000 in 1997.
Costs and expenses decreased overall by approximately 40% for the year ended
December 31, 1998 as compared to the year ended December 31, 1997. The decrease
was primarily due to the following:
i) a decrease in depreciation of approximately 66% for 1998 as compared to
1997 due to certain aircraft having previously reached their salvage
value as well due to the sale of certain aircraft in 1998;
ii) a decrease in general and administrative expenses of approximately 29%
primarily due to lower legal costs;
iii) a reduction in management fees of approximately 32% principally due to
lower rental income in 1998 on which such fees are based, offset by:
iv) an increase in operating expenses due to maintenance costs associated
with a Boeing 737 aircraft to comply with certain airworthiness
directives, insurance, remarketing fees, and storage costs for a Boeing
737 aircraft which went off lease in January 1998 and was sold on March
31, 1998 and three McDonnell Douglas DC-9 aircraft which went off lease
in September 1998 and December 1998.
Allowance for equipment impairment increased due to the current year impairment
recorded by Registrant totaling $1,350,000. This impairment recorded in the 1998
period was comprised of $600,000 and $750,000 with respect to two McDonnell
Douglas DC9-32 aircraft which were previously leased to Continental. Such
impairments were calculated based on current market conditions.
Registrant recognized approximately $11,126,000 of gain from the sale of certain
aircraft for the year ended December 31, 1998 as compared to a gain of
approximately $632,000 from the sale of aircraft for the year ended December 31,
1997.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not applicable
II-5
<PAGE>
Item 8. Financial Statements and Supplementary Data
AIRCRAFT INCOME PARTNERS L.P.
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
INDEX
Page
Number
------
Independent Auditor's Report F-1
Financial statements - years ended
December 31, 1999, 1998 and 1997
Balance sheets F-2
Statements of operations F-3
Statement of partners' equity F-4
Statements of cash flows F-5
Notes to financial statements F-6 through F-17
Schedule:
II -- Valuation and Qualifying Accounts F-18 through F-20
All other schedules have been omitted because they are inapplicable or the
information is included in the financial statements or notes thereto.
II-6
<PAGE>
To the Partners of
Aircraft Income Partners L.P.
Cambridge, Massachusetts
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Aircraft Income Partners L.P.
(a limited partnership) as of December 31, 1999 and 1998, and the related
statements of operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1999. Our audits also included the
financial statement schedule listed in the Index at Item 14(a) 2. These
financial statements and the financial statement schedule are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aircraft Income Partners L.P.
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
On January 19, 2000, the Partnership sold its remaining aircraft and is in the
process of winding up its affairs and dissolving before the end of its next
fiscal year.
/s/ Hays & Company
March 15, 2000
New York, New York
F-1
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
BALANCE SHEETS
December 31,
-----------------------------
1999 1998
----------- -----------
ASSETS
Equipment held for sale - net $ 573,982 $5,058,237
Cash and cash equivalents 7,411,200 4,199,804
Accounts receivable 26,250 471,250
Other receivables 8,310 38,886
Deferred costs -- 19,700
---------- ----------
$8,019,742 $9,787,877
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 115,253 $ 540,437
---------- ----------
Commitments and contingencies
(Notes 3, 4, 8 and 9)
Partners' equity
Limited partners' equity (385,805 units
issued and outstanding) 7,105,085 8,313,741
General partner's equity 799,404 933,699
---------- ----------
Total partners' equity 7,904,489 9,247,440
---------- ----------
$8,019,742 $9,787,877
========== ==========
See notes to financial statements
F-2
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues
Settlement income $ 1,638,913 $ -- $ --
Rental -- 3,692,729 7,572,100
Interest 346,552 687,646 375,609
Interest - installment note -- 141,009 284,242
------------ ------------ ------------
1,985,465 4,521,384 8,231,951
------------ ------------ ------------
Costs and expenses
Depreciation -- 2,102,680 6,227,309
Provision for equipment impairment 2,659,828 1,350,000 --
General and administrative 534,520 319,760 452,956
Operating 157,207 319,480 135,658
Management fee -- 180,200 265,161
Other 88,411 44,377 76,999
------------ ------------ ------------
3,439,966 4,316,497 7,158,083
------------ ------------ ------------
(1,454,501) 204,887 1,073,868
Gain on disposition of aircraft - net 111,550 11,126,432 632,367
------------ ------------ ------------
Net (loss) income $ (1,342,951) $ 11,331,319 $ 1,706,235
============ ============ ============
Net (loss) income attributable to
Limited partners $ (1,208,656) $ 10,198,187 $ 1,535,611
General partner (134,295) 1,133,132 170,624
------------ ------------ ------------
$ (1,342,951) $ 11,331,319 $ 1,706,235
============ ============ ============
Net (loss) income per unit of limited partnership
interest (385,805 units outstanding) $ (3.13) $ 26.43 $ 3.98
============ ============ ============
</TABLE>
See notes to financial statements
F-3
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
Limited General Total
Partners' Partner's Partners'
Equity Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1997 $ 31,186,652 $ 3,475,133 $ 34,661,785
Net income - 1997 1,535,611 170,624 1,706,235
Distributions to partners ($20.50 per limited
partnership unit) (7,909,003) (878,778) (8,787,781)
------------ ------------ ------------
Balance, December 31, 1997 24,813,260 2,766,979 27,580,239
Net income - 1998 10,198,187 1,133,132 11,331,319
Distributions to partners ($69.20 per limited
partnership unit) (26,697,706) (2,966,412) (29,664,118)
------------ ------------ ------------
Balance, December 31, 1998 8,313,741 933,699 9,247,440
Net loss - 1999 (1,208,656) (134,295) (1,342,951)
------------ ------------ ------------
Balance, December 31, 1999 $ 7,105,085 $ 799,404 $ 7,904,489
============ ============ ============
</TABLE>
See notes to financial statements
F-4
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
INCREASE (DECREASE) IN CASH AND --------------------------------------------------
CASH EQUIVALENTS 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income $ (1,342,951) $ 11,331,319 $ 1,706,235
Adjustments to reconcile net (loss) income to net
cash provided by operating activities
Depreciation -- 2,102,680 6,227,309
Provision for equipment impairment 2,659,828 1,350,000 --
Gain on disposition of aircraft - net (111,550) (11,126,432) (632,367)
Changes in operating assets and liabilities
Accounts receivable 445,000 34,480 263,817
Other receivables 30,576 51,005 434,024
Deferred costs 19,700 75,805 128,361
Prepaid expenses -- 13,170 82,191
Deferred rents and modification advances receivable -- -- 254,432
Accounts payable and accrued expenses (425,184) 371,876 64,796
Deferred income -- (133,217) 1,667
Maintenance reserves -- (2,129,110) (38,219)
Deferred costs payable -- (50,000) --
Management fee payable -- -- (94,000)
------------ ------------ ------------
Net cash provided by operating activities 1,275,419 1,891,576 8,398,246
------------ ------------ ------------
Cash flows from investing activities
Proceeds from sale of aircraft - net 1,935,977 25,157,627 1,922,265
Proceeds from installment sale note receivable -- 382,006 975,759
Additions and modifications to leased aircraft - net -- -- 1,984
------------ ------------ ------------
Net cash provided by investing activities 1,935,977 25,539,633 2,900,008
------------ ------------ ------------
Cash flows from financing activities
Distributions to partners -- (29,664,118) (11,145,478)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 3,211,396 (2,232,909) 152,776
Cash and cash equivalents, beginning of year 4,199,804 6,432,713 6,279,937
------------ ------------ ------------
Cash and cash equivalents, end of year $ 7,411,200 $ 4,199,804 $ 6,432,713
============ ============ ============
</TABLE>
See notes to financial statements
F-5
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1 ORGANIZATION
Aircraft Income Partners L.P. (the "Partnership"), was formed in
October 1987, under the Delaware Revised Uniform Limited Partnership
Act for the purpose of engaging in the business of acquiring and
leasing aircraft. The Partnership will terminate on December 31, 2010,
or sooner, in accordance with the terms of the Agreement of Limited
Partnership (the "Limited Partnership Agreement").
Limited partners' units were originally issued at a price value of $500
per unit. Five limited partner units were issued to the original
limited partner for a capital contribution of $2,500. In addition, the
General Partner contributed a total of $9,950 to the capital of the
Partnership. Through the final admission of limited partners on May 1,
1989, the Partnership had 14 admissions of limited partners
representing an additional 385,800 limited partner units aggregating
$192,900,000.
The Partnership has been attempting to sell its remaining aircraft with
a view towards liquidating the Partnership's entire portfolio and
winding up the business of the Partnership prior to the end of 2000. In
that regard, the Partnership sold its remaining aircraft on January 19,
2000 (Note 11).
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leases
The Partnership accounts for all of its leases in accordance with the
operating method. Under the operating method, revenue is recognized on
a straight-line basis and expenses (including depreciation) are charged
to operations as incurred. When the Partnership enters into a
utilization arrangement, rents are recorded as earned based upon actual
use of the related aircraft.
Leased aircraft and equipment held for sale
The cost of leased aircraft and equipment held for sale represents the
initial cost of the aircraft to the Partnership plus miscellaneous
acquisition and closing costs and are carried at the lower of
depreciated cost or net realizable value.
Depreciation is computed using the straight-line method, over the
estimated useful lives of such aircraft (15 years for McDonnell Douglas
DC9-32 aircraft, 12 to 12.5 years for Boeing 737-200 Advanced aircraft,
Boeing 727-200 Advanced aircraft and McDonnell Douglas DC9-51
aircraft). The Partnership capitalizes major additions to its aircraft
and depreciates such capital improvements over the remaining estimated
useful life of the aircraft. No depreciation is taken on equipment held
for sale.
When aircraft are sold or otherwise disposed of, the cost and
accumulated depreciation (and any related allowance for equipment
impairment) are removed from the accounts and any gain or loss on such
sale or disposal is reflected in operations. Normal maintenance and
repairs are charged to operations as incurred. The Partnership provides
allowances for equipment impairment based upon a periodic review of all
aircraft in its portfolio, when management believes that, based upon
market analysis, appraisal reports and leases currently in place with
respect to specific aircraft, the investment in such aircraft may not
be recoverable.
F-6
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leased aircraft and equipment held for sale (continued)
The allowance is inherently subjective and is based upon management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide for additional losses in
subsequent years and such provisions could be material.
Financial statements
The financial statements include only those assets, liabilities, and
results of operations which relate to the business of the Partnership.
Cash and cash equivalents
For the purpose of the statements of cash flows, the Partnership
considers all short-term investments, which have an original maturity
of three months or less, to be cash equivalents.
Substantially all of the Partnership's cash and cash equivalents are
held at one financial institution.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The
Partnership's financial instruments include cash and cash equivalents.
Unless otherwise disclosed, the fair value of financial instruments
approximates their recorded values.
Net income and distributions per unit of limited partnership interest
Net income and distributions per unit of limited partnership interest
are computed based upon the number of outstanding units (385,805)
during the year.
Income taxes
No provisions have been made for federal, state and local income taxes,
since they are the personal responsibility of the partners.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could
result in adjustments to Partnership income, which changes could affect
the income tax liability of the individual partners.
Reclassifications
Certain reclassifications have been made to the financial statements
shown for the prior years in order to conform to the current year's
classifications.
F-7
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The general partner of the Partnership, Integrated Aircraft Fund
Management Corp. ("IAFM"), is a wholly owned subsidiary of Presidio
Capital Corp. ("Presidio"). Other limited partnerships and similar
investment programs have been formed by affiliates of IAFM to acquire
equipment and, accordingly, conflicts of interest may arise between the
Partnership and such other limited partnerships. Affiliates of IAFM
have also engaged in businesses related to the management of equipment
and the sale of various types of equipment and may transact business
with the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
indirect ownership of all of the shares of IAFM. On August 28, 1997, an
affiliate of NorthStar Capital Partners acquired all of the Class B
shares of Presidio, the corporate parent of IAFM. This acquisition,
when aggregated with previous acquisitions, caused NorthStar Capital
Partners to acquire indirect control of IAFM. Effective July 31, 1998,
Presidio is indirectly owned by NorthStar Capital Investment Corp.
("NorthStar"), a Maryland corporation. Presidio was also a party to an
Administrative Services Agreement with Wexford Management LLC
("Wexford") pursuant to which Wexford was responsible for the
day-to-day management of Presidio and, among other things, had
authority to designate directors of IAFM.
On November 2, 1997, the Administrative Services Agreement between
Presidio and Wexford expired. Effective November 3, 1997, Wexford and
Presidio entered into a new Administrative Services Agreement (the
"ASA"), which expired on May 3, 1998. Under the terms of the ASA,
Wexford provided consulting and administrative services to Presidio and
its affiliates including IAFM and the Partnership. Presidio also
entered into a management agreement with NorthStar Presidio Management
Company, LLC ("NorthStar Presidio"). Under the terms of the management
agreement, NorthStar Presidio provides the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates.
Reimbursable expenses paid to NorthStar Presidio under the terms of the
Administrative Services Agreement amounted to $12,171 and $20,250 for
the years ended December 31, 1999 and 1998, respectively.
Effective November 3, 1997, the officers and employees of Wexford that
had served as officers and/or directors of IAFM tendered their
resignation. On the same date, the Board of Directors of Presidio
appointed new individuals to serve as officers and/or directors of
IAFM.
On October 21, 1999, Presidio entered into a new Services Agreement
with AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was
retained to provide asset management and investor relation services to
the Partnership and other entities affiliated with the Partnership.
F-8
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
As a result of this agreement, the Agent has the duty to direct the day
to day affairs of the Partnership, including, without limitation,
reviewing and analyzing potential sale, financing or restructuring
proposals regarding the Partnership's assets, preparation of all
reports, maintaining Partnership records and maintaining bank accounts
of the Partnership. The Agent is not permitted, however, without the
consent of Presidio, or as otherwise required under the terms of the
Limited Partnership Agreement to, among other things, cause the
Partnership to sell or acquire an asset or file for bankruptcy
protection.
In order to facilitate the Agent's provision of asset management
services and the investor relation services, effective October 25,
1999, the officers and directors of the General Partners resigned and
nominees of the Agent were elected as the officers and directors of the
General Partners. The Agent is an affiliate of Winthrop Financial
Associates, a Boston based company that provides asset management
services, investor relation services and property management services
to over 150 limited partnerships which own commercial property and
other assets. The General Partner does not believe this transaction
will have a material effect on the operations of the Partnership.
IAFM is entitled to a 10 percent interest in the net income, loss and
distributions from operations and cash from sales. For the years ended
December 31, 1998 and 1997, IAFM received or was entitled to
distributions approximating $2,966,000 and $879,000, respectively. No
distributions were declared for the year ended December 31, 1999.
As compensation for its services, IAFM receives the management fee
provided for in the Limited Partnership Agreement which is equal to 4%
of Distributions of Cash from Operations from Operating Leases and 2%
of Distributions of Cash from Operations from Full Payout Leases, as
such terms are defined in the Limited Partnership Agreement. In
conjunction with such services, IAFM earned management fees of $180,200
and $265,161, for the years ended December 31, 1998 and 1997,
respectively. No management fees were earned for the year ended
December 31, 1999.
In April 1995, IAFM and certain affiliates entered into an agreement
with Fieldstone Private Capital Group, L.P. ("Fieldstone") pursuant to
which Fieldstone performed certain management and administrative
services relating to the Partnership. Fieldstone continued to perform
such services until July 31, 1998.
4 EQUIPMENT HELD FOR SALE
Equipment held for sale consisted of the Partnership's one McDonnell
Douglas DC9-32 aircraft with an aggregate net carrying value of
$573,982 (net of accumulated depreciation of $4,683,731 and an
allowance for equipment impairment of $2,284,162) at December 31, 1999.
This aircraft was sold on January 19, 2000 for net proceeds of
approximately $574,000.
Maintenance and repairs expense for the years ended December 31, 1999,
1998 and 1997 was $8,647, $256,000 and $1,963, respectively.
F-9
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
5 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31,
-----------------------
1999 1998
-------- --------
Professional fees $ 64,000 $ 72,274
Investor relations 28,800 67,355
Operating expenses 22,453 54,308
Management services -- 320,000
Other -- 26,500
-------- --------
$115,253 $540,437
======== ========
6 PARTNERS' EQUITY
The General Partner holds a 10% equity interest in the Partnership. At
the inception of the Partnership, the General Partner's equity account
was credited with only the actual capital contributed in cash, $9,950.
The Partnership's management determined that this accounting did not
appropriately reflect the limited partners' and the General Partner's
relative participations in the Partnership's net assets, since it did
not reflect the General Partner's 10% equity interest in the
Partnership. The Partnership reallocated $19,290,250 (10% of the gross
proceeds raised at the Partnership's formation) of the partners' equity
to the General Partner's equity account. This reallocation was made as
of the inception of the Partnership. The reallocation had no impact on
the Partnership's financial position, results of operations, cash
flows, distributions to partners, or the partners' tax basis capital
accounts.
7 RECONCILIATION OF NET (LOSS) INCOME AND NET ASSETS PER FINANCIAL
STATEMENTS TO TAX BASIS
The principal differences between the financial statements and the tax
basis of accounting have been accelerated depreciation, the tax
treatment of an aircraft purchased subject to a tax benefit transfer
lease, and bad debts provided for financial statement purposes in
previous periods offset by provisions for equipment impairment. A
reconciliation of net (loss) income per financial statements to the tax
basis of accounting is as follows:
F-10
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
7 RECONCILIATION OF NET (LOSS) INCOME AND NET ASSETS PER FINANCIAL
STATEMENTS TO TAX BASIS (continued)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net (loss) income per financial statements $ (1,342,951) $ 11,331,319 $ 1,706,235
Difference between financial statements and
tax basis operating expenses (4,861) -- --
Difference between financial statements and
tax basis depreciation -- (983,590) 241,038
Difference between financial statements and
tax basis in aircraft sold or disposed of 1,824,427 4,965,770 --
Difference between financial statements and
tax basis in reserves -- (1,574,249) (53,457)
Provision for equipment impairment provided
for financial statement purposes 2,659,828 1,350,000 --
Difference between financial basis and tax
basis liabilities -- (600,000) --
Difference between tax basis and financial
statement treatment of aircraft subject
to Temporary Regulation Section
5c.168(f)(8)-2(a)(5) of the Internal
Revenue Code -- -- (6,183,974)
Financial statement recognition of advance
rental payments recognized in prior
periods for tax purposes -- (133,218) 1,668
------------ ------------ ------------
Net income (loss) per tax basis $ 3,136,443 $ 14,356,032 $ (4,288,490)
============ ============ ============
</TABLE>
F-11
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
7 RECONCILIATION OF NET (LOSS) INCOME AND NET ASSETS PER FINANCIAL
STATEMENTS TO TAX BASIS (continued)
The differences between the Partnership's net assets per financial
statements and tax basis of accounting are as follows:
December 31,
----------------------------
1999 1998
------------ ------------
Net assets per financial statements $ 7,904,489 $ 9,247,440
Net carrying value of aircraft (573,982) (5,058,237)
Syndication costs 22,665,750 22,665,750
Receipt of maintenance reserves -- 4,861
------------ ------------
Net assets per tax basis $ 29,996,257 $ 26,859,814
============ ============
8 MAJOR LESSEES
Revenues from aircraft leased by individual lessees, which generated
10% or more of rental revenues, were as follows:
Year ended December 31,
-------------------------------------
1999 1998 1997
---------- ---------- -----------
Continental Airlines, Inc. $ - $1,477,000 $2,286,000
% of revenues -% 40% 30%
American Trans Air, Inc. $ - $1,000,900 $1,781,168
% of revenues -% 27% 24%
Ladeco S.A $ - $ 665,000 $1,140,000
% of revenues -% 18% 15%
Air Micronesia, Inc. $ - $ 513,533 $ 895,056
% of revenues -% 14% 12%
Aloha Airlines, Inc. $ - $ - $ 869,872
% of revenues -% -% 11%
F-12
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9 COMMITMENTS AND CONTINGENCIES
a Hawaiian Airlines, Inc.
On September 1, 1996, the Partnership and Hawaiian Airlines, Inc.
("Hawaiian") amended the lease agreement of the McDonnell Douglas Model
DC9-51 aircraft (the "Hawaiian Aircraft"). Under the terms of the
agreement, Hawaiian paid the Partnership a down payment of $450,000 and
the balance was to be paid in monthly installments (39 payments of
$72,000 and then 36 payments of $50,000) until November 30, 2002, at
which time Hawaiian had a bargain purchase option on the aircraft. The
Partnership treated this transaction as an installment sale and
classified the net present value of the anticipated future cash flows
of approximately $4,052,000 on the balance sheet as note
receivable-installment sale. On September 1, 1996 the Partnership
removed the associated cost of the equipment and the net carrying value
from the books of the Partnership, and recognized a gain on the sale of
approximately $1,655,000.
As discussed in Note 10, the Partnership sold its rights under the
amended lease agreement to an unaffiliated third party during the third
quarter of 1998.
b Continental Airlines, Inc.
In November 1991, in connection with its reorganization under the
United States Bankruptcy Code, Continental Airlines, Inc.
("Continental") rejected the leases of the three Boeing 727-100
aircraft owned by the Partnership, which had been out of service since
1991. Due to the condition and the related market for such aircraft,
the Partnership provided aggregate allowances for equipment impairment
of approximately $6,483,000. During 1993, the Partnership sold all
three Boeing 727-100 aircraft. The Partnership had retained its rights
pursuant to a proof of claim and an administrative claim filed in the
Continental Bankruptcy case with respect to such aircraft.
In June 1999, the Partnership and Continental agreed to settle the
foregoing claims. Pursuant to the settlement, the Partnership received
$780,000 on August 24, 1999 as well as 8,684 shares of Continental's
Class A stock and 24,179 shares of Continental's Class B stock and an
additional $90,861 on September 24, 1999. On October 6, 1999, the
Partnership sold all shares of stock for net proceeds aggregating
approximately $1,213,000, which equaled the Partnership's cost basis in
the stock. Subject to the resolution of third party claims against
additional stock reserved under Continental's Plan of Reorganization,
the Partnership may receive additional shares of Class A and Class B
stock.
As a result of this settlement, the Partnership has recorded settlement
income in the amount of $1,638,913 during the year ended December 31,
1999. The Partnership's carrying amount of its claim prior to the
settlement was approximately $445,000.
During 1997, the leases of three McDonnell Douglas Model DC9-32
aircraft owned by the Partnership were extended to September 1998 (2
aircraft) and December 1998 (1 aircraft) at a rental of $52,500 per
month, per aircraft. Two of the aircraft were returned in September
1998 and the third aircraft was returned in December 1998.
Upon return, the Partnership conducted inspections of the aircraft to
ascertain whether the return conditions of the lease were satisfied. On
May 5, 1999, First Security Bank, N.A., acting not in its individual
capacity, but solely as trustee under a trust agreement in which the
Partnership is
F-13
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9 COMMITMENTS AND CONTINGENCIES (continued)
b Continental Airlines, Inc. (continued)
beneficiary, filed a complaint in the United States District Court,
Southern District of New York. The complaint seeks damages in an amount
to be determined at trial, but believed to be in excess of $3,000,000,
arising out of Continental's i) failure to return the three DC9-32
aircraft in the return condition required by the lease and ii) failure
to make a rent payment provided for in the lease. Continental has filed
an answer denying the allegations in the complaint.
Two of the Partnership's DC9-32 aircraft were sold during 1999 and the
remaining aircraft was sold on January 19, 2000.
c Continental Air Micronesia
On January 20, 1993, the Partnership leased a Boeing 727-200 Advanced
aircraft to Continental for a term of approximately 71 months to be
used by Continental Air Micronesia (the "Air Mike Lease"). The Air Mike
Lease provided for a monthly base rent of $76,750, subject to
adjustments for rental credits relating to initial modifications.
Further, the Partnership agreed to provide up to $813,500 of financing
for certain new image modifications through credits ("Lessor
Financing") against base rental payments due from Continental.
Continental was repaying the Lessor Financing credits through monthly
installments which were amortized at the rate of 9.31% per annum over
the then remaining lease term.
As discussed in Note 10, the Partnership sold this aircraft to an
unaffiliated third party during the third quarter of 1998.
d Ladeco S.A.
During 1993, the Partnership consummated two leases with Ladeco S.A.
("Ladeco"), each for a Boeing 737-200 Advanced aircraft for terms of 48
and 60 months. Both leases provided for, among other things, monthly
rentals of $47,500 each, plus certain maintenance reserves for engines
and landing gear, based upon the number of hours flown. At lease
inception of both aircraft, Ladeco paid a security deposit of $125,000
per aircraft. The Ladeco aircraft leases, originally scheduled to
expire in October 1997 and March 1998, were each renewed for a one year
period at the same lease rate beginning at the expiration of the
original leases.
As discussed in Note 10, the Partnership sold these aircraft to an
unaffiliated third party during the third quarter of 1998.
e American Trans Air, Inc.
In May 1996, American Trans Air, Inc. ("ATA"), the lessee of a Boeing
727-200 Advanced aircraft (in which the Partnership owned an undivided
47.92231% joint venture interest) (the "JV Aircraft") exercised its
renewal option. The lease, originally scheduled to expire in November
1996, was renewed for an additional two years at the same lease rate.
F-14
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9 COMMITMENTS AND CONTINGENCIES (continued)
e American Trans Air, Inc. (continued)
In addition, ATA had leased two other Boeing 727-200 Advanced aircraft
(the "ATA Aircraft"), pursuant to two separate leases that commenced in
November and December 1994, respectively. Each of the leases had an
initial term of approximately 39 months and provided for monthly
rentals of $59,000. During early 1995, the Partnership contributed
$75,000 per aircraft towards bridging "C" check inspections.
In March 1998, the Partnership and ATA agreed to amend all three of the
leases extending the term at the same lease rentals through December
31, 2000, at which time ATA would have a purchase obligation of
approximately $3.3 million per aircraft. During the term of the amended
lease, ATA could, at its expense, retrofit the aircraft to comply with
the Stage III noise emission standards pursuant to FAR Part 36.
As discussed in Note 10, the Partnership sold these aircraft (including
its undivided joint venture interest) to an affiliated third party
during the third quarter of 1998.
f Aloha Airlines, Inc.
Aloha Airlines, Inc. ("Aloha"), leased a Boeing 737-297 Advanced
aircraft from the Partnership, the lease of which was scheduled to
expire in accordance with its lease terms on August 15, 1996. Aloha
agreed to a fifteen month lease extension at 50% of the prior lease
rate and the aircraft was scheduled to be returned following the
expiration of the term and the completion of certain repairs and
maintenance to bring the aircraft in compliance with the lease return
provisions. On November 15, 1997, the lease was scheduled to expire in
accordance with the terms of the lease. Aloha had indicated that
certain modifications to the aircraft as required by the Airworthiness
Directives issued by the FAA were not applicable under the return
conditions of the lease.
On November 14, 1997, First Security Bank, National Association, acting
not in its individual capacity, but solely as trustee under a trust
agreement in which the Partnership is beneficiary, filed a complaint
for declaratory judgment in the United States District Court, Southern
District of New York. The complaint requested interpretation of the
language under the lease regarding return conditions for the aircraft.
In December 1997, the foregoing action was settled and Aloha agreed to
satisfy certain return conditions of the lease.
On May 19, 1998, the aircraft was sold to an unaffiliated third party
for proceeds of $4,100,000, exclusive of selling expenses of
approximately $124,000. The aircraft had a net carrying value of
approximately $2,617,000 at the time of sale.
g Tax assessment
In September 1996, the Partnership received proposed notices of
assessment from the State of Hawaii with respect to general excise tax
("GET") of approximately $1,338,000 (including interest and penalties)
for the years 1991, 1992, 1993 and 1994. In July 1998, the Partnership
received additional proposed notices of assessment for GET aggregating
approximately $585,000 for the years 1995, 1996 and 1997. The State of
Hawaii is alleging that GET is owed by the Partnership with respect to
rents received from Aloha and Hawaiian under the leases between the
Partnership and each of the airlines.
F-15
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
9 COMMITMENTS AND CONTINGENCIES (continued)
g Tax assessment (continued)
The leases with both Aloha and Hawaiian provide for full
indemnification of the Partnership for such taxes, but the bankruptcy
of Hawaiian may relieve Hawaiian of its indemnification obligation for
any periods prior to September 21, 1993, when Hawaiian and its
affiliates sought bankruptcy protection. In any event, it is the
Partnership, as taxpayer, who is ultimately liable for the GET, if it
is applicable.
The state of Hawaii has never previously applied the GET to rentals
received by a lessor of aircraft where the lessor's only contact with
the state of Hawaiian is the fact that it has leased its aircraft to
airlines which are based in the state. Aloha and Hawaiian, as well as
the Partnership, have separately engaged tax counsel and, both airlines
are cooperating with the Partnership to vigorously contest the proposed
assessments.
Final notices of assessments have not yet been issued. Although there
can be no assurance that the contest of the assessments will be
successful, the Partnership believes that the state's position on the
applicability of GET in this instance is without merit. The Partnership
has not recorded any provision or liability as a result of the proposed
notices of assessments.
10 AIRCRAFT SALES
Year ended December 31, 1997
On May 22, 1997, a Boeing 737-297 Advanced aircraft owned by the
Partnership was sold to an unaffiliated third party for proceeds of
approximately $1,982,000 exclusive of selling expenses of approximately
$60,000. The aircraft, which was formerly leased to Aloha, had been
off-lease since October 15, 1996. At the time of the sale, the aircraft
had a net carrying value of approximately $1,290,000.
Year ended December 31, 1998
On March 31, 1998, a Boeing 737-2H4 aircraft owned by the Partnership
was sold to an unaffiliated third party for $3,500,000 exclusive of
selling expenses of approximately $106,000. The aircraft, which was
formerly leased to Southwest, had been off-lease since January 1998. At
the time of sale, the aircraft had a net carrying value of
approximately $1,141,000.
On May 19, 1998, a Boeing 737-297 Advanced aircraft owned by the
Partnership was sold to an unaffiliated third party for proceeds of
$4,100,000, exclusive of selling expenses of approximately $124,000.
The aircraft, which was formerly leased to Aloha had a net carrying
value of approximately $2,617,000 at the time of sale.
F-16
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
10 AIRCRAFT SALES (continued)
Year ended December 31, 1998 (continued)
Between August 17, 1998 and September 23, 1998, the Partnership sold
its interest in two Boeing 737-200 aircraft, four Boeing 727-200
aircraft (inclusive of an undivided 47.92231% joint venture interest in
one aircraft) and one McDonnell Douglas DC9-51 aircraft. Aside from the
DC9-51 aircraft, the six aircraft had an original cost of approximately
$71,235,500, represented 45.03% of the net carrying value of
Partnership's aircraft as of the end of June 30, 1998 and, at the time
of sale, had a net carrying value of approximately $7,744,000. The
Partnership's interest in the DC9-51 aircraft consisted of the right to
receive deferred payments of $2,529,900 related to a September 1, 1996
installment sale. The sales were made to an unaffiliated third party
for gross sales proceeds, exclusive of closing costs, of $18,000,000.
Year ended December 31, 1999
On June 1, 1999, the Partnership sold two McDonnell Douglas DC9-32
aircraft to an unaffiliated third party for gross sale proceeds of
$1,910,000, exclusive of selling expenses of approximately $86,000. At
the time of sale, the aircraft had a net carrying value of
approximately $1,824,000. In the quarter ended September 30, 1999, the
Partnership received an additional $111,550 relating to the sale of the
aircraft as a result of the Partnership providing the records for the
engines.
11 SUBSEQUENT EVENTS
Sale of aircraft
On January 19, 2000, the Partnership sold to an unaffiliated third
party the McDonnell Douglas DC9-30 aircraft for gross proceeds of
$650,000. Costs associated with the sale amounted to approximately
$77,000. At the time of the sale, the aircraft had a net carrying value
of $574,000.
Distribution to partners
During February 2000, the Partnership declared and paid a $4,000,000
distribution to the Unitholders of record as of January 1, 2000. Of
this amount, the limited partners collectively received $3,600,000 or
$9.33 per Unit.
F-17
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
Schedule II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
---------------------------
Balance at Charged to Charged Balance at
Beginning of Costs and to Other Additions End of
Description Period Expenses Accounts (Deductions) Period
- ----------------------------------- ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Equipment held for sale - valuation
allowance for equipment
impairment
Three McDonnell Douglas
DC9-32 aircraft $ 2,968,000 $ 2,659,828 (A) $ - $ (3,343,666) (B) $ 2,284,162
------------ ------------ ----------- ------------- -----------
$ 2,968,000 $ 2,659,828 $ - $ (3,343,666) $ 2,284,162
============ ============ =========== ============= ===========
</TABLE>
(A) Represents valuation allowance for equipment impairments recorded during
1999 relating to certain equipment held for sale.
(B) Represents reversal of valuation allowance due to the sale of certain
equipment during 1999.
(continued)
See notes to financial statements
F-18
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
Schedule II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance at Charged to Charged Balance at
Beginning of Costs and to Other Additions End of
Description Period Expenses Accounts (Deductions) Period
- ---------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Leased aircraft - valuation
allowance for equipment
impairment
Four Boeing 737-200 Advanced
aircraft $ 13,068,000 $ -- $ -- $(13,068,000) (A) $ --
Four Boeing 727-200 Advanced
aircraft 9,414,000 -- -- (9,414,000) (A) --
Three McDonnell Douglas DC9-32
aircraft 1,618,000 -- -- (1,618,000) (C) --
------------ ------------ ------------ ------------ ------------
$ 24,100,000 $ -- $ -- $(24,100,000) $ --
------------ ------------ ------------ ------------ ------------
Equipment held for sale - valuation
allowance for equipment
impairment
Three McDonnell Douglas
DC9-32 aircraft $ -- $ 1,350,000 (B) $ -- $ 1,618,000 (C) $ 2,968,000
------------ ------------ ------------ ------------ ------------
$ 24,100,000 $ 1,350,000 $ -- $(22,482,000) $ 2,968,000
============ ============ ============ ============ ============
</TABLE>
(A) Represents valuation allowances for equipment impairment relating to certain
equipment sold during 1998.
(B) Represents valuation allowance for equipment impairment relating to certain
equipment held for sale at December 31, 1998.
(C) Represents valuation allowance for equipment that was transferred to
Equipment held for sale during 1998.
(continued)
See notes to financial statements
F-19
<PAGE>
AIRCRAFT INCOME PARTNERS L.P.
Schedule II
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (continued)
<TABLE>
<CAPTION>
Additions
------------------------
Balance at Charged to Charged Balance at
Beginning of Costs and to Other Additions End of
Description Period Expenses Accounts (Deductions) Period
- ------------------------------- ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Leased aircraft - valuation
allowance for equipment
impairment
Four Boeing 737-200 Advanced
aircraft $16,468,000 $ -- $ -- $ (3,400,000) (A) $13,068,000
Four Boeing 727-200 Advanced
aircraft 9,414,000 -- -- -- 9,414,000
Three McDonnell Douglas DC9-32
aircraft 1,618,000 -- -- -- 1,618,000
----------- ----------- ----------- -------------- -----------
$27,500,000 $ -- $ -- $ (3,400,000) $24,100,000
=========== =========== =========== ============== ===========
</TABLE>
(A) Represents valuation allowances for equipment impairment relating to certain
equipment sold during 1997.
See notes to financial statements
F-20
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
II-8
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant
Registrant has no officers or directors. The General Partner manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. The
names and positions held by the officers and directors of the General Partner
are described below.
Has Served as
Position Held with the Has Served as a Director
Name Managing General Partner or Officer Since
- ---- ------------------------ ----------------
Michael L. Ashner President and Director 10-99
David G. King, Jr. Vice President 11-97
Peter Braverman Executive Vice President 10-99
Lara K. Sweeney Vice President and Secretary 10-99
Carolyn Tiffany Vice President and Treasurer 10-99
Michael L. Ashner, age 47, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") since January 15,
1996. From June 1994 until January 1996, Mr. Ashner was a Director, President
and Co-chairman of National Property Investors, Inc., a real estate investment
company ("NPI"). Mr. Ashner was also a Director and executive officer of NPI
Property Management Corporation ("NPI Management") from April 1984 until January
1996. In addition, since 1981 Mr. Ashner has been President of Exeter Capital
Corporation, a firm which has organized and administered real estate limited
partnerships. s.
David G. King, Jr., 37, has been a Vice President and Assistant
Treasurer of NorthStar Capital Investment Corp. since November 1997. He is also
a Vice President of the General Partner. For more than the previous five years
he was a Senior Vice President of Finance at Olympia & York Companies (USA).
Peter Braverman, age 48, has been a Vice President of WFA since January
1996. From June 1995 until January 1996, Mr. Braverman was a Vice President of
NPI and NPI Management. From June 1991 until March 1994, Mr. Braverman was
President of the Braverman Group, a firm specializing in management consulting
for the real estate and construction industries. From 1988 to 1991, Mr.
Braverman was a Vice President and Assistant Secretary of Fischbach Corporation,
a publicly traded, international real estate and construction firm.
Lara K. Sweeney, age 27, has been a Senior Vice President of WFA since
January 1996. Prior to joining WFA, Ms. Sweeney was an officer of NPI and NPI
Management in the asset management and investor relations departments.
Carolyn Tiffany, age 33, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. From October 1995 to present
Ms. Tiffany was a Vice President in the asset management and investor relations
departments of WFA until December 1997, at which time she became the Chief
Operating Officer of WFA.
Each director and officer of the General Partner will hold office until the next
annual meeting of stockholders of the General Partner and until his successor is
elected and qualified.
One or more of the above persons are also directors or officers of a general
partner (or general partner of a general partner) of a number of limited
partnerships which either have a class of securities registered
III-1
<PAGE>
pursuant to Section 12(g) of the Securities and Exchange Act of 1934, or are
subject to the reporting requirements of Section 15(d) of such Act.
There are no family relationships among the officers and directors of the
General Partner.
Item 11. Executive Compensation
Registrant is not required to pay any compensation to the officers or directors
of the General Partner. The General Partner does not currently pay any
compensation to any of its officers or directors.
Certain officers and directors of the General Partner receive compensation from
affiliates of the General Partner (but not from Registrant) for services
performed for various affiliated entities, which may include services performed
for Registrant; however, the General Partner believes that any compensation
attributable to such services performed for Registrant is immaterial. See Item
13 "Certain Relationships and Related Transactions".
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners.
No person or group is known by the Registrant to be the beneficial
owner of more than 5% of the outstanding Units at March 1, 2000.
(b) Security Ownership of Management.
At March 1, 2000, Presidio, the General Partner and their affiliates,
officers and directors owned as a group 2,519 Units representing less than 1% of
the total number of Units outstanding.
(c) Changes in Control.
There exists no arrangement known to the Registrant the operation of
which may at a subsequent date result in a change in control of the Registrant.
Item 13. Certain Relationships and Related Transactions
No director or officer of the General Partner received any direct remuneration
from Registrant during the year ended December 31, 1999.
The General Partner did not receive management fees for the performance of
management services during 1999.
The General Partner's share of Registrant's taxable loss for the year ended
December 31, 1999 amounted to $312,350.
III-2
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial Statements
See Index to Financial Statements and Supplementary Data in Part II,
Item 8.
2. Financial Schedules
Schedule II. Valuation and Qualifying Accounts (See Index to Financial
Statements and Supplementary Data in Part II, Item 8).
3. Exhibits
3 Certificate of Limited Partnership.(1)
4 Limited Partnership Agreement.(1)
10.1 Agreement between Registrant and Integrated Aircraft Fund
Management Corp.(1)
10.2 Form of Trust Agreement between Integrated Aircraft Fund
Management Corp., as beneficiary, and First Security Bank of
Utah, N.A., as trustee.(1)
10.3 Form of Aircraft Purchase Agreement between Integrated
Aircraft Fund Management Corp. and Continental Airlines,
Inc.(1)
10.4 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, Integrated Aircraft Fund Management Corp.
and Continental Airlines, Inc.(1)
Note: substantially identical leases in all material respects
except for the dates of term and rental amounts cover the
equipment described under "Properties" as purchased on April
20, 1988 and the McDonnell Douglas DC-9-32 aircraft purchased
on May 13, 1988.(1)
10.5 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee and Midway Airlines, Inc.(1)
10.6 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, and Braathens South-American and Far East
Airtransport A/S.(2)
10.7 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, and U.S. Air, Inc.(2)
Note: substantially identical leases in all material respects
except for dates of term and rental amounts cover the
equipment described in "Properties" as purchased on December
15, 1988 and in "Business - General" as purchased on January
18, 1989.
10.8 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, and Southwest Airlines Co.(2)
10.9 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, and Alaska Airlines.(3)
10.10 Form of Lease Agreement I between First Security Bank of Utah,
N.A., as trustee, and Aloha Airlines, Inc.3 10.11 Form of
Lease Agreement II between First Security Bank of Utah, N.A.,
as trustee, and Aloha Airlines, Inc.(3)
IV-1
<PAGE>
10.11 Form of Lease Agreement II between First Security Bank of
Utah, N.A., as trustee, and Aloha Airlines, Inc.(3)
10.12 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, and Hawaiian Airlines, Inc.(4)
10.13 Form of Lease Agreement dated as of May 1, 1991, between First
Security Bank of Utah, N.A., as trustee, and Southwest
Airlines Co. to be supplemented by Lease Agreement No. 1 dated
June 14, 1991 and Amendment No. 2 to Lease Agreement dated as
of May 1, 1991.(5)
10.14 Form 11 of Lease Amendment No. 2 dated as of February 27, 1992
between First Security Bank of Utah, N.A., as trustee and
Braathens South-American and Far East Airtransport A/S.(5)
10.15 Form of Lease Agreement No. 3 dated as of March 23, 1992
between First Security Bank of Utah, N.A., as trustee and
Braathens South-American and Far East Airtransport A/S.(5)
10.16 Form of Purchase Agreement dated as of May 19, 1992 between
Alaska Airlines, Inc. and First Security Bank of Utah, N.A.,
as trustee and lessor.(5)
10.17 Termination Agreement dated July 28, 1992 by and among
Integrated Aircraft Fund Management Corp., Registrant and
Citicorp Aircraft Management, Inc.(5)
10.18 Lease Amendment No. 2 dated as of July 7, 1992 between First
Security Bank of Utah, N.A., as trustee and Braathens
South-American and Far East Airtransport A/S.(5)
10.19 Remarketing Agreement between Integrated Aircraft Fund
Management Corp. and Aviation Capital Group, L.P., dated
August 1, 1992.(6)
10.20 Amendment No. 3 dated as of August 1, 1992 to the Lease
Agreement dated as of May 1, 1991 between First Security Bank
of Utah, N.A., as trustee and Southwest Airlines Co.(6)
10.21 Amendment No. 1 dated as of November 1, 1992 to the Lease
Agreement dated as of December 1, 1988 between First Security
Bank of Utah, N.A., as trustee and USAir, Inc.(6)
10.22 Amendment No. 2 dated as of December 1, 1992 to the Lease
Agreement dated as of December 1, 1988 between First Security
Bank of Utah, N.A., as trustee and USAir, Inc.(6)
10.23 Amendment No. 1 dated as of November 1, 1992 to the Lease
Agreement dated as of January 1, 1989 between First Security
Bank of Utah, N.A., as trustee and USAir, Inc.(6)
10.24 Lease Agreement dated January 5, 1993 between First Security
Bank of Utah, N.A., as trustee, and Continental Airlines,
Inc.(6)
10.25 Participation Agreement dated January 5, 1993 between First
Security Bank of Utah, N.A., as trustee, Registrant and
Continental Airlines, Inc.(6)
10.26 Amendment No. 2 dated as of December 1, 1993 to the Lease
Agreement dated as of January 1, 1989 between First Security
Bank of Utah, N.A., as trustee and USAir, Inc.(7)
10.27 Amendment No. 3 dated as of December 1, 1993 to the Lease
Agreement dated as of December 1, 1988 between First Security
Bank of Utah, N.A., as trustee and USAir, Inc.(7)
10.28 Amendment dated as of December 1, 1993 to Lease Agreement II
between First Security Bank of Utah, N.A., as trustee, and
Aloha Airlines, Inc.(7)
IV-2
<PAGE>
10.29 Form of Lease Agreement between First Security Bank of Utah,
N.A., as trustee, Registrant, as lessor, and Ladeco S.A.(7)
Note: a substantially identical lease in all material respects
except for dates of term and rental amounts covers the Second
Alaska Aircraft. See "Business - Recent Developments, Alaska
Airlines".
10.30 Lease Agreement dated as of November 5, 1993 between First
Security Bank of Utah, N.A., as trustee, and American Trans
Air, Inc.(7)
10.31 Lease Agreement dated as of November 1, 1994 between First
Security Bank of Utah, N.A., as trustee, and American Trans
Air, Inc.(8)
10.32 Lease Agreement dated as of November 10, 1994 between First
Security Bank of Utah, N.A., as trustee, and American Trans
Air, Inc. (8)
10.33 Lease Amendment and Extension Agreement, dated as of July 20,
1994, between First Security Bank of Utah N.A., as trustee,
and Southwest Airlines Co. (8)
10.34 Second Lease Extension Agreement, dated as of July 5, 1995,
between First Security Bank of Utah, N.A., as trustee, and
Southwest Airlines Co.
10.35 Form of Purchase Agreement, dated April 15, 1996, between
Southwest Airlines Co. ("Purchaser"), First Security Bank of
Utah N.A. ("Trustee") and Aircraft Income Partners L.P.
("Beneficiary") (10)
10.36 Lease Amendment, dated January 1, 1997, between First Security
Bank of Utah N.A., as Trustee, and Hawaiian Airlines, Inc.
(10)
10.37 Lease Amendment and Extension Agreement, dated June 24, 1996,
between First Security Bank of Utah N.A., as Trustee, and
American Trans Air, Inc. (10)
10.38 Lease Amendment and Extension Agreement, dated July 29, 1996,
between First Security Bank of Utah N.A., as Trustee, and
Aloha Airlines, Inc. (10)
28 Prospectus of Registrant dated February 29, 1988, as
supplemented by Supplements dated May 20, 1988, August 16,
1988, November 4, 1988, January 6, 1989 and February 28, 1989
filed pursuant to Rules 424(b) and 424(c) under the Securities
Act of 1933.(1)
(b) Current reports on Form 8-K filed during the last quarter of
Registrant's fiscal year
None.
- -------------------------
1 Filed as an exhibit to Registrant's Registration Statement on
Form S-1 (33-18891), and incorporated herein by reference.
2 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988, and incorporated
herein by reference.
3 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989, and incorporated
herein by reference.
4 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, and incorporated
herein by reference.
5 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991 and incorporated
herein by reference.
IV-3
<PAGE>
6 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992 and incorporated
herein by reference.
7 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 and incorporated
herein by reference.
8 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 and incorporated
herein by reference.
9 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 and incorporated
herein by reference.
10 Filed as an exhibit to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and incorporated
herein by reference.
* Filed herewith.
IV-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 29th day of [ ].
AIRCRAFT INCOME PARTNERS L.P.
By: INTEGRATED AIRCRAFT FUND MANAGEMENT CORP.
General Partner
Date
----
By: /s/ Michael L. Ashner March 29, 2000
---------------------
Michael L. Ashner
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant in their
capacities as directors and/or officers (as to the Managing General Partner) on
the date indicated below.
Signature Title Date
/s/ Michael L. Ashner Director and President March 29, 2000
- ----------------------
Michael L. Ashner
/s/ Carolyn Tiffany Vice President and March 29, 2000
- --------------------- Treasurer
Carolyn Tiffany
<PAGE>
EXHIBIT INDEX
Exhibits Page
- -------- Number
------
3 Certificate of Limited Partnership.(1)
4 Limited Partnership Agreement.(1)
10.1 Agreement between Registrant and Integrated Aircraft Fund Management
Corp.(1)
10.2 Form of Trust Agreement between Integrated Aircraft Fund Management
Corp., as beneficiary, and First Security Bank of Utah, N.A., as
trustee.(1)
10.3 Form of Aircraft Purchase Agreement between Integrated Aircraft Fund
Management Corp. and Continental Airlines, Inc.(1)
10.4 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, Integrated Aircraft Fund Management Corp. and Continental
Airlines, Inc.(1)
Note: substantially identical leases in all material respects except
for the dates of term and rental amounts cover the equipment described
under "Properties" as purchased on April 20, 1988 and the McDonnell
Douglas DC-9-32 aircraft purchased on May 13, 1988.(1)
10.5 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee and Midway Airlines, Inc.(1)
10.6 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, and Braathens South-American and Far East Airtransport A/S.(2)
10.7 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, and U.S. Air, Inc.(2)
Note: substantially identical leases in all material respects except
for dates of term and rental amounts cover the equipment described in
"Properties" as purchased on December 15, 1988 and in "Business -
General" as purchased on January 18, 1989.
10.8 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, and Southwest Airlines Co.(2)
10.9 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, and Alaska Airlines.(3)
10.10 Form of Lease Agreement I between First Security Bank of Utah, N.A., as
trustee, and Aloha Airlines, Inc.(3)
10.11 Form of Lease Agreement II between First Security Bank of Utah, N.A.,
as trustee, and Aloha Airlines, Inc.(3)
10.12 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, and Hawaiian Airlines, Inc.(4)
10.13 Form of Lease Agreement dated as of May 1, 1991, between First Security
Bank of Utah, N.A., as trustee, and Southwest Airlines Co. to be
supplemented by Lease Agreement No. 1 dated June 14, 1991 and Amendment
No. 2 to Lease Agreement dated as of May 1, 1991.(5)
<PAGE>
10.14 Form 11 of Lease Amendment No. 2 dated as of February 27, 1992 between
First Security Bank of Utah, N.A., as trustee and Braathens
South-American and Far East Airtransport A/S.(5)
10.15 Form of Lease Agreement No. 3 dated as of March 23, 1992 between First
Security Bank of Utah, N.A., as trustee and Braathens South-American
and Far East Airtransport A/S.(5)
10.16 Form of Purchase Agreement dated as of May 19, 1992 between Alaska
Airlines, Inc. and First Security Bank of Utah, N.A., as trustee and
lessor.(5)
10.17 Termination Agreement dated July 28, 1992 by and among Integrated
Aircraft Fund Management Corp., Registrant and Citicorp Aircraft
Management, Inc.(5)
10.18 Lease Amendment No. 2 dated as of July 7, 1992 between First Security
Bank of Utah, N.A., as trustee and Braathens South-American and Far
East Airtransport A/S.(5)
10.19 Remarketing Agreement between Integrated Aircraft Fund Management Corp.
and Aviation Capital Group, L.P., dated August 1, 1992.(6)
10.20 Amendment No. 3 dated as of August 1, 1992 to the Lease Agreement dated
as of May 1, 1991 between First Security Bank of Utah, N.A., as trustee
and Southwest Airlines Co.(6)
10.21 Amendment No. 1 dated as of November 1, 1992 to the Lease Agreement
dated as of December 1, 1988 between First Security Bank of Utah, N.A.,
as trustee and USAir, Inc.(6)
10.22 Amendment No. 2 dated as of December 1, 1992 to the Lease Agreement
dated as of December 1, 1988 between First Security Bank of Utah, N.A.,
as trustee and USAir, Inc.(6)
10.23 Amendment No. 1 dated as of November 1, 1992 to the Lease Agreement
dated as of January 1, 1989 between First Security Bank of Utah, N.A.,
as trustee and USAir, Inc.(6)
10.24 Lease Agreement dated January 5, 1993 between First Security Bank of
Utah, N.A., as trustee, and Continental Airlines, Inc.(6)
10.25 Participation Agreement dated January 5, 1993 between First Security
Bank of Utah, N.A., as trustee, Registrant and Continental Airlines,
Inc.(6)
10.26 Amendment No. 2 dated as of December 1, 1993 to the Lease Agreement
dated as of January 1, 1989 between First Security Bank of Utah, N.A.,
as trustee and USAir, Inc.(7)
10.27 Amendment No. 3 dated as of December 1, 1993 to the Lease Agreement
dated as of December 1, 1988 between First Security Bank of Utah, N.A.,
as trustee and USAir, Inc.(7)
10.28 Amendment dated as of December 1, 1993 to Lease Agreement II between
First Security Bank of Utah, N.A., as trustee, and Aloha Airlines,
Inc.(7)
10.29 Form of Lease Agreement between First Security Bank of Utah, N.A., as
trustee, Registrant, as lessor, and Ladeco S.A.(7)
<PAGE>
Note: a substantially identical lease in all material respects except for
dates of term and rental amounts covers the Second Alaska Aircraft. See
"Business - Recent Developments, Alaska Airlines".
10.30 Lease Agreement dated as of November 5, 1993 between First Security
Bank of Utah, N.A., as trustee, and American Trans Air, Inc.(7)
10.31 Lease Agreement dated as of November 1, 1994 between First Security
Bank of Utah, N.A., as trustee, and American Trans Air, Inc.(8)
10.32 Lease Agreement dated as of November 10, 1994 between First Security
Bank of Utah, N.A., as trustee, and American Trans Air, Inc. (8)
10.33 Lease Amendment and Extension Agreement, dated as of July 20, 1994,
between First Security Bank of Utah N.A., as trustee, and Southwest
Airlines Co. (8)
10.34 Second Lease Extension Agreement, dated as of July 5, 1995, between
First Security Bank of Utah, N.A., as trustee, and Southwest Airlines
Co. (8)
10.35 Form of Purchase Agreement, dated April 15, 1996, between Southwest
Airlines Co. ("Purchaser"), First Security Bank of Utah N.A.
("Trustee") and Aircraft Income Partners L.P. ("Beneficiary") (10)
10.36 Lease Amendment, dated January 1, 1997, between First Security Bank of
Utah N.A., as Trustee, and Hawaiian Airlines, Inc. (10)
10.37 Lease Amendment and Extension Agreement, dated June 24, 1996, between
First Security Bank of Utah N.A., as Trustee, and American Trans Air,
Inc. (10)
10.38 Lease Amendment and Extension Agreement, dated July 29, 1996, between
First Security Bank of Utah N.A., as Trustee, and Aloha Airlines, Inc.
(10)
28 Prospectus of Registrant dated February 29, 1988, as supplemented by
Supplements dated May 20, 1988, August 16, 1988, November 4, 1988,
January 6, 1989 and February 28, 1989 filed pursuant to Rules 424(b)
and 424(c) under the Securities Act of 1933.(1)
- -------------------------
1 Filed as an exhibit to Registrant's Registration Statement on Form S-1
(33-18891), and incorporated herein by reference.
2 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference.
3 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, and incorporated herein by
reference.
4 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference.
5 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 and incorporated herein by
reference.
6 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by
reference.
7 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 and incorporated herein by
reference.
<PAGE>
8 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and incorporated herein by
reference.
9 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 and incorporated herein by
reference.
10 Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and incorporated herein by
reference
* Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from audited financial statements for the
year ended December 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,411,200
<SECURITIES> 0
<RECEIVABLES> 34,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,019,742
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 7,904,489
<TOTAL-LIABILITY-AND-EQUITY> 8,019,742
<SALES> 0
<TOTAL-REVENUES> 1,638,913
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,905,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,342,951)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,342,951)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,342,951)
<EPS-BASIC> (3.13)
<EPS-DILUTED> (3.13)
</TABLE>
