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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-18368.
AIRFUND International Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-3037350
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
98 N. Washington St., Fifth Floor, Boston, MA 02114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
Securities registered pursuant to Section 12(b) of the Act NONE
Title of each class Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act:
3,040,000 Units Representing Limited Partnership Interest
(Title of class)
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes XX No
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. Not applicable. Securities are nonvoting for
this purpose. Refer to Item 12 for further information.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to security holders for
the year ended December 31, 1995 (Part I and II)
AIRFUND International Limited Partnership
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder Matters 6
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 7
PART III
Item 10. Directors and Executive Officers of the Partnership 8
Item 11. Executive Compensation 9
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13-15
PART I
Item 1. Business.
(a) General Development of Business
AIRFUND International Limited Partnership (the "Partnership") was
organized as a limited partnership under the Massachusetts Uniform Limited
Partnership Act (the "Uniform Act") on January 31, 1989 for the purpose of
acquiring and leasing to third parties a specified portfolio of used commercial
aircraft. Partners' capital initially consisted of contributions of $1,000 from
the General Partner (AFG Aircraft Management Corporation, a Massachusetts
corporation) and $100 from the Initial Limited Partner (AFG Assignor
Corporation, a Massachusetts corporation). On July 26, 1989, the Partnership
issued 3,040,000 units representing assignments of limited partnership interests
(the "Units") to 4,147 investors. Unitholders and Limited Partners (other than
the Initial Limited Partner) are collectively referred to as Recognized Owners.
The General Partner is an affiliate of American Finance Group ("AFG"), a
Massachusetts partnership. The common stock of the General Partner is owned by
AF/AIP Programs Limited Partnership, of which AFG and a wholly-owned affiliate
are the 99% limited partners and AFG Programs, Inc., a Massachusetts corporation
which is wholly-owned by Geoffrey A. MacDonald, is the 1% general partner. The
capital contribution of the General Partner, in consideration of its general
partner interests, equals $1,000. The General Partner is not required to make
any other capital contributions except as may be required under the Uniform Act
and Section 6.1(b) of the Amended and Restated Agreement and Certificate of
Limited Partnership (the "Restated Agreement, as amended").
(b) Financial Information About Industry Segments
The Partnership is engaged in only one industry segment: the business of
acquiring used commercial aircraft and leasing the aircraft to creditworthy
lessees on an operating lease basis. Full-payout leases are those in which
aggregate noncancellable rents equal or exceed the Purchase Price of the leased
equipment. Operating leases are those in which the aggregate noncancellable
rents are less than the Purchase Price of the leased equipment. Industry segment
data is not applicable.
(c) Narrative Description of Business
The Partnership was organized to acquire a specified portfolio of used
commercial jet aircraft subject to various full-payout and operating leases and
to lease the aircraft to third parties as income-producing investments. More
specifically, the Partnership's primary investment objectives are to acquire and
lease aircraft which will:
1. Generate quarterly cash distributions;
2. Preserve and protect Partnership capital; and
3. Maintain substantial residual value for ultimate sale of the aircraft.
The Partnership has the additional objective of providing certain
federal income tax benefits.
The Closing date of the Offering of Units of the Partnership was July
26, 1989. The initial purchase of the aircraft and the associated lease
commitments occurred on July 27, 1989. The acquisition of the Partnership's
aircraft and its associated leases is described in Note 3 to the financial
statements included in Item 14, herein. The Partnership will terminate no later
than December 31, 2004.
The Partnership has no employees; however, it entered into a Management
Agreement with AF/AIP Programs Limited Partnership. At the same time, AF/AIP
Programs Limited Partnership entered into an identical Management Agreement with
AFG (the "Manager") (collectively, the "Management Agreement"). The Manager's
role, among other things, is to (i) evaluate, select, negotiate, and consummate
the acquisition of aircraft, (ii) manage the leasing, re-leasing, financing, and
refinancing of aircraft, and (iii) arrange the resale of aircraft. The Manager
is compensated for such services as described in the Restated Agreement, as
amended, Item 13, herein and in Note 4 to the financial statements, included in
Item 14, herein.
The Partnership's investment in commercial aircraft is, and will
continue to be, subject to various risks, including physical deterioration,
technological obsolescence and defaults by lessees. A principal business risk of
owning and leasing aircraft is the possibility that aggregate lease revenues and
aircraft sale proceeds will be insufficient to provide an acceptable rate of
return on invested capital after payment of all operating expenses.
Consequently, the success of the Partnership is largely dependent upon the
ability of the General Partner and its Affiliates to forecast technological
advances, the ability of the lessees to fulfill their lease obligations and the
quality and marketability of the aircraft at the time of sale.
In addition, the leasing industry is very competitive. Although all
funds available for acquisitions have been invested in aircraft, subject to
noncancellable lease agreements, the Partnership will encounter considerable
competition when the aircraft are re-leased or sold at the expiration of primary
lease terms. The Partnership will compete with lease programs offered directly
by manufacturers and other equipment leasing companies, including lease programs
organized and managed similarly to the Partnership, and including other
AFG-sponsored partnerships and trusts, which may seek to re-lease or sell
aircraft within their own portfolios to the same customers as the Partnership.
Many competitors have greater financial resources and more experience than the
Partnership, the General Partner and the Manager.
In recent years, market values for used commercial jet aircraft have
deteriorated. Consistent price competition and other pressures within the
airline industry have inhibited sustained profitability for many carriers. Most
major airlines have had to re-evaluate their aircraft fleets and operating
strategies. Such issues complicate the determination of net realizable value for
specific aircraft, and particularly used aircraft, because cost-benefit and
market considerations may differ significantly between the major airlines.
Aircraft condition, age, passenger capacity, distance capability, fuel
efficiency, and other factors also influence market demand and market values for
passenger jet aircraft.
A significant consideration in evaluating used commercial aircraft is
compliance with The Airport Capacity Act of 1990 (the "Airport Act"), which
prohibits the operation of Stage 2 commercial jet aircraft to or from U.S.
airports after December 31, 1999. Stage designations range from Stage 1 to Stage
3 and are indicative of an aircraft's compliance with noise level regulations
promulgated by the Federal Aviation Administration. Stage 3 designates the
highest level of compliance. The Partnership's two Boeing 727 aircraft leased to
Northwest Airlines, Inc. are Stage 2 aircraft. Various hush kit and
re-engineering programs are available to retrofit Stage 2 aircraft to comply
with the Airport Act; however, the cost to effect such improvements is estimated
to range from $2 million to $3 million per aircraft. Accordingly, this factor is
a major consideration in assessing estimated net realizable value for used
aircraft.
Notwithstanding the foregoing, the ultimate realization of residual
value for any aircraft is dependent upon many factors, including AFG's ability
to sell and re-lease the aircraft. Changes in market conditions, industry
trends, technological advances, and other events could converge to enhance or
detract from asset values at any given time. Accordingly, AFG will attempt to
monitor changes in the airline industry in order to identify opportunities which
may be advantageous to the Partnership and which will maximize total cash
returns for each aircraft.
The General Partner will determine when each aircraft should be sold and
the terms of such sale based upon numerous factors with a view toward achieving
the investment objectives of the Partnership. The General Partner is authorized
to sell the aircraft prior to the expiration of the initial lease terms and
intends to monitor and evaluate the market for resale of the aircraft to
determine whether an aircraft should remain in the Partnership's portfolio or be
sold. As an alternative to sale, the Partnership may enter re-lease agreements
when considered advantageous by the General Partner and the Manager.
In September 1995, the General Partner arranged for the Partnership to
transfer its entire ownership interest in a Boeing 747-SP aircraft to the
lessee, United Air Lines, Inc. ("United"). The transaction was structured as a
like-kind exchange for income tax reporting purposes thereby enabling the
Partnership to exchange its interest in the United aircraft for other aircraft
which are expected to generate a better economic benefit to the Partnership than
the United aircraft. Refer to Item 7, incorporated by reference to the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the 1995 Annual Report.
Revenue from major individual lessees which accounted for 10% or more of
lease revenue during the years ended December 31, 1995, 1994 and 1993 is
incorporated herein by reference to Note 2 to the financial statements in the
1995 Annual Report. Refer to Item 14(a)(3) for lease agreements filed with the
Securities and Exchange Commission.
Default by a lessee under a lease may cause aircraft to be returned to
the Partnership at a time when the General Partner or the Manager is unable to
arrange for the re-lease or sale of such aircraft. This could result in the loss
of a material portion of anticipated revenues and significantly weaken the
Partnership's ability to recover the cost of invested capital.
AFG is a successor to the business of American Finance Group, Inc., a
Massachusetts corporation engaged since its inception in 1980 in various aspects
of the equipment leasing business. In 1990, certain members of AFG's management,
principally Geoffrey A. MacDonald, Chief Executive Officer and co-founder of
AFG, established AFG Holdings (Massachusetts) Limited Partnership ("Holdings
Massachusetts") to acquire ownership and control of AFG. Holdings Massachusetts
effected this event by acquiring all of the equity interests of AFG's two
partners, AFG Holdings Illinois Limited Partnership ("Holdings Illinois") and
AFG Corporation. Holdings Massachusetts incurred significant indebtedness to
finance this acquisition, a significant portion of which was scheduled to mature
in 1995.
On December 16, 1994, the senior lender to Holdings Massachusetts (the
"Senior Lender") assumed control of its security interests in Holdings Illinois
and AFG Corporation and sold all such interests to GDE Acquisitions Limited
Partnership, a Massachusetts limited partnership owned and controlled entirely
by Gary D. Engle, President and a member of the Executive Committee of AFG. As a
result of this transaction, GDE Acquisitions Limited Partnership acquired all of
the assets, rights and obligations of AFG from the Senior Lender and assumed
control of AFG. Geoffrey A. MacDonald remains as Chief Executive Officer of AFG
and member of its Executive Committee.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
Not applicable.
Item 2. Properties.
Incorporated herein by reference to Note 3 to the financial statements
in the 1995 Annual Report.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Partnership
is a party or which involve any of its aircraft or leases.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
There is no public market for the resale of the Units and it is not
anticipated that a public market for resale of the Units will develop.
(b) Approximate Number of Security Holders
At December 31, 1995, there were 4,088 recordholders of Units in the
Partnership.
(c) Dividend History and Restrictions
Pursuant to Article VI of the Restated Agreement, as amended, the
Partnership's Distributable Cash From Operations and Distributable Cash From
Sales or Refinancings are determined and distributed to the Partners quarterly.
Each quarter's distribution may vary in amount. Distributions may be made to the
General Partner prior to the end of the fiscal quarter; however, the amount of
such distribution reflects only amounts to which the General Partner is entitled
at the time such distribution is made. Currently, there are no restrictions that
materially limit the Partnership's ability to distribute Distributable Cash From
Operations and Distributable Cash From Sales or Refinancings or that the
Partnership believes are likely to materially limit the future distribution of
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings. The Partnership expects to continue to distribute all available
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings on a quarterly basis.
Distributions declared in 1995 and 1994 were made as follows:
General Recognized
Total Partner Owners
Total 1995 distributions $ 3,200,000 $ 160,000 $ 3,040,000
Total 1994 distributions 4,000,000 200,000 3,800,000
Total $ 7,200,000 $ 360,000 $ 6,840,000
Distributions payable at December 31, 1995 and 1994 were $600,000 and
$1,000,000, respectively.
"Distributable Cash From Operations" means the net cash provided by the
Partnership's normal operations after general expenses and current liabilities
of the Partnership are paid, reduced by any reserves for working capital and
contingent liabilities to be funded from such cash, to the extent deemed
reasonable by the General Partner, and increased by any portion of such reserves
deemed by the General Partner not to be required for Partnership operations and
reduced by all accrued and unpaid Equipment Management Fees and, after Payout,
further reduced by all accrued and unpaid Subordinated Remarketing Fees.
Distributable Cash From Operations does not include any Distributable Cash From
Sales or Refinancings.
"Distributable Cash From Sales or Refinancings" means Cash From Sales or
Refinancings as reduced by (i)(a) for a period of two years from Final Closing,
Cash From Sales or Refinancings, which the General Partner reinvests in
additional aircraft, and (b) amounts realized from any loss or destruction of
any aircraft which the General Partner reinvests in replacement aircraft, and
(ii) any accrued and unpaid Equipment Management Fees and, after Payout, any
accrued and unpaid Subordinated Remarketing Fees.
"Cash From Sales or Refinancings" means cash received by the Partnership
from Sale or Refinancing transactions, as (i) reduced by (a) all debts and
liabilities of the Partnership required to be paid as a result of Sale or
Refinancing transactions, whether or not then due and payable (including any
liabilities on aircraft which are not assumed by the buyer and any remarketing
fees required to be paid to persons not affiliated with the General Partner, but
not including any Subordinated Remarketing Fees required to be accrued) and (b)
any reserves for working capital and contingent liabilities funded from such
cash to the extent deemed reasonable by the General Partner and (ii) increased
by any portion of such reserves deemed by the General Partner not to be required
for Partnership operations. In the event the Partnership accepts a note in
connection with any Sale or Refinancing transaction, all payments subsequently
received in cash by the Partnership with respect to such note shall be included
in Cash From Sales or Refinancings, regardless of the treatment of such payments
by the Partnership for tax or accounting purposes. If the Partnership receives
purchase money obligations in payment for aircraft sold, which are secured by
liens on such aircraft, the amount of such obligations shall not be included in
Cash From Sales or Refinancings until the obligations are fully satisfied.
Each distribution of Distributable Cash From Operations and
Distributable Cash From Sales or Refinancings of the Partnership shall be made
95% to the Recognized Owners and 5% to the General Partner. "Payout" is defined
as the first time when the aggregate amount of all distributions to the
Recognized Owners of Distributable Cash From Operations and Distributable Cash
From Sales or Refinancings equals the aggregate amount of the Recognized Owners'
original capital contributions plus a cumulative annual return of 10%
(compounded quarterly and calculated beginning with the last day of the month of
the Partnership's Closing Date) on their aggregate unreturned capital
contributions. For purposes of this definition, capital contributions shall be
deemed to have been returned only to the extent that distributions of cash to
the Recognized Owners exceed the amount required to satisfy the cumulative
annual return of 10% (compounded quarterly) on the Recognized Owners' aggregate
unreturned capital contributions, such calculation to be based on the aggregate
unreturned capital contributions outstanding on the first day of each fiscal
quarter.
Distributable Cash From Operations and Distributable Cash From Sales or
Refinancings ("Distributions") are distributed within 30 days after the
completion of each quarter, beginning with the first full fiscal quarter
following the Partnership's Closing Date. Each Distribution is described in a
statement sent to the Recognized Owners.
Item 6. Selected Financial Data.
Incorporated herein by reference to the section entitled "Selected
Financial Data" in the 1995 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Incorporated herein by reference to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1995 Annual Report.
Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference to the financial statements and
supplementary data included in the 1995 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1 of
this report, AFG Aircraft Management Corporation is the sole General Partner of
the Partnership. Under the Restated Agreement, as amended, the General Partner
is solely responsible for the operation of the Partnership's properties and the
Recognized Owners have no right to participate in the control of such
operations. The names, titles and ages of the Directors and Executive Officers
of the General Partner as of March 15, 1996 are as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF
THE GENERAL PARTNER (See Item 13)
Name Title Age Term
Geoffrey A. MacDonald Chief Executive Officer, Chairman Until a
and a member of the Executive successor
Committee of AFG and President is duly
and a Director of the General elected
Partner 47 and
qualified
Gary D. Engle President and Chief Operating
Officer and member of the
Executive Committee of AFG and a Director
of the General Partner 47
Gary M. Romano Vice President and Controller
of AFG and Clerk of the General Partner 36
Michael J. Butterfield Vice President and Treasurer of
the General Partner 36
James F. Livesey Vice President, Aircraft and Vessels 46
of AFG
Sandra L. Simonsen Vice President, Information Systems 45
of AFG
(c) Identification of Certain Significant Persons
None.
(d) Family Relationship
No family relationship exists among any of the foregoing Partners,
Directors or Executive Officers.
(e) Business Experience
Mr. MacDonald, age 47, is a co-founder, Chief Executive Officer, Chairman and a member of the Executive Committee
of AFG and President and a Director of the General Partner. Mr. MacDonald served as a co-founder, Director and Senior
Vice President of AFG's predecessor corporation from 1980 to 1988. Mr. MacDonald controls AFG, the General Partner and
each of AFG's partners and affiliates. Mr. MacDonald is Vice President of American Finance Group Securities Corp. and a
limited partner in Atlantic Acquisition Limited Partnership ("AALP"). Prior to co-founding AFG's predecessor, Mr.
MacDonald held various executive and management positions in the leasing and pharmaceutical industries. Mr. MacDonald
holds an M.B.A. from Boston College and a B.A. degree from the University of Massachusetts (Amherst).
Mr. Engle, age 47, is President and Chief Operating Officer and a member of the Executive Committee of AFG and
President of AFG Realty Corporation. Mr. Engle is Vice President and a Director of certain of AFG's affiliates and a
Director of the General Partner. On December 16, 1994, Mr. Engle acquired control of AFG, the General Partner and each
of AFG's subsidiaries. Mr. Engle controls the general partner of AALP and is also a limited partner in AALP. From 1987
to 1990, Mr. Engle was a principal and co-founder of Cobb Partners Development, Inc., a real estate and mortgage banking
company. From 1980 to 1987, Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney Company, a
large scale community development company owned by Walt Disney Company. Prior to 1980, Mr. Engle served in various
management consulting and institutional brokerage capacities. Mr. Engle has an M.B.A. from Harvard University and a B.S.
degree from the University of Massachusetts (Amherst).
Mr. Romano, age 36, is Vice President and Controller of AFG and certain of its affiliates and Clerk of the General
Partner. Mr. Romano joined AFG in November 1989 and was appointed Vice President and Controller in April 1993. Prior to
joining AFG, Mr. Romano was Assistant Controller for a privately-held real estate company which he joined in 1987. Mr.
Romano held audit staff and manager positions at Ernst & Whinney from 1982 to 1986. Mr. Romano is a C.P.A. and holds a
B.S. degree from Boston College.
Mr. Butterfield, age 36, is Vice President and Treasurer of certain of AFG's affiliates, including the General
Partner. Mr. Butterfield joined AFG in June 1992 and was appointed Vice President and Treasurer in March 1996. Prior to
joining AFG, Mr. Butterfield was an Audit Manager with Ernst & Young LLP, which he joined in 1987. Mr. Butterfield was
employed in public and industry positions in New Zealand and London (U.K.) prior to coming to the United States in 1987.
Mr. Butterfield attained his Associate Chartered Accountant (A.C.A.) professional qualification in New Zealand and has
completed his C.P.A. requirements in the United States. He holds a Bachelor of Commerce degree from the University of
Otago, Dunedin, New Zealand.
Mr. Livesey, age 46, is Vice President, Aircraft and Vessels, of AFG. Mr. Livesey joined AFG in October, 1989,
and was promoted to Vice President in January, 1992. Prior to joining AFG, Mr. Livesey held sales and marketing
positions with two privately-held equipment leasing firms. Mr. Livesey holds an M.B.A. from Boston College and B.A.
degree from Stonehill College.
Ms. Simonsen, age 45, joined AFG in February 1990 and was promoted to Vice President, Information Systems in April
1992. Prior to joining AFG, Ms. Simonsen was Vice President, Information Systems with Investors Mortgage Insurance
Company which she joined in 1973. Ms. Simonsen provided systems consulting for a subsidiary of American International
Group and authored a software program published by IBM. Ms. Simonsen holds a B.A. degree from Wilson College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
See Item 10 (a-b) above.
Item 11. Executive Compensation.
(a) Cash Compensation
Currently, the Partnership has no employees. However, under the terms of
the Restated Agreement, as amended, the Partnership is obligated to pay all
costs of personnel employed full or part-time by the Partnership, including
officers or employees of the General Partner or its Affiliates. There is no plan
at the present time to make any partners or employees of the General Partner or
its Affiliates employees of the Partnership. The Partnership has not paid and
does not propose to pay any options, warrants or rights to the officers or
employees of the General Partner or its Affiliates.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
Although the Partnership has no employees, as discussed in Item 11(a),
pursuant to section 10.4(c) of the Restated Agreement, as amended, the
Partnership incurs a monthly charge for personnel costs of the Manager for
persons engaged in providing administrative services to the Partnership. A
description of the remuneration paid by the Partnership to the General Partner
and its Affiliates for such services is included in Item 13, herein and in Note
4 to the financial statements included in Item 14, herein.
(d) Compensation of Directors
None.
(e) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the General
Partner or its Affiliates which results or may result from their resignation,
retirement or any other termination.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
By virtue of its organization as a limited partnership, the Partnership
has outstanding no securities possessing traditional voting rights. However, as
provided for in Section 11.2(a) of the Restated Agreement, as amended (subject
to Sections 11.2(b) and 11.3), a majority interest of the Recognized Owners have
voting rights with respect to:
1. Amendment of the Restated Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of all or substantially all of
the assets of the Partnership (except in the orderly liquidation
of the Partnership upon its termination and dissolution).
As of March 1, 1996, the following person or group owns beneficially more than 5% of the Partnership's 3,040,000
outstanding Units:
Name and Amount Percent
Title Address of of Beneficial of
of Class Beneficial Owner Ownership Class
Units Representing West American Insurance Co.
Limited Partnership 136 North Third Street 200,000 Units 6.6%
Interests Hamilton, OH 45025
The ownership and organization of AFG is described in Item 1 of this report.
Item 13. Certain Relationships and Related Transactions.
The General Partner of the Partnership is AFG Aircraft Management
Corporation, an affiliate of AFG.
(a) Transactions with Management and Others
All operating expenses incurred by the Partnership are paid by AFG on
behalf of the Partnership and AFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the years ended December 31,
1995, 1994, and 1993, which were accrued or paid by the Partnership to AFG or
its Affiliates, are as follows:
1995 1994 1993
Equipment management fees $ 229,430 $ 258,320 $ 291,144
Administrative charges 21,000 12,000 14,955
Reimbursable operating expenses
due to third parties 218,185 131,434 89,155
Total $ 468,615 $ 401,754 $ 395,254
As provided under the terms of the Management Agreement, AFG is
compensated for its services to the Partnership. Such services include all
aspects of acquisition, management and sale of equipment. For acquisition
services, AFG was compensated by an amount equal to 1.6% of Equipment Base Price
paid by the Partnership. For management services, AFG is compensated by an
amount equal to the lesser of (i) 5% of gross operating lease rental revenues
and 2% of gross full payout lease rental revenues received by the Partnership or
(ii) fees which the General Partner reasonably believes to be competitive for
similar services for similar equipment. Both of these fees are subject to
certain limitations defined in the Management Agreement. Compensation to AFG for
services connected to the sale of equipment is calculated as the lesser of (i)
3% of gross sale proceeds or (ii) one-half of reasonable brokerage fees
otherwise payable under arm's length circumstances. Payment of the remarketing
fee is subordinated to Payout and is subject to certain limitations defined in
the Management Agreement.
Administrative charges represent amounts owed to AFG, pursuant to
Section 10.4(c) of the Restated Agreement, as amended, for persons employed by
AFG who are engaged in providing administrative services to the Partnership.
Reimbursable operating expenses due to third parties represent costs paid by AFG
on behalf of the Partnership which are reimbursed to AFG.
All aircraft were purchased from AFG or one of its Affiliates. The
Partnership's Purchase Price was determined by the method described in Note 2 to
the financial statements included in Item 14, herein.
Substantially all rents and proceeds from the sale of aircraft are paid
directly to AFG. AFG temporarily deposits collected funds in a separate
interest-bearing escrow account prior to remittance to the Partnership. At
December 31, 1995, the Partnership was owed $353,803 by AFG for such funds and
the interest thereon. These funds were remitted to the Partnership in January
1996.
In 1990, AFG assigned its equipment Management Agreement with the
Partnership to AF/AIP Programs Limited Partnership, and AF/AIP Programs Limited
Partnership entered into an identical management agreement with AFG. AF/AIP
Programs Limited Partnership also entered into a nonexclusive confirmatory
agreement with AFG's former majority-owned subsidiary, AIRFUND Corporation
("AFC"), for the provision of aircraft remarketing services.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
See Item 13(a) above.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements:
Report of Independent Auditors...................................................................*
Statement of Financial Position
at December 31, 1995 and 1994....................................................................*
Statement of Operations
for the years ended December 31, 1995, 1994 and 1993.............................................*
Statement of Changes in Partners' Capital
for the years ended December 31, 1995, 1994 and 1993.............................................*
Statement of Cash Flows
for the years ended December 31, 1995, 1994 and 1993.............................................*
Notes to the Financial Statements................................................................*
(2) Financial Statement Schedules:
None required.
(3) Exhibits:
Except as set forth below, all Exhibits to Form 10-K,
as set forth in Item 601 of Regulation S-K, are not
applicable.
Exhibit
Number
4 Amended and Restated Agreement and Certificate of Limited Partnership included as Exhibit A to
the Prospectus which is included in Registration Statement on Form S-1 (No.33-25334).
13 The 1995 Annual Report to security holders, a copy of
which is furnished for the information of the
Securities and Exchange Commission. Such Report, except
for those portions thereof which are incorporated
herein by reference, is not deemed "filed" with the
Commission.
23 Consent of Independent Auditors.
99 (a) Lease agreement with Northwest Airlines, Inc. was
filed in the Registrant's Annual Report on Form 10-K
for the period July 26, 1989 (commencement of
operations) to December 31, 1989 as Exhibit 28 (b) and
is incorporated herein by reference.
* Incorporated herein by reference to the appropriate portion of the 1995 Annual Report to security holders for the year
ended December 31, 1995. (See Part II)
Exhibit
Number
99 (b) Lease agreement with United Air Lines, Inc. was filed
in the Registrant's Annual Report on Form 10-K for
the period July 26, 1989 (commencement of operations)
to December 31, 1989 as Exhibit 28 (c) and is
incorporated herein by reference.
99 (c) Lease agreement with Cathay Pacific Airways Limited
was filed in the Registrant's Annual Report on Form
10-K for the year ended December 31, 1992 as Exhibit 28
(d) and is incorporated herein by reference.
99 (d) Lease agreement with Southwest Airlines, Inc. is
filed in the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and is included
herein.
(b) Reports on Form 8-K
None.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of AIRFUND International Limited Partnership of our report dated March 12,
1996, except for the fourth paragraph of Note 7, as to which the date is March
25, 1996, included in the 1995 Annual Report to Partners of AIRFUND
International Limited Partnership.
ERNST & YOUNG LLP
Boston, Massachusetts
March 25, 1996
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report has been sent to the Recognized Owners. A report will
be furnished to the Recognized Owners subsequent to the date hereof.
No proxy statement has been or will be sent to the Recognized Owners.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on behalf of the registrant and in the
capacity and on the date indicated.
AIRFUND International Limited Partnership
By: AFG Aircraft Management Corporation,
a Massachusetts corporation and the
General Partner of the Registrant.
By: /s/ Geoffrey A. MacDonald By: /s/ Gary D. Engle
Geoffrey A. MacDonald Gary D. Engle
Chief Executive Officer, President and Chief Operating
Chairman, and a member of the Officer and member of the
Executive Committee of AFG and Executive Committee of AFG and
President and a Director of the a Director of the General Partner
General Partner (Principal Financial Officer)
(Principal Executive Officer)
Date: March 29, 1996 Date: March 29, 1996
By: /s/ Gary M. Romano
Gary M. Romano
Vice President and Controller
of AFG and Clerk of the General Partner
(Principal Accounting Officer)
Date: March 29, 1996