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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the annual period ended December 31, 2002
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the transition period from to
Commission File No. 0-20031
AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP LIQUIDATING TRUST
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3057290
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
c/o Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19890
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 676-0009
------------------
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:
2,714,647 Units Representing Limited Partnership Interests
----------------------------------------------------------
(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____ No X
-----
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 herein, to
the best of registrant's knowledge, in definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes____ No X
-----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable. Securities are nonvoting for this purpose.
Refer to Item 12 for further information.
AIRFUND II INTERNATIONAL
LIMITED PARTNERSHIP
LIQUIDATING TRUST
FORM 10-K
Page
PART I
Item 1. Business 3
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for the Partnership's Securities and Related Security Holder Matters 4
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
Item 7a. Quantitative and Qualitative Disclosures about Market Risks 10
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Partnership 17
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and Management 19
Item 13. Certain Relationships and Related Transactions 19
Item 14. Control and Procedures 20
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 20
PART I
Item 1. Business.
- -------------------
(a) General Development of Business
AIRFUND II International Limited Partnership Liquidating Trust (the "Trust") was
formed as of July 18, 2002 pursuant to a Liquidating Trust Agreement of the same
date by and between Wilmington Trust Company, as Trustee (the "Trustee") and
AIRFUND II International, a Limited Partnership (the "Partnership"). In
accordance with the terms of the settlement of the class and derivative action
lawsuit entitled Leonard Rosenblum, et al. v. Equis Financial Group Limited
Partnership, et al. (the "Settlement Agreement") and pursuant to a Plan of
Liquidation and Dissolution dated as of July 18, 2002 (the "Plan"), the
Partnership dissolved and transferred all of its remaining assets and
liabilities to the Trust, including a $ 2,208,000 cash reserve set aside for the
estimated contingent liabilities of the Partnership and the Trust.
From and after July 18, 2002, unitholders of the Partnership are deemed to be
pro rata beneficial interest holders in the Trust. Pursuant to the terms of the
Liquidating Trust Agreement, the Trustee shall complete the liquidation and
distribution of the assets and the satisfaction or discharge of the liabilities
of the Partnership. In accordance with the Plan, all of the net cash proceeds
from the sale of the assets of the Trust and cash, less reserves for any
contingent liabilities, are to be distributed to the Trust's interest holders no
later than December 31, 2003.
As permitted by the Liquidating Trust Agreement, the Trustee has appointed Equis
Corporation as the manager of the Trust ("Manager"), pursuant to the Appointment
Agreement between Wilmington Trust Company and Equis Corporation, dated November
13, 2002. As Manager, Equis Corporation is to continue to perform the
management, administrative, accounting and advisory services as may be requested
by the Trustee and as were previously rendered by Equis Financial Group Limited
Partnership ("EFG") or its affiliates. Equis Corporation is owned by EFG, which
also owns the General Partner, as discussed below.
The Partnership, which has been dissolved, was originally organized as a limited
partnership under the Uniform Limited Partnership Act on July 20, 1989 for the
purpose of acquiring and leasing to third parties a specified portfolio of used
commercial aircraft. Partners' capital initially consisted of contributions from
a General Partner (AFG Aircraft Management Corporation) and the Initial Limited
Partner (AFG Assignor Corporation). The Partnership's General Partner is owned
by EFG.
(b) Financial Information About Industry Segments
The Trust has no employees; however, it is managed pursuant to the Liquidating
Trust Agreement with Wilmington Trust Company as Trustee. The Trustee's role,
among other things, is to complete the liquidation of the assets and to satisfy
or discharge the liabilities of the Trust. As discussed above, the Trustee has
appointed Equis Corporation as the Manager of the Trust. The Trustee and the
Manager are both compensated for such services as provided for in the
Liquidating Trust Agreement.
The Trust is engaged in only one operating industry segment: financial services.
Industry segment data is not applicable.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 herein.
(c) Narrative Description of Business
The Trust was organized for the sole purpose to liquidate and dissolve all of
the remaining assets and liabilities of the Partnership with no objective to
continue or engage in the conduct of trade or business. At December 31, 2002,
the Trust's net assets primarily consisted of:
- - Cash and cash equivalents
- Accounts and interest receivable - affiliate
- Equipment held for sale
- Accrued liabilities
The Trust has no employees; however, it is managed pursuant to the Liquidating
Trust Agreement with Wilmington Trust Company as Trustee. The Trustee's role,
among other things, is to complete the liquidation of the assets and to satisfy
or discharge the liabilities of the Trust. In accordance with the Liquidating
Trust Agreement, the Trustee has appointed Equis Corporation as the manager of
the Trust ("Manager"), pursuant to the Appointment Agreement between Wilmington
Trust Company and Equis Corporation, dated November 13, 2002. The Trustee and
the Manager are both compensated for such services as provided for in the
Liquidating Trust Agreement.
All operating expenses incurred directly by the Trust are disbursed by
Wilmington Trust on behalf of the Trust. During the liquidation process,
certain other operating expenses incurred by the Trust are paid by Equis
Corporation in its role as Manager. Equis Corporation is reimbursed by the Trust
at its actual cost for such expenditures. Fees and other costs incurred during
the period July 18, 2002 through December 31, 2002, which were paid or accrued
by the Trust to Equis Corporation or its affiliates, were $34,689.
In accordance with the liquidation basis of accounting, the Trust recorded an
accrual as of December 31, 2002 for the estimated costs to be incurred to
liquidate the Trust. Approximately $277,000 of the accrual is estimated to be
paid to the Manager for salaries and other expenses incurred to liquidate the
assets.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Not applicable.
Item 2. Properties.
- ---------------------
None.
Item 3. Legal Proceedings.
- -----------------------------
The Trust is subject to various claims and proceedings in the normal course of
business. The Trustee believes that the disposition of such matters is not
expected to have a material adverse effect on the financial position of the
Trust or its results of operations.
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, 2002, there were 3,960 record holders in the Trust.
(c) Dividend History and Restrictions
Cash distributions of $3,386,363 and $5,100,000 were paid to the beneficial
interest holders of the Trust on August 18, 2002 and December 31, 2002,
respectively. In any given year, it is possible that beneficial interest
holders in the Trust will be allocated taxable income in excess of distributed
cash. This discrepancy between tax obligations and cash distributions may or
may not continue in the future, and cash may or may not be available for
distribution to the beneficial interest holders in the Trust adequate to cover
any tax obligation.
Cash distributions when paid to the beneficial interest holders in the Trust
consist of both a return of and a return on capital. Cash distributions do not
represent and are not indicative of yield on investment. Actual yield on
investment cannot be determined with any certainty until conclusion of the Trust
and will be primarily dependent upon the proceeds realized from the liquidation
of the Trust's remaining assets offset by the associated costs of such
liquidation and dissolution of the Trust.
Item 6. Selected Financial Data.
- ------------------------------------
The following data should be read in conjunction with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements included in Item 8 herein.
AIRFUND II International Limited Partnership Liquidating Trust (the "Trust) was
organized for the purpose of liquidating the assets that were held by AIRFUND II
International, a Limited Partnership (the "Partnership"). Per the Plan of
Liquidation and Dissolution (the "Plan"), all of the net cash proceeds from the
sale of the net assets of the Trust and cash, less reserves for any contingent
liabilities, are to be distributed to the Trust's interest holders no later than
December 31, 2003.
The selected financial data below represents the net assets of the Trust as of
December 31, 2002 and the changes in net assets for the period July 18, 2002
(date of inception) through December 31, 2002.
December 31, 2002
-------------------
Total assets $ 1,345,055
Accrued liabilities 529,931
-------------------
Net assets in liquidation $ 815,124
===================
Net assets at July 18, 2002 $ -
Transfer of net assets at liquidation basis 9,599,474
Change in provision for liquidation expenses (742,153)
Net income from operations 444,166
Distributions (8,486,363)
-------------------
Net assets in liquidation at December 31, 2002 $ 815,124
===================
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- ---------------
FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-K of the Trust that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a variety of risks
and uncertainties. There are a number of factors that could cause actual
results to differ materially from those expressed in any forward-looking
statements made herein. These factors include, but are not limited to the
realization of residual proceeds for the Trust's equipment, the performance and
liquidation of the Trust's non-equipment assets and future economic conditions.
OVERVIEW
AIRFUND II International Limited Partnership Liquidating Trust (the "Trust") was
formed as of July 18, 2002 pursuant to a Liquidating Trust Agreement of the same
date by and between Wilmington Trust Company, as Trustee (the "Trustee") and
AIRFUND II International, a Limited Partnership (the "Partnership"). In
accordance with the terms of the settlement of the class and derivative action
lawsuit entitled Leonard Rosenblum, et al. v. Equis Financial Group Limited
Partnership, et al. (the "Settlement Agreement") and pursuant to a Plan of
Liquidation and Dissolution dated as of July 18, 2002 (the "Plan"), the
Partnership dissolved and transferred all of its remaining assets and
liabilities to the Trust, including a $ 2,208,000 cash reserve set aside for the
estimated contingent liabilities of the Partnership and the Trust.
From and after July 18, 2002, unitholders of the Partnership are deemed to be
pro rata beneficial interest holders in the Trust. Pursuant to the terms of the
Liquidating Trust Agreement, the Trustee shall complete the liquidation and
distribution of the assets and the satisfaction or discharge of the liabilities
of the Partnership. In accordance with the Plan, all of the net cash proceeds
from the sale of the assets of the Trust and cash, less reserves for any
contingent liabilities, are to be distributed to the Trust's interest holders no
later than December 31, 2003.
In accordance with the Liquidating Trust Agreement, the Trustee has appointed
Equis Corporation as the manager of the Trust ("Manager"), pursuant to the
Appointment Agreement between Wilmington Trust Company and Equis Corporation,
dated November 13, 2002. As Manager, Equis Corporation is to continue to perform
the management, administrative, accounting and advisory services as may be
requested by the Trustee and as were previously rendered by Equis Financial
Group Limited Partnership ("EFG") or its affiliates. Equis Corporation is owned
by EFG, which also owns the General Partner, as discussed below.
The Partnership, which has been dissolved, was originally organized as a limited
partnership under the Uniform Limited Partnership Act on July 20, 1989 for the
purpose of acquiring and leasing to third parties a specified portfolio of used
commercial aircraft. Partners' capital initially consisted of contributions from
a General Partner (AFG Aircraft Management Corporation) and the Initial Limited
Partner (AFG Assignor Corporation). The Partnership's General Partner is owned
by EFG.
LIQUIDITY AND CAPITAL RESOURCES
In accordance with the liquidation basis of accounting, the carrying values of
the assets are presented at net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated costs associated
with completing the liquidation of the Trust. Preparation of the financial
statements on a liquidation basis requires significant assumptions by
management, including the estimate of liquidation costs and the resolution of
any contingent liabilities. There may be differences between the assumptions
and the actual results because events and circumstances frequently do not occur
as expected. Those differences, if any, could result in a change in the net
assets recorded in the Statement of Net Assets in Liquidation.
At December 31, 2002, the Trust had approximately $7,000 included in accounts
receivables from affiliates for rents and proceeds from the sale of equipment
paid by the lessee directly to EFG. EFG temporarily deposits collected funds a
separate interest-bearing escrow account prior to remittance to the Liquidating
Trust. The Trust's cash proceeds received by EFG are reimbursed to the Trust on
a monthly basis. At December 31, 2002, the Trust also had accounts
receivable-affiliates of approximately $104,000. These receivables were paid to
the Trust in January 2003.
The Trust had accrued liabilities of $529,931 at December 31, 2002. Accrued
liabilities consist of costs incurred and estimated costs associated with
liquidating the assets. To the extent the Trust has a contingent liability,
meaning generally a liability the payment of which is subject to the outcome of
a future event, the Trust recognizes a liability when the amount of the
liability can be reasonably estimated and the liability is probable. There may
be differences between the assumptions and the actual results because events and
circumstances frequently do not occur as expected. Those differences, if any,
could result in a change in the net assets recorded in the Statement of Net
Assets in Liquidation.
The events of September 11, 2001 and the economic downturn, have adversely
affected the market demand in the equipment leasing industry. While the Trustee
cannot determine if these events will have a material effect on the Trust in the
next year, it is monitoring the industries to assess the timing of disposition
of the remaining equipment held for sale.
Cash distributions of $3,386,363 and $5,100,000 were paid to the beneficial
interest holders of the Trust on August 18, 2002 and December 31, 2002,
respectively. In any given year, it is possible that beneficial interest
holders in the Trust will be allocated taxable income in excess of distributed
cash. This discrepancy between tax obligations and cash distributions may or
may not continue in the future, and cash may or may not be available for
distribution to the beneficial interest holders in the Trust adequate to cover
any tax obligation.
Cash distributions when paid to the beneficial interest holders in the Trust
generally consist of both a return of and a return on capital. Cash
distributions do not represent and are not indicative of yield on investment.
Actual yield on investment cannot be determined with any certainty until
conclusion of the Trust and will be primarily dependent upon the proceeds
realized from the liquidation of the Trust's remaining assets offset by the
associated costs of such liquidation and dissolution of the Trust.
RESULTS OF OPERATIONS AND LIQUIDATION ADJUSTMENTS
The Liquidating Trust Agreement provides Equis Corporation (the "Manager")
authority to liquidate the remaining assets of the Trust in an orderly manner.
As a result of the liquidation, operations are being accounted for on a
liquidation basis in accordance with generally accepted accounting principles.
Net income from operations was $444,166 and change in provision for liquidation
expenses resulted in a decrease in net assets of $742,153 for the period July
18, 2002 through December 31, 2002.
Results of Operations
- -----------------------
Significant transactions included in the Trust's Statement of Changes in Net
Assets In Liquidation as a component of operations for the period July 18, 2002
(date of inception) through December 31, 2002 include:
In accordance with the Settlement, on or prior to July 18, 2002, Equis Financial
Group Limited Partnership ("EFG") agreed to buy a loan made by the Partnership
to Echelon Residential Holdings LLC ("Echelon Residential Holdings"). EFG
agreed to purchase the loan on or before December 31, 2002 for its original
principal value of $3,640,000, less any amounts previously paid, together with
interest accruing at an annual rate of 7.5%.
This loan was originally made to Echelon Residential Holdings by the Partnership
together with loans made by ten other affiliated partnerships. In accordance
with the Settlement Agreement and in anticipation of the purchase of the loan by
EFG, the Trust agreed not to foreclose or initiate foreclosure procedures on the
loan.
As of July 18, 2002, the loan and related accrued interest were increased to
their estimated net realizable amounts during the Trust's adjustment to
liquidation accounting in the amount $395,300, which is reflected in the net
assets transferred into the Trust.
On November 29, 2002, an affiliate of EFG purchased the loan for its outstanding
principal of $3,076,074 plus interest accrued at an annual rate of 7.5% for a
total purchase price of $3,801,497, resulting in a gain to the Trust of
approximately $725,000.
The Trust also incurred expenses of approximately $281,000 incurred during the
period July 18, 2002 (date of inception) through December 31, 2002 related to
the liquidation of the Trust's assets and operations of the Trust.
Liquidation Adjustments
- ------------------------
Other significant transactions which are included in the Trust's Statement of
Changes in Net Assets in Liquidation as a change in provision for liquidation
expenses for the period July 18, 2002 (date of inception) through December 31,
2002 include:
During the period July 18, 2002 (date of inception) through December 31, 2002,
the Trust recorded a writedown of approximately $359,000 on a McDonnell Douglas
MD-82 aircraft in which the Trust owns a proportionate interest to reflect the
Manager's revised estimate of the liquidation value of the aircraft.
In addition, during the period July 18, 2002 (date of inception) through
December 31, 2002, the Trust recorded a liquidation adjustment of approximately
$383,000 reflecting the Manager's estimate of additional amounts expected to be
incurred to liquidate the Trust. The additional liquidation costs are directly
correlated to management's estimate of the amount of time necessary to dissolve
the Trust.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Trustee believes the following critical accounting policies, among others,
are subject to significant judgments and estimates used in the preparation of
these financial statements.
Liquidation Accounting
- -----------------------
In accordance with the liquidation basis of accounting, the carrying values of
the assets are presented at net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated costs associated
with completing the liquidation of the Trust. Preparation of the financial
statements on a liquidation basis requires significant assumptions by the Trust,
including the estimate of liquidation costs and the resolution of any contingent
liabilities. There may be differences between the assumptions and the actual
results because events and circumstances do not occur as expected. Those
differences, if any, could result in a change in the net assets recorded in the
Statement of Net Assets in Liquidation.
Cash Equivalents and Investment Securities
- ----------------------------------------------
The Trust classifies any amounts on deposits in banks and all highly liquid
investments purchased with an original maturity of three months or less as cash
and cash equivalents.
Accrued Liabilities
- --------------------
Accrued liabilities consist of assumptions by management, including the estimate
of liquidation costs and the resolution of any contingent liabilities. There
may be differences between the assumptions and the actual results because events
and circumstances frequently do not occur as expected. Those differences, if
any, could result in a change in the net assets recorded in the Statement of Net
Assets in Liquidation.
Commitments and Contingencies
- -------------------------------
The Trust is subject to various claims and proceeding in the normal course of
business. The Trustee believes that the disposition of such matters is not
expected to have a material adverse effect on the financial position of the
Trust or its results of operations.
New Accounting Pronouncements
- -------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations". SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001,
as well as all purchase method business combinations completed after June 30,
2001. SFAS 141 also specifies criteria that intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill. The Trust adopted SFAS 141 upon formation on July 18, 2002
and such adoption had no effect on the Trust's financial position and results of
operations.
The Trust adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS. No. 142") on January 1, 2002. As a result,
the discontinuance of goodwill amortization was effective upon adoption of SFAS
No. 142. SFAS No. 142 also includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the useful
lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill, and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. The amount of the impairment is the difference between the carrying
amount and the fair value of the asset. Fair value of the asset is calculated
using several valuation models which utilize the expected future cash flows of
the Trust. The Trust adopted SFAS 142 upon formation on July 18, 2002 and such
adoption had no effect on the Trust's financial position and results of
operations.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations". SFAS No. 143 establishes
accounting standards for the recognition and measurement of legal obligations
associated with the retirement of tangible long-lived assets and requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. The Trust adopted SFAS No. 143 at the beginning of fiscal
2003 and such adoption had no effect on the Trust's net assets in liquidation
and statement of changes in net assets in liquidation.
In accordance with the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), the Trust evaluates long-lived
assets for impairment whenever events or circumstances indicate that the
carrying values of such assets may not be recoverable. Losses for impairment
are recognized when the undiscounted cash flows estimated to be realized from a
long-lived asset are determined to be less than the carrying value of the asset
and the carrying amount of long-lived assets exceed its fair value. The
determination of fair value for a given investment requires several
considerations, including but not limited to, income expected to be earned from
the asset, estimated sales proceeds, and holding costs excluding interest. The
Trust adopted SFAS 144 upon formation on July 18, 2002 and such adoption had no
effect on the Trust's financial position and results of operations.
In April 2002, the FASB issued SFAS No.145, "Rescission of FASB Statements No.4,
44 and 64, Amendment of FASB Statement No.13, and Technical Corrections." As a
result of the rescission of SFAS No. 4, a gain or loss on extinguishment of debt
will no longer be presented as an extraordinary item upon the adoption of SFAS
No. 145. The Trust adopted SFAS No. 145 in the second quarter of fiscal 2002
and such adoption had no effect on the Trust's net assets in liquidation and
statement of changes in net assets in liquidation.
In July 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with
Exit or Disposal Activities." SFAS No.146 is based on the general principle that
a liability for a cost associated with an exit or disposal activity should be
recorded when it is incurred and initially measured at fair value. SFAS No.146
applies to costs associated with (1) an exit activity that does not involve an
entity newly acquired in a business combination, or (2) a disposal activity
within the scope of SFAS No.144. These costs include certain termination
benefits, costs to terminate a contract that is not a capital lease, and other
associated costs to consolidate facilities or relocate employees. Because the
provisions of this statement are to be applied prospectively to exit or disposal
activities initiated after December 31, 2002, the effect of adopting this
statement has not been determined.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of the
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002 and the disclosure requirements in this
interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The adoption of FIN 45 is not expected
to have a material impact on the Trust's net assets in liquidation and statement
of changes in net assets in liquidation.
In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities ("FIN 46"). This interpretation clarifies existing accounting
principles related to the preparation of consolidated financial statements when
the equity investors in an entity do no have the characteristics of a
controlling financial interest or when the equity at risk is not sufficient for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 requires a Trust to evaluate all existing
arrangements to identify situations where a Trust has a "variable interest,"
commonly evidenced by a guarantee arrangement or other commitment to provide
financial support, in a "variable interest entity," commonly a thinly
capitalized entity, and further determine when such variable interest requires a
Trust to consolidate the variable interest entities financial statement with its
own. The Trust has determined that it is not reasonably possible that it will be
required to consolidate or disclose information about a variable interest entity
upon the effective date of FIN 46. This interpretation applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. If it is reasonably possible
that an enterprise will consolidate or disclose information about a variable
interest entity when this interpretation becomes effective, the enterprise shall
disclose information about those entities in all financial statements issued
after January 31, 2003. The interpretation may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is first applied or by
restating previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated.
Based on the recent release of this interpretation, we have not completed our
assessment as to whether or not the adoption of this interpretation will have a
material impact on our financial statements.
OUTLOOK FOR THE FUTURE
Several other factors may affect the Trust's operating performance through the
remainder of 2003, including:
- -changes in markets for the Trust's equipment and;
- -changes in the regulatory environment in which the equipment operates.
The Trust's equipment leasing assets consists of the ownership interest in an
aircraft currently off-lease.
The events of September 11, 2001 and its aftermath have adversely affected
market demand for both new and used commercial aircraft and weakened the
financial position of several airline companies. While it currently is not
possible for the Trust to determine the ultimate long-term economic consequences
of these events to the equipment leasing segment, management anticipates that
the resulting decline in air travel will suppress market prices for used
aircraft in the short-term and could inhibit the viability of some airlines.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including condition and type of equipment being
sold and its marketability at the time of sale. The Trust attempts to monitor
these change in order to identify opportunities which may be advantageous to the
Trust and which will maximize total cash returns for each asset.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks.
- -----------------------------------------------------------------------------
The Trust's financial statements do not include financial instruments that are
exposed to interest rate risks.
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------------
Financial Statements:
Statement of Net Assets in Liquidation
at December 31, 2002 11
Statement of Changes in Net Assets in Liquidation
for the period July 18, 2002 (inception) through December 31, 2002 12
Notes to the Financial Statements 13
AIRFUND II INTERNATIONAL
LIMITED PARTNERSHIP LIQUIDATING TRUST
STATEMENT OF NET ASSETS IN LIQUIDATION AT
DECEMBER 31, 2002
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 815,611
Accounts receivable - affiliate 111,745
Interest receivable - affiliate 569
Other assets 16,099
Equipment held for sale 401,031
----------
Total assets $1,345,055
==========
LIABILITIES AND NET ASSETS IN LIQUIDATION
Accrued liabilities $ 529,931
----------
Net assets in liquidation $ 815,124
==========
The accompanying notes are an integral part of these financial statements.
AIRFUND II INTERNATIONAL
LIMITED PARTNERSHIP LIQUIDATING TRUST
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FOR THE PERIOD JULY 18, 2002 (INCEPTION) THROUGH DECEMBER 31, 2002
(UNAUDITED)
Net assets at July 18, 2002 $ -
Transfer of net assets at liquidation basis 9,599,474
Change in provision for liquidation expenses (742,153)
Net income from operations 444,166
Distributions (8,486,363)
----------
Net assets in liquidation at December 31, 2002 $ 815,124
==========
The accompanying notes are an integral part of these financial statements.
AIRFUND II INTERNATIONAL
LIMITED PARTNERSHIP LIQUIDATING TRUST
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION
- ------------------------
AIRFUND II International Limited Partnership Liquidating Trust (the "Trust") was
formed as of July 18, 2002 pursuant to a Liquidating Trust Agreement of the same
date by and between Wilmington Trust Company, as Trustee (the "Trustee") and
AIRFUND II International, a Limited Partnership (the "Partnership"). In
accordance with the terms of the settlement of the class and derivative action
lawsuit entitled Leonard Rosenblum, et al. v. Equis Financial Group Limited
Partnership, et al. (the "Settlement Agreement") and pursuant to a Plan of
Liquidation and Dissolution dated as of July 18, 2002 (the "Plan"), the
Partnership dissolved and transferred all of its remaining assets and
liabilities to the Trust, including a $2,208,000 cash reserve set aside for the
estimated contingent liabilities of the Partnership and the Trust.
From and after July 18, 2002, unitholders of the Partnership are deemed to be
pro rata beneficial interest holders in the Trust. Pursuant to the terms of the
Liquidating Trust Agreement, the Trustee shall complete the liquidation and
distribution of the assets and the satisfaction or discharge of the liabilities
of the Partnership. In accordance with the Plan, all of the net cash proceeds
from the sale of the assets of the Trust and cash, less reserves for any
contingent liabilities, are to be distributed to the Trust's interest holders no
later than December 31, 2003.
As permitted by the Liquidating Trust Agreement, the Trustee has appointed Equis
Corporation as the manager of the Trust ("Manager"), pursuant to the Appointment
Agreement between Wilmington Trust Company and Equis Corporation, dated November
13, 2002. As Manager, Equis Corporation is to continue to perform the
management, administrative, accounting and advisory services as may be requested
by the Trustee and as were previously rendered by Equis Financial Group Limited
Partnership ("EFG") or its affiliates. Equis Corporation is owned by EFG, which
also owns the General Partner, as discussed below.
The Partnership, which has been dissolved, was originally organized as a limited
partnership under the Uniform Limited Partnership Act on July 20, 1989 for the
purpose of acquiring and leasing to third parties a specified portfolio of used
commercial aircraft. Partners' capital initially consisted of contributions from
a General Partner (AFG Aircraft Management Corporation) and the Initial Limited
Partner (AFG Assignor Corporation). The Partnership's General Partner is owned
by EFG.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------
Liquidation Accounting
- -----------------------
In accordance with the liquidation basis of accounting, the carrying values of
the assets are presented at net realizable amounts and all liabilities are
presented at estimated settlement amounts, including estimated costs associated
with completing the liquidation of the Trust. Preparation of the financial
statements on a liquidation basis requires significant assumptions by the Trust,
including the estimate of liquidation costs and the resolution of any contingent
liabilities. There may be differences between the assumptions and the actual
results because events and circumstances do not occur as expected. Those
differences, if any, could result in a change in the net assets recorded in the
Statement of Net Assets in Liquidation.
In the opinion of the Trust, all adjustments (consisting of normal and recurring
adjustments) considered necessary to present fairly the net assets in
liquidation at December 31, 2002 and the changes in net assets in liquidation
for the period July 18, 2002 through December 31, 2002 have been made and are
reflected in the accompanying financial statements.
The net adjustment required to convert from the going concern (historical cost)
basis of accounting to the liquidation basis of accounting was an increase in
net assets of $33,709. This amount is reflected in the transfer of net assets
at liquidation basis in the Statement of Changes in Net Assets in Liquidation.
Significant changes in the carrying value of assets and liabilities are
summarized as follows:
Adjustment to equipment $ (89,591)
Increase in loan receivable and interest receivable 395,300
Adjustment to accrued expenses 108,000
Estimated liquidation costs (380,000)
----------
Total adjustment to liquidation basis $ 33,709
=========
Cash Equivalents and Investment Securities
- ----------------------------------------------
The Trust classifies any amounts on deposits in banks and all highly liquid
investments purchased with an original maturity of three months or less as cash
and cash equivalents.
Accrued Liabilities
- --------------------
Accrued liabilities consist of assumptions by management, including the estimate
of liquidation costs and the resolution of any contingent liabilities. There
may be differences between the assumptions and the actual results because events
and circumstances frequently do not occur as expected. Those differences, if
any, could result in a change in the net assets recorded in the Statement of Net
Assets in Liquidation.
Income Taxes
- -------------
The Trust is not a taxable entity for federal income tax purposes. Accordingly,
no provision for income taxes has been recorded in the accounts of the Trust.
Allocation of Profits and Losses and Distributions
- --------------------------------------------------------
For financial statement purposes, net income or loss and distributions are
allocated to each owner according to their "pro rate beneficial interest" in the
respective Liquidating Trust. Specifically, net income or loss and
distributions are allocated based on the type of interest held in the
predecessor Partnership, and allocated 95% to the limited partners and 5% to
the general partner.
New Accounting Pronouncements
- -------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations". SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001,
as well as all purchase method business combinations completed after June 30,
2001. SFAS 141 also specifies criteria that intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill. The Trust adopted SFAS 141 upon formation on July 18, 2002
and such adoption had no effect on the Trust's financial position and results of
operations.
The Trust adopted Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS. No. 142") on January 1, 2002. As a result,
the discontinuance of goodwill amortization was effective upon adoption of SFAS
No. 142. SFAS No. 142 also includes provisions for the reclassification of
certain existing recognized intangibles as goodwill, reassessment of the useful
lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill, and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. The amount of the impairment is the difference between the carrying
amount and the fair value of the asset. Fair value of the asset is calculated
using several valuation models which utilize the expected future cash flows of
the Trust. The Trust adopted SFAS 142 upon formation on July 18, 2002 and such
adoption had no effect on the Trust's financial position and results of
operations.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations". SFAS No. 143 establishes
accounting standards for the recognition and measurement of legal obligations
associated with the retirement of tangible long-lived assets and requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. The Trust adopted SFAS No. 143 at the beginning of fiscal
2003 and such adoption had no effect on the Trust's net assets in liquidation
and statement of changes in net assets in liquidation.
In accordance with the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), the Trust evaluates long-lived
assets for impairment whenever events or circumstances indicate that the
carrying values of such assets may not be recoverable. Losses for impairment
are recognized when the undiscounted cash flows estimated to be realized from a
long-lived asset are determined to be less than the carrying value of the asset
and the carrying amount of long-lived assets exceed its fair value. The
determination of fair value for a given investment requires several
considerations, including but not limited to, income expected to be earned from
the asset, estimated sales proceeds, and holding costs excluding interest. The
Trust adopted SFAS 144 upon formation on July 18, 2002 and such adoption had no
effect on the Trust's financial position and results of operations.
In April 2002, the FASB issued SFAS No.145, "Rescission of FASB Statements No.4,
44 and 64, Amendment of FASB Statement No.13, and Technical Corrections." As a
result of the rescission of SFAS No. 4, a gain or loss on extinguishment of debt
will no longer be presented as an extraordinary item upon the adoption of SFAS
No. 145. The Trust adopted SFAS No. 145 in the second quarter of fiscal 2002
and such adoption had no effect on the Trust's net assets in liquidation and
statement of changes in net assets in liquidation.
In July 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with
Exit or Disposal Activities." SFAS No.146 is based on the general principle that
a liability for a cost associated with an exit or disposal activity should be
recorded when it is incurred and initially measured at fair value. SFAS No.146
applies to costs associated with (1) an exit activity that does not involve an
entity newly acquired in a business combination, or (2) a disposal activity
within the scope of SFAS No.144. These costs include certain termination
benefits, costs to terminate a contract that is not a capital lease, and other
associated costs to consolidate facilities or relocate employees. Because the
provisions of this statement are to be applied prospectively to exit or disposal
activities initiated after December 31, 2002, the effect of adopting this
statement has not been determined.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the disclosures to be
made by a guarantor in its interim and annual financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of the
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002 and the disclosure requirements in this
interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The adoption of FIN 45 is not expected
to have a material impact on the Trust's net assets in liquidation and statement
of changes in net assets in liquidation.
In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities ("FIN 46"). This interpretation clarifies existing accounting
principles related to the preparation of consolidated financial statements when
the equity investors in an entity do no have the characteristics of a
controlling financial interest or when the equity at risk is not sufficient for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 requires a Trust to evaluate all existing
arrangements to identify situations where a Trust has a "variable interest,"
commonly evidenced by a guarantee arrangement or other commitment to provide
financial support, in a "variable interest entity," commonly a thinly
capitalized entity, and further determine when such variable interest requires a
Trust to consolidate the variable interest entities financial statement with its
own. The Trust has determined that it is not reasonably possible that it will be
required to consolidate or disclose information about a variable interest entity
upon the effective date of FIN 46. This interpretation applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after
June 15, 2003, to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. If it is reasonably
possible that an enterprise will consolidate or disclose information about a
variable interest entity when this interpretation becomes effective, the
enterprise shall disclose information about those entities in all financial
statements issued after January 31, 2003. The interpretation may be applied
prospectively with a cumulative-effect adjustment as of the date on which it is
first applied or by restating previously issued financial statements for one or
more years with a cumulative-effect adjustment as of the beginning of the first
year restated. Based on the recent release of this interpretation, we have not
completed our assessment as to whether or not the adoption of this
interpretation will have a material impact on our financial statements.
NOTE 3 - EQUIPMENT
- ---------------------
At December 31, 2002, the Trust's remaining equipment, with an estimated
liquidation value of $401,031, is a proportionate ownership interest in a
McDonnell Douglas MD-82 aircraft. This McDonnell Douglas MD-82 was returned to
the Trust upon its lease expiration in April 2001 and has been held for re-lease
or sale since that time. The Trust is actively seeking to sell this aircraft.
NOTE 4 - RELATED PARTY TRANSACTIONS
- ----------------------------------------
All operating expenses incurred directly by the Trust are disbursed by
Wilmington Trust on behalf of the Trust. The Trustee's role, among other things,
is to complete the liquidation of the assets and to satisfy or discharge the
liabilities of the Trust.
The Trust has no employees; however, it is managed pursuant to the Liquidating
Trust Agreement with Wilmington Trust Company as Trustee. In accordance with
the Liquidating Trust Agreement, the Trustee has appointed Equis Corporation as
the manager of the Trust ("Manager"), pursuant to the Appointment Agreement
between Wilmington Trust Company and Equis Corporation, dated November 13, 2002.
The Trustee and the Manager are both compensated for such services as provided
for in the Liquidating Trust Agreement.
During the liquidation process, certain operating expenses incurred by the Trust
are paid by Equis Corporation in its role as Manager. Equis Corporation is
reimbursed by the Trust at its actual cost for such expenditures. Fees and
other costs incurred during the period July 18, 2002 through December 31, 2002,
which were paid or accrued by the Trust to Equis Corporation or its affiliates,
were $34,689.
In accordance with the liquidation basis of accounting, the Trust recorded an
accrual as of December 31, 2002 for the estimated costs to be incurred to
liquidate the Trust. Approximately $277,000 of the accrual is estimated to be
paid to the Manager for salaries and other expenses incurred to liquidate the
Trust's remaining assets.
------
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure.
- ----------------------
None.
PART III
Item 10. Directors and Executive Officers of the Manager.
- -----------------------------------------------------------------
(a-b) Identification of Directors and Executive Officers
The Trust has no Directors or Officers. As indicated in Item 1 of this report,
Equis Corporation is the Manager of the Trust. The names, titles and ages of the
Directors and Executive Officers of Equis Corporation as of March 15, 2003 are
as follows:
DIRECTORS AND EXECUTIVE OFFICERS OF THE EQUIS CORPORATION (See Item 13)
- --------------------------------------------------------------------------------
Name Title Age Term
- --------------------- -------------------------------------- --- -----------------
Geoffrey A. MacDonald Chairman of Equis Corporation 54 Until a successor
is duly elected
and qualified
Gary D. Engle President, Chief Executive Officer and
Director of Equis Corporation 54
James A. Coyne Executive Vice President of Equis
Corporation 43
Wayne E. Engle Vice President and Chief Financial
Officer of Equis Corporation 49
Gail D. Ofgant Senior Vice President, Lease
Operations of Equis Corporation 37
(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 54, is the Chairman of the Board of Equis Corporation, an
entity owned by EFG . Mr. McDonald was a co-founder of EFG's predecessor,
American Finance Group, which was established in 1980. Mr. MacDonald is a
member of the Board of Managers of Echelon Development Holdings LLC Prior to
co-founding American Finance Group, Mr. MacDonald held various positions in the
equipment leasing industry and the ethical pharmaceutical industry with Eli
Lilly & Company. Mr. MacDonald holds an M.B.A. from Boston College and a B.A.
degree from the University of Massachusetts (Amherst).
Mr. Gary Engle, age 54, is the sole shareholder, Director, President and Chief
Executive Officer of Equis Corporation, an entity owned by EFG. Mr. Engle is
also Chairman and Chief Executive Officer of Semele Group Inc. ("Semele") and a
member of the Board of Managers of Echelon Development Holdings LLC. Mr. Engle
controls the general partners of Atlantic Acquisition Limited Partnership
("AALP") and Old North Capital Limited Partnership ("ONC"). Mr. Engle joined EFG
in 1990 and acquired control of EFG and its subsidiaries in December 1994. Mr.
Engle co-founded Cobb Partners Development, Inc., a real estate and mortgage
banking company, where he was a principal from 1987 to 1989. From 1980 to 1987,
Mr. Engle was Senior Vice President and Chief Financial Officer of Arvida Disney
Company, a large-scale community development organization 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. degree from Harvard
University and a B.S. degree from the University of Massachusetts (Amherst).
Mr. Coyne, age 43, is Executive Vice President of Equis Corporation, the general
partner of EFG, and President and Chief Operating Officer of Semele. He is also
a Director and President of Equis II Corporation. Mr. Coyne joined EFG in 1989
and remained with the company until May 1993 when he resigned to join the
Raymond Company, a private investment firm, where he was responsible for
financing corporate and real estate acquisitions. Mr. Coyne remained with the
Raymond Company until November 1994 when he re-joined EFG. From 1985 to 1989,
Mr. Coyne was employed by Ernst & Whinney (now known as Ernst & Young LLP). Mr.
Coyne holds a Masters degree in accounting from Case Western Reserve University
and a B.S. in Business Administration from John Carroll University and is a
Certified Public Accountant.
Wayne E. Engle is Senior Vice President of Equis Financial Group. He has
primary responsibility for the day to day management of AFG Realty Inc's
Australian and U. S. real estate holdings, and EFG's owned equipment portfolio.
Prior to joining EFG in 1995, he was Finance Director for Coventry Schools,
where he was responsible for all financial reporting and human resource
activities. From 1983 through 1989, Mr. Engle was Director of Finance and
Administration for CompuServe Data Technologies, a division of CompuServe, a
developer of database management systems and access control services. While at
CompuServe, Mr. Engle was involved in financing all corporate research and
development and strategic planning for new product development. Prior to 1983,
he worked at Trans National as an accountant for the travel services side of the
business which included tour operators in Europe, Asia and the Caribbean
Islands. Mr. Engle has a BS degree from Northeastern University.
Ms. Ofgant, age 37, joined EFG in July 1989 and held various positions in the
organization before becoming Senior Vice President of Equis Corporation in 1998.
Ms. Ofgant is Senior Vice President and Assistant Clerk of Equis/Echelon
Management Corporation, the manager of Echelon Residential LLC. From 1987 to
1989, Ms. Ofgant was employed by Security Pacific National Trust Company. Ms.
Ofgant holds a B.S. degree from Providence College.
(f) Involvement in Certain Legal Proceedings
None.
(g) Promoters and Control Persons
Not applicable.
Item 11. Executive Compensation.
- -----------------------------------
(a) Cash Compensation
The Trust has no employees; however, it is managed pursuant to the Liquidating
Trust Agreement with Wilmington Trust Company as Trustee. The Trustee's role,
among other things, is to complete the liquidation of the assets and to satisfy
or discharge the liabilities of the Trust. In accordance with the Liquidating
Trust Agreement, the Trustee has appointed Equis Corporation as the manager of
the Trust ("Manager"), pursuant to the Appointment Agreement between Wilmington
Trust Company and Equis Corporation, dated November 13, 2002. The Trustee and
the Manager are both compensated for such services as provided for in the
Liquidating Trust Agreement.
All operating expenses incurred directly by the Trust are disbursed by
Wilmington Trust on behalf of the Trust. During the liquidation process, certain
operating expenses incurred by the Trust are paid by Equis Corporation in its
role as Manager. Equis Corporation is reimbursed by the Trust at its actual cost
for such expenditures. Fees and other costs incurred during the period July
18, 2002 through December 31, 2002, which were paid or accrued by the Trust to
Equis Corporation or its affiliates, were $34,689.
In accordance with the liquidation basis of accounting, the Trust recorded an
accrual as of December 31, 2002 for the estimated costs to be incurred to
liquidate the Trust. Approximately $277,000 of the accrual is estimated to be
paid to the Manager for salaries and other expenses incurred to liquidate the
assets.
(b) Compensation Pursuant to Plans
None.
(c) Other Compensation
See discussion in (a) above.
(d) Stock Options and Stock Appreciation Rights
Not applicable.
(e) Long-Term Incentive Plan Awards Table
Not applicable.
(f) Defined Benefit or Actuarial Plan Disclosure
Not applicable.
(g) Compensation of Directors
None.
(h) Termination of Employment and Change of Control Arrangement
There exists no remuneration plan or arrangement with the Trustee, Manager 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 liquidating trust, the Trust has outstanding
no securities possessing traditional voting rights.
As of March 15, 2003, the following person or group owns beneficially more than
5% of the Trust's 2,714,647 outstanding Units:
Name and Amount Percent
Title Address of of Beneficial of
of Class Beneficial Owner Ownership Class
- ------------------- ------------------------------------- ------------- -------
Units Representing Old North Capital Limited Partnership
Limited Partnership 1050 Waltham St., Suite 310 40,000 Units 1.47%
Interests Lexington, MA 02421
The general partner of Old North Capital Limited Partnership ("ONC") is a
Massachusetts limited partnership formed in 1995. The general partner of ONC is
controlled by Gary D. Engle and the limited partnership interests in ONC are
owned by Semele. Gary D. Engle is Chairman and Chief Executive Officer of
Semele and President, Chief Executive Officer, sole shareholder and Director of
EFG's General Partner. James A. Coyne, Executive Vice President of the general
partner of EFG, is Semele's President and Chief Operating Officer. Mr. Engle
and Mr. Coyne are both members of the Board of Directors of, and own significant
stock in, Semele. See Items 10 and 13 of this report.
The ownership and organization of EFG is described in Item 1 of this report.
Item 13. Certain Relationships and Related Transactions.
- --------------------------------------------------------------
(a) Transactions with Management and Others
All operating expenses incurred directly by the Trust are disbursed by
Wilmington Trust on behalf of the Trust. The Trustee's role, among other things,
is to complete the liquidation of the assets and to satisfy or discharge the
liabilities of the Trust. The Trustee has engaged Equis Corporation as Manager
of the Trust. The Trustee and Manager are compensated for such services as
provided for in the Liquidating Trust Agreement.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management to the Partnership
None.
(d) Transactions with Promoters
Not applicable.
Item 14. Controls and Procedures
- ------------------------------------
Based on their evaluation as of a date within 90 days of the filing of this Form
10-K, the Manger's Principal Executive Officer and Chief Financial Officer have
concluded that the Trust's disclosure controls and procedures are effective to
ensure that information required to be disclosed in the reports that the Trust
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. There have been no
significant changes in the Trust's internal controls or in other factors that
could significantly affect those controls subsequent to the date of their
evaluation.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- --------------------------------------------------------------------------------
(a) Documents filed as part of this report:
(1) All Financial Statements:
The financial statements are filed as part of this report under Item 8
"Financial Statements and Supplementary Data".
(2) Financial Statement Schedules:
None.
(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.
A list of exhibits filed or incorporated by reference is as follows:
Exhibit
Number
- ------
Exhibit 2.12 Final Judgment and Order in re: Leonard Rosenblum, et al. v.
Equis Financial Group Limited Partnership, et al. dated June 12, 2002 and
entered on the docket on June 18, 2002 was filed in the Registrant's Form 8-K on
July 24, 2002 and is incorporated herein by reference.
Exhibit 2.13 Amendment to subsection 22(f) of the Revised Stipulation of
Settlement dated January 29, 2002 was filed in the Registrant's Form 10-Q for
the quarter ended June 30, 2002 as Exhibit 2.13 and is incorporated herein by
reference.
Exhibit 2.14 Plan of Liquidation and Dissolution dated July 18, 2002 was
filed in the Registrant's Form 10-Q for the quarter ended June 30, 2002 as
Exhibit 2.14 and is incorporated herein by reference.
Exhibit 2.15 Account Agency Agreement between Equis Financial Group Limited
Partnership and Wilmington Trust Company, dated April 11, 2002 was filed in the
Registrant's Form 10-Q for the quarter ended June 30, 2002 as Exhibit 2.14 and
is incorporated herein by reference.
Exhibit 2.16 Liquidating Trust Agreement between the Partnership and
Wilmington Trust Company dated July 18, 2002 was filed in the Registrant's Form
10-Q for the quarter ended June 30, 2002 as Exhibit 2.14 and is incorporated
herein by reference.
Exhibit 4 Liquidating Trust Agreement between the Partnership and
Wilmington Trust Company dated July 18, 2002 was filed in the Partnership's June
30, 2002 Quarterly Report as Exhibit 2.16 and is incorporated herein by
reference.
Exhibit 10.1 Appointment Agreement between Wilmington Trust Company, as
Trustee and not Individually, of the Liquidating Trusts, and Equis Corporation,
as Manager, dated November 13, 2002 was filed in the Registrant's Form 10-Q for
the quarter ended September 30, 2002 as Exhibit 10.1 and is incorporated herein
by reference.
Exhibit 99.1 Certificate of the Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley
Exhibit 99.2 Certificate of the Chief Executive Officer pursuant to Section
906 of Sarbanes - Oxley
(b) Reports on Form 8-K
None.
(c) Other Exhibits
None.
(d) Financial Statement Schedules:
None.
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP Liquidating Trust
By: Equis Corporation, as Manager of the Trust, under a Liquidating Trust
Agreement dated as of July 18, 2002, Wilmington Trust Company, as Trustee and
not Individually
By: /s/ Gary D Engle
------------------
Gary D. Engle
President
(Principal Executive Officer)
Date: March 31, 2003
----------------
By: /s/ Wayne E. Engle
---------------------
Wayne E. Engle
Vice President
(Duly Authorized Officer and
Chief Financial Officer)
Date: March 31, 2003
----------------
- ------
CERTIFICATION:
I, Gary D. Engle, certify that:
1. I have reviewed this annual report on Form 10-K of AIRFUND II International
Limited Partnership Liquidating Trust (the "Trust");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
d) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
e) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Gary D. Engle
- --------------------
Gary D. Engle
President (Chief Executive Officer)
Equis Corporation, as Manager of the Trust, under a Liquidating Trust Agreement
dated as of July 18, 2002, Wilmington Trust Company, as Trustee and not
Individually
Date: March 31, 2003
CERTIFICATION:
I, Wayne E. Engle, certify that:
1. I have reviewed this annual report on Form 10-K of AIRFUND II International
Limited Partnership Liquidating Trust (the "Trust");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
d) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
e) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Wayne E. Engle
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Wayne E. Engle
Vice President (Chief Financial Officer)
Equis Corporation, as Manager of the Trust, under a Liquidating Trust Agreement
dated as of July 18, 2002, Wilmington Trust Company, as Trustee and not
Individually
Date: March 31, 2003
Exhibit Index
10.1 Appointment Agreement between Wilmington Trust Company and Equis
Corporation
99.1 Certificate of Chief Executive Officer pursuant to Section 906 of Sarbanes
- - Oxley Act
99.2 Certificate of Chief Financial Officer pursuant to Section 906 of Sarbanes
- - Oxley Act