Willis Lease Finance Corp – ‘424A’ on 11/19/97

As of:  Wednesday, 11/19/97   ·   Accession #:  950149-97-2120   ·   File #:  333-39865

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Prospectus   —   Rule 424(a)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424A        Preliminary Prospectus                                79    460K 

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                                   Filed Pursuant to Rule 424A
                                  Registration No. 333-39865

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

SUBJECT TO COMPLETION, DATED NOVEMBER 17, 1997

PROSPECTUS                                                                      
1,500,000 SHARES

LOGO
COMMON STOCK
--------------------------- 

  All of the 1,500,000 shares of Common Stock, no par value per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by Willis Lease 
Finance Corporation (the "Company"). The Common Stock is traded on the Nasdaq   
National Market under the symbol "WLFC." On November 14, 1997 the last sale     
price of the Common Stock as reported by the Nasdaq National Market was $18.75  
per share. See "Price Range of Common Stock."                                   
--------------------------- 

    THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.                                         
--------------------------- 

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES        
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION                
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE           
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR                 
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION               
TO THE CONTRARY IS A CRIMINAL OFFENSE.                    

                                                        [Enlarge/Download Table]
                                                                                               
===============================================================================================
                                                           Underwriting                        
                                         Price to            Discounts          Proceeds to    
                                         Public(1)      and Commissions(2)      Company(2)     
-----------------------------------------------------------------------------------------------

Per Share..........................          $                   $                   $         
-----------------------------------------------------------------------------------------------
Total(3)...........................          $                   $                   $         
===============================================================================================

(1) The Company has agreed to indemnify the Underwriters against certain        
liabilities, including liabilities under the Securities Act of 1933, as 
amended. See "Underwriting."                                            

(2) Before deducting expenses payable by the Company, estimated at $510,000.    

(3) The Company has granted the Underwriters a 30-day option to purchase up to  
an additional 225,000 shares of Common Stock on the same terms and      
 conditions as set forth above solely to cover over-allotments, if any. If
all such shares are purchased, the total Price to Public, Underwriting  
Discounts and Commissions and Proceeds to Company will be $          ,  
$          and $          , respectively.                               
--------------------------- 

  The shares of Common Stock offered by this Prospectus are offered by the
Underwriters, subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters  
and to certain further conditions. It is expected that the delivery of          
certificates for the shares of Common Stock will be made at the offices of      
Lehman Brothers Inc., New York, New York, on or about December   , 1997.        
--------------------------- 

LEHMAN BROTHERS                                             DAIN BOSWORTH       
                                                    INCORPORATED

December   , 1997                                                               

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[PHOTOS]

   CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF   
THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON     
STOCK PRIOR TO THE PRICING OF THIS OFFERING FOR THE PURPOSE OF MAINTAINING THE  
PRICE OF THE COMMON STOCK AND THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING  
THE PRICING OF THIS OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON  
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK. FOR A    
DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."                             

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN  
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE    
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE    
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."                

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PROSPECTUS SUMMARY

 The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes included elsewhere in this   
Prospectus, including the unaudited consolidated financial statements for the   
nine month periods ended September 30, 1997 and 1996 (the "Unaudited Financial  
Statements") and the audited consolidated financial statements for the years    
ended December 31, 1996 and 1995 (the "Audited Financial Statements"). Unless   
otherwise indicated, all information in this Prospectus assumes that the        
Underwriters' over-allotment option is not exercised.                           

THE COMPANY 

    Willis Lease Finance Corporation (the "Company") provides operating leases
of commercial jet aircraft engines and aircraft equipment and sells aircraft    
engines and parts to air carriers, manufacturers and overhaul/repair facilities 
worldwide. The Company's core business is acquiring and leasing, primarily      
pursuant to operating leases, commercial aircraft spare engines and other       
aircraft equipment. As a significant corollary to its core business, the        
Company, through its wholly-owned subsidiary Willis Aeronautical Services, Inc. 
("WASI"), specializes in the purchase and resale of aftermarket airframe and    
engine parts, engines, modules and rotable components. The Company also engages 
in the selective purchase and resale of commercial aircraft engines. Integrating
these three activities improves the Company's ability to maximize the residual  
and resale values of its engines, equipment and parts. The Company's senior     
management has extensive expertise in the commercial jet aircraft engine        
industry, a business which is not the focus of the major commercial aircraft    
lessors.                                                                        

 As of September 30, 1997, the Company had 42 engines and eight aircraft
parts packages under lease to 34 customers in 20 countries. The Company's       
strategy for its leasing business is to focus primarily on marketing operating  
leases of commercial aircraft engines and related equipment to a diversified    
base of customers worldwide. With operating leases, the Company retains the     
potential benefit and assumes the risk of the residual value of the leased      
asset, as distinct from finance leases where the entire cost of the asset is    
generally recovered over the term of the lease. In order to maximize residual   
values, the Company focuses on popular Stage III commercial jet aircraft        
engines. As of September 30, 1997, all of the engines in the Company's lease    
portfolio were Stage III engines and were generally suitable for use on one or  
more commonly used aircraft.                                                    

    Through WASI, the Company purchases and resells various aircraft equipment
in the aftermarket. WASI's strategy is to focus on the acquisition of aviation  
equipment, such as whole engines and aircraft, which can be dismantled and sold 
as parts at a greater profit. After the completion of an extensive facilities   
audit and numerous meetings with the Company's management, the Airline Suppliers
Association, an FAA recognized independent quality assurance organization,      
accredited WASI as an aftermarket parts supplier. WASI recently expanded its    
operations by opening a new facility in Arizona to facilitate the disassembly of
aircraft into parts for sale.                                                   

     The Company also engages in the selective purchase and resale of commercial
aircraft engines and engine components in the aftermarket. It is the Company's  
general objective to minimize risk by not purchasing engines or components on   
speculation; however, on occasion, the Company purchases engines and components 
without having a commitment for their sale. To date, these engines and          
components have been successfully sold or leased by the Company shortly after   
acquisition.                                                                    

Management believes the Company's market offers attractive growth     
opportunities. Industry analysts estimate that the worldwide fleet of           
approximately 11,500 commercial aircraft utilizes approximately 30,000 engines, 
including approximately 5,000 spare engines valued at over $11 billion. The     
Company's engine portfolio represents approximately 1% of the current market for
spare engines. Based on industry analysts' projections of growth in the         
commercial aircraft fleet, the Company expects commercial airlines to acquire   
approximately 5,300 additional spare engines over the next 20 years.            

    Airlines have increasingly turned to operating leases as an alternative to
traditional financing of their aircraft, engines and spare parts. Operating     
leases allow airlines greater fleet and financial flexibility due to            

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their shorter term nature and relatively small initial capital outlay. Aviation 
Week and Space Technology ("Aviation Week") reports that leasing will be the    
primary means by which the global air transport industry acquires new aircraft  
between now and 1999, and probably beyond. According to Aviation Week, based    
upon data provided by GE Capital Aviation Services, 84% of the world's airlines 
leased all or a portion of their equipment in 1996, up from 59% in 1986.        

   As part of its growth stategy, the Company intends to expand its existing
operations to include leasing and selling similar assets in additional markets  
such as the corporate, commuter and cogeneration markets. For example, the      
Company recently made its first investment in the commuter market by committing 
to purchase three de Havilland DHC-8-102 commuter aircraft and three spare      
engines, which are currently on lease to a domestic commuter carrier.           

The Company is a California corporation which commenced its leasing   
business in 1988. Its executive offices are located at 180 Harbor Drive, Suite  
200, Sausalito, California 94965 and its telephone and facsimile numbers are    
(415) 331-5281 and (415) 331-0607, respectively. The Company transacts business 
directly and through its subsidiaries. Unless otherwise indicated, references in
this Prospectus to the Company refer to Willis Lease Finance Corporation and its
subsidiaries.                                                                   

THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                             
Common Stock offered by the Company... 1,500,000 shares                                      
Common Stock to be outstanding after                                                         
  the Offering.......................  6,952,320 shares(1)                                   
Use of proceeds......................  To finance the acquisition of additional equipment for
                                       lease or sale, potential acquisitions of businesses   
                                       complementary to the Company's existing businesses and
                                       the possible expansion into other aviation-related    
                                       activities and businesses, as well as for working     
                                       capital and other general corporate purposes. Pending 
                                       such uses, the net proceeds will be used to reduce the
                                       outstanding borrowings under the Company's revolving  
                                       line of credit. See "Use of Proceeds."                
Nasdaq National Market Symbol........  WLFC                                                  

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

(1) Excludes (i) 438,500 shares of Common Stock issuable upon exercise of       
 options granted under the Company's 1996 Stock Option/Stock Issuance Plan
   (the "1996 Plan") and 71,500 additional shares of Common Stock reserved for
 issuance under the 1996 Plan, (ii) 64,473 shares of Common Stock reserved
for issuance under the Company's Employee Stock Purchase Plan and (iii) 
100,000 shares of Common Stock issuable upon exercise of outstanding    
warrants. See "Management -- 1996 Stock Option/Stock Issuance Plan," and
"Employee Stock Purchase Plan."                                         
------------------------------------

The Company's design logo is a service mark of the Company for which  
registration has been applied. All other service marks, trademarks or trade     
names referred to in this Prospectus are the property of their respective       
owners.                                                                         

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA 

                                                        [Enlarge/Download Table]

                                                                                                         NINE MONTHS ENDED  
                                                            YEAR ENDED DECEMBER 31,                        SEPTEMBER 30,    
                                            -------------------------------------------------------     ------------------- 
                                             1992        1993        1994        1995        1996        1996        1997   
                                            -------     -------     -------     -------     -------     -------     ------- 
                                                         (IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE DATA)               
                                                                                                                            
INCOME STATEMENT DATA:                                                                                                      
Revenue:                                                                                                                    
  Operating lease revenue.................. $ 8,744     $10,323     $13,636     $13,771     $13,740     $10,379     $13,481 
  Finance lease revenue....................      --          --          --          --          --          --         223 
  Gain (loss) on sale of leased                                                                                             
    equipment..............................     659        (281)        633        (483)          2          --       1,333 
  Spare parts sales........................      --          --         795       3,859       5,843       3,303      11,459 
  Sale of equipment acquired for resale....   3,598          --       2,184       5,472      12,105       9,605      12,748 
  Interest and other income................      70         938         542         119         618         197         544 
                                            -------     -------     -------     -------     -------     -------     ------- 
    Total revenue..........................  13,071      10,980      17,790      22,738      32,308      23,484      39,788 
Expenses:                                                                                                                   
  Interest expense.........................   4,815       4,809       5,948       5,722       4,323       3,371       5,226 
  Depreciation expense.....................   2,666       3,070       4,447       4,703       3,181       2,513       2,995 
  Residual share(1)........................     279         445       1,284         408         723         536         598 
  Cost of spare parts sales................      --          --         659       2,546       3,308       1,604       7,751 
  Cost of equipment acquired for resale....   3,140          --       1,863       2,742      10,789       8,551      10,672 
  General and administrative expense.......   1,357       1,533       1,616       3,335       5,124       3,434       6,358 
                                            -------     -------     -------     -------     -------     -------     ------- 
    Total expenses.........................  12,257       9,857      15,817      19,456      27,448      20,009      33,600 
Gain on modification of credit                                                                                              
  facility(2)..............................      --          --          --       2,203          --          --          -- 
                                            -------     -------     -------     -------     -------     -------     ------- 
Income before income taxes, minority                                                                                        
  interest and extraordinary item..........     814       1,123       1,973       5,485       4,860       3,475       6,188 
Income taxes...............................    (327)       (454)       (797)     (2,212)     (1,976)     (1,395)     (2,456)
                                            -------     -------     -------     -------     -------     -------     ------- 
Income before minority interest and                                                                                         
  extraordinary item.......................     487         669       1,176       3,273       2,884       2,080       3,732 
Less: minority interest in net income of                                                                                    
  subsidiary...............................      --          --           4          57          79          79          -- 
                                            -------     -------     -------     -------     -------     -------     ------- 
Income before extraordinary item...........     487         669       1,172       3,216       2,805       2,001       3,732 
Extraordinary item less applicable income                                                                                   
  taxes(3).................................      --          --          --          --          --          --       2,008 
                                            -------     -------     -------     -------     -------     -------     ------- 
Net income................................. $   487     $   669     $ 1,172     $ 3,216     $ 2,805     $ 2,001     $ 5,740 
                                            =======     =======     =======     =======     =======     =======     ======= 
Earnings per share before extraordinary                                                                                     
  item.....................................   $0.16       $0.22       $0.38       $1.03       $0.74       $0.62       $0.65 
Extraordinary item.........................      --          --          --          --          --          --        0.36 
                                            -------     -------     -------     -------     -------     -------     ------- 
Earnings per share.........................   $0.16       $0.22       $0.38       $1.03       $0.74       $0.62       $1.01 
                                            =======     =======     =======     =======     =======     =======     ======= 
Weighted average number of shares                                                                                           
  outstanding..............................   3,111       3,111       3,111       3,111       3,796       3,215       5,709 
Return on average assets(4)................    0.79%       0.97%       1.54%       3.68%       2.59%       2.67%       3.34%
Return on average equity(4)................  172.39%      82.90%      75.37%      94.99%      20.02%      21.26%      19.01%

                                                        [Enlarge/Download Table]

                                                                                              AT SEPTEMBER 30, 1997  
                                                                                             ------------------------
                                                                                                              AS     
                                                                                              ACTUAL      ADJUSTED(5)
                                                                                             --------     -----------
                                                                                                  (IN THOUSANDS)     
                                                                                                                     
BALANCE SHEET DATA:                                                                                                  
Total assets................................................................................ $173,018      $ 173,018 
Equipment under lease, net..................................................................  135,886        135,886 
Debt financing(6)...........................................................................  108,062         82,134 
Shareholders' equity........................................................................   29,164         55,092 
Debt to equity ratio........................................................................      3.7x           1.5x

                                                        [Enlarge/Download Table]

                                                                         AT DECEMBER 31,                    AT      
                                                             ----------------------------------------  SEPTEMBER 30,
                                                             1992     1993     1994     1995     1996      1997     
                                                             ----     ----     ----     ----     ----  -------------
                                                                                                                    
LEASE PORTFOLIO:                                                                                                    
Engines in lease portfolio at end of the period(7)..........  26       25       26       31       32         43     

                                                   (footnotes on following page)

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(1) The Company has negotiated a sharing of residual proceeds with certain      
 lenders in exchange for a higher percentage financing of certain aircraft
engines. Residual sharing arrangements apply to five of the Company's   
    engines (representing $15.5 million of book value) as of September 30, 1997.
The Company accrues for its residual sharing obligations using net book 
    value as a proxy for residual proceeds. See "Business -- Financing/Source of
Funds" and Note 1 to the Audited Financial Statements.                  

(2) Gain on modification of credit facility of $2.2 million represents the      
  elimination of residual share payable of $2.4 million less the net loss on
the sale of two engines to the lender of $199,000. See "Management's    
 Discussion and Analysis of Financial Condition and Results of Operations"
and Note 4 to the Audited Financial Statements.                         

(3) In February 1997, the Company obtained a new loan agreement for $41.5       
million to replace an existing loan of $44.2 million. The transaction   
resulted in an extraordinary gain of $2 million or $0.36 per weighted   
average share, net of tax. See "Management's Discussion and Analysis of 
  Financial Condition and Results of Operations" and Note 4 to the Unaudited
Financial Statements.                                                   

(4) Calculations are based on the average of beginning and end of period        
 balances. Nine month results are annualized and exclude the extraordinary
item.                                                                   

(5) As adjusted to give effect to the sale of 1,500,000 shares of Common Stock  
 offered hereby at an assumed price of $18.75 per share (the closing price
per share of the Common Stock on November 14, 1997), less underwriting  
   discounts and estimated expenses of the Offering and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."                

(6) Inclusive of accrued interest and capital lease obligation and exclusive of 
residual share payable.                                                 

(7) At September 30, 1997, 42 of the 43 engines in the lease portfolio were on  
  lease. In addition, at September 30, 1997, eight parts packages with a net
book value of $7.0 million were on lease.                               

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RISK FACTORS

     An investment in the shares of Common Stock being offered hereby involves a
high degree of risk. In addition to other information in this Prospectus, the   
following risk factors should be considered carefully by potential purchasers in
evaluating an investment in the Common Stock offered hereby. Except for         
historical information contained herein, this Prospectus contains               
forward-looking statements that involve risks and uncertainties, such as        
statements of the Company's plans, objectives, expectations and intentions. The 
cautionary statements made in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this          
Prospectus. The Company's actual results could differ materially from those     
discussed here. Factors that could cause or contribute to such differences      
include those discussed below as well as those discussed elsewhere herein.      

OWNERSHIP RISKS                                                                 

The Company leases its portfolio of aircraft engines and spare parts  
packages (collectively, "Aircraft Equipment") primarily under operating leases  
as opposed to finance leases. Under an operating lease, the Company retains     
title to the Aircraft Equipment and assumes the risk of not recovering its      
entire investment in the Aircraft Equipment through the re-leasing and          
remarketing process. Operating leases require the Company to re-lease or sell   
Aircraft Equipment in its portfolio in a timely manner upon termination of the  
lease in order to minimize off-lease time and recover its investment in the     
Aircraft Equipment. Numerous factors, many of which are beyond the control of   
the Company, may have an impact on the Company's ability to re-lease or sell    
Aircraft Equipment on a timely basis. Among the factors are general market      
conditions, regulatory changes (particularly those imposing environmental,      
maintenance and other requirements on the operation of aircraft engines),       
changes in the supply or cost of the Aircraft Equipment and technological       
developments. Further, the value of a particular used aircraft engine varies    
greatly depending upon its condition, the number of hours remaining until the   
next major maintenance of the aircraft engine is required and general conditions
in the airline industry. In addition, the success of an operating lease depends 
in part upon having the Aircraft Equipment returned by the lessee in marketable 
condition as required by the lease. Consequently, there can be no assurance that
the Company's estimated residual value for the Aircraft Equipment will be       
realized. As of September 30, 1997, the Company had 42 engines and eight parts  
packages under lease to 34 customers in 20 countries (one additional engine is  
off lease and is being actively marketed by the Company). If the Company is     
unable to re-lease or sell the Aircraft Equipment on favorable terms, its       
business, financial condition, cash flow, ability to service debt and results of
operations could be adversely affected.                                         

   The Company, through WASI, also acquires aviation equipment such as whole
engines and aircraft which can be dismantled and sold as parts. Before parts may
be installed in an aircraft, they must meet certain standards of condition      
established by the Federal Aviation Administration ("FAA"). See "Government     
Regulations" below. Parts must also be traceable to sources deemed acceptable by
the FAA. See "Business -- Spare Parts Sales." Parts owned by the Company may not
meet applicable standards or standards may change, causing parts which are      
already in the Company's inventory to be scrapped or modified. Engine           
manufacturers may also develop new parts to be used in lieu of parts already    
contained in the Company's inventory. In all such cases, to the extent the      
Company has such parts in its inventory, their value may be reduced. In         
addition, if the Company does not sell airframe and engine component parts that 
it purchases in the time frame contemplated at acquisition, the Company may be  
subject to unanticipated inventory financing costs as well as all the risks of  
ownership described above.                                                      

     The Company also engages in the selective purchase and resale of commercial
aircraft engines and engine components in the aftermarket. On occasion, the     
Company purchases engines or components without having a commitment for their   
sale. If the Company were to purchase an engine or component without having a   
firm commitment for its sale or if a firm commitment for sale were to exist but 
not be consummated for whatever reason, the Company would be subject to all the 
risks of ownership described above.                                             

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INDUSTRY RISKS                                                                  

Downturns in the air transportation industry affect each of the three 
components of the Company's business. In particular, substantial increases in   
fuel costs or interest rates, increased fare competition, slower growth in air  
traffic, or any significant downturn in the general economy could adversely     
affect the air transportation industry and may therefore negatively impact the  
Company's business, financial condition and results of operations.              

While the Company believes that its lease terms protect its Aircraft  
Equipment and the Company's investment in such Aircraft Equipment, there can be 
no assurance that the financial difficulties experienced by a number of airlines
will not have an adverse effect on the Company's business, financial condition  
or results of operations. In recent years and as discussed in "Customer Credit  
Risks" below, a number of commercial airlines have experienced financial        
difficulties, in some cases resulting in bankruptcy proceedings.                

CUSTOMER CREDIT RISKS                                                           

A lessee may default in performance of its lease obligations and the  
Company may be unable to enforce its remedies under a lease. The Company's      
existing and prospective customers include smaller domestic and foreign         
passenger airlines, freight and package carriers and charter airlines, which,   
together with major passenger airlines, may suffer from the factors which have  
historically affected the airline industry. As a result, certain of these       
customers may pose credit risks to the Company. The Company's inability to      
collect receivables due under a lease or to repossess Aircraft Equipment in the 
event of a default by a lessee could have a material adverse effect on the      
Company's business, financial condition or results of operations. A number of   
airlines have experienced financial difficulties, certain airlines have filed   
for bankruptcy and a number of such airlines have ceased operations. In most    
cases where a debtor seeks protection under Chapter 11 of Title 11 of the United
States Code (the "Bankruptcy Code"), creditors are automatically stayed from    
enforcing their rights. In the case of United States certified airlines, Section
1110 of the Bankruptcy Code provides certain relief to lessors of the aircraft  
equipment. Specifically, the debtor airline has 60 days from the date the       
airline seeks protection under Chapter 11 of the Bankruptcy Code to agree to    
perform its obligations and to cure any defaults. If it does not do so, the     
lessor may repossess the aircraft equipment. The scope of Section 1110 has been 
the subject of significant litigation and there can be no assurance that the    
provisions of Section 1110 will protect the Company's investment in an aircraft 
engine in the event of a lessee's bankruptcy. In addition, Section 1110 does not
apply to lessees located outside of the United States and applicable foreign    
laws may not provide comparable protection.                                     

During the three years ended September 30, 1997, three lessees of the 
Company filed for bankruptcy protection or otherwise became insolvent or ceased 
operations. In two of these cases (Great American Airways and Mark Air), the    
Company's engines were returned and re-leased. In the third case, Air Liberte   
S.A. was acquired by British Airways and the lease continues. On October 5,     
1997, Western Pacific Airlines, Inc., a domestic lessee of three of the         
Company's engines with a combined net book value of $8.7 million, filed a       
petition under Chapter 11 of the Bankruptcy Code in the District of Colorado.   
Western Pacific has 60 days from October 5, 1997 to agree to perform its        
obligations and to cure any defaults under its leases with the Company.         

QUARTERLY FLUCTUATIONS IN OPERATING RESULTS                                     

     The Company has experienced fluctuations in its quarterly operating results
and anticipates that these fluctuations may continue. Such fluctuations may be  
due to a number of factors, including the timing of sales of engines and spare  
parts and engine marketing activities, unanticipated early lease terminations,  
the timing of engine acquisitions or a default by a lessee. Given the           
possibility of such fluctuations, the Company believes that comparisons of the  
results of its operations for preceding quarters are not necessarily meaningful 
and that results for any prior quarter should not be relied upon as an          
indication of future performance. See "Management's Discussion and Analysis of  
Financial Condition and Results of Operations Quarterly Results of Operations." 
In the event the Company's revenues or earnings for any quarter are less than   
the level                                                                       

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expected by securities analysts or the market in general, such shortfall could  
have an immediate and significant adverse impact on the market price of the     
Company's Common Stock.                                                         

INTERNATIONAL RISKS                                                             

    In 1996, approximately 61% of the Company's lease revenue was generated by
leases to foreign customers. During the nine months ended September 30, 1997,   
approximately 64% of the Company's lease revenue was generated by leases to     
foreign customers. Such leases may present greater risks to the Company because 
certain foreign laws, regulations and judicial procedures may not be as         
protective of lessor rights as those which apply in the United States. In       
addition, many foreign countries have currency and exchange laws regulating the 
international transfer of currencies. The Company attempts to minimize its      
currency and exchange risks by negotiating all of its lease transactions in U.S.
Dollars and all guarantees obtained to support various lease agreements are     
denominated for payment in U.S. Dollars. To date, the Company has experienced   
some collection problems under certain leases with foreign airlines, and there  
can be no assurance that the Company will not experience such collection        
problems in the future. The Company may also experience collection problems     
related to the enforcement of its lease agreements under foreign local laws and 
the attendant remedies in such locales. Consequently, the Company is subject to 
the timing and access to courts and the remedies local laws impose in order to  
collect its lease payments and recover its assets. In addition, political       
instability abroad and changes in international policy also present risks       
associated with expropriation of the Company's leased engines. To date, the     
Company has experienced limited problems in reacquiring assets; however, there  
can be no assurance that the Company will not experience more serious problems  
in the future.                                                                  

     Certain countries have no registration or other recording system with which
to locally establish the Company's or its lender's interest in the engines and  
related leases, potentially making it more difficult for the Company to prove   
its interest in an engine in the event that it needs to recover an engine       
located in such a country.                                                      

   The Company's engines and the aircraft on which they are installed can be
subject to certain foreign taxes and airport fees. Consequently, unexpected     
liens on an engine or the aircraft on which it is installed could be imposed in 
favor of a foreign entity, such as Eurocontrol or the airports of the United    
Kingdom.                                                                        

DEPENDENCE UPON AVAILABILITY OF FINANCING                                       

     The operating lease business is a capital intensive business. The Company's
typical operating lease transaction requires a cash investment by the Company of
approximately 15% to 20% of the aircraft engine purchase price, commonly known  
as an "equity investment." The Company's equity investments have historically   
been financed from internally generated cash and the net proceeds of the        
Company's initial public offering which was completed on September 18, 1996 at a
price of $8.00 per share (the "Initial Public Offering"), and in the future will
include a substantial portion of the net proceeds of this Offering. See         
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations -- Liquidity and Capital Resources." The balance of the purchase     
price is typically financed with the proceeds of secured borrowings.            
Accordingly, the Company's ability to successfully execute its business strategy
and to sustain its operations is dependent, in part, on the availability of debt
and equity capital. There can be no assurance that the necessary amount of such 
capital will continue to be available to the Company on favorable terms, or at  
all. If the Company were unable to continue to obtain required financing on     
favorable terms, the Company's ability to add new leases to its portfolio and   
parts inventory would be limited, which would have a material adverse effect on 
the Company's business, financial condition and results of operations.          

BACK LEVERAGING                                                                 

    The Company typically acquires the engines it leases with a combination of
equity capital and funds borrowed from financial institutions. In some          
circumstances, the Company acquires assets before it has obtained debt          
financing. There can be no assurance that debt financing will be available after
the asset has been acquired or, if available, at attractive rates or terms.     
Factors that could cause debt financing to be more                              

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expensive or unavailable include changes in interest rates, financial conditions
of the lessee or the Company, prospects for the airline industry or the asset   
type as well as general economic conditions. If debt financing is not available,
a like amount of the Company's equity capital would be unavailable for use to   
acquire additional assets, which could have a material adverse effect on the    
Company's business, financial condition or results of operations.               

INTEREST RATE RISKS                                                             

    The Company's engine leases are generally structured at fixed rental rates
for specified terms. As of September 30, 1997, borrowings subject to interest   
rate risk totaled $66.6 million or 62% of the Company's total borrowings.       
Increases in interest rates could narrow or eliminate the spread, or result in a
negative, spread between the rental revenue the Company realizes under its      
leases and the interest rate that the Company pays under its lines of credit or 
loans. The Company has purchased an amortizing interest rate cap with a notional
principal amount of $37.2 million as of September 30, 1997, to reduce its       
interest rate exposure; however, there can be no assurance that the Company's   
business, operating results or financial condition will not be adversely        
affected during any period of increases in interest rates. See "Management's    
Discussion and Analysis of Financial Condition and Results of                   
Operations -- Management of Interest Rate Exposure."                            

COMPETITION                                                                     

In the medium-term engine lease market segment, which is the Company's
target market, the Company principally competes with Shannon Engine Services,   
headquartered in Shannon, Ireland, which is owned in part by CFM International  
("CFM") and Rolls Royce Finance Ltd. ("Rolls Royce"). Rolls Royce limits its    
leasing activities to products of its parent company and related parties. The   
Bank of Tokyo-Mitsubishi, through its affiliate Engine Lease Finance in Shannon,
Ireland, also competes with the Company. Each of these competitors is           
substantially larger and has greater financial resources than the Company which 
may permit, among other things, greater access to capital markets at more       
favorable terms. In addition, major aircraft lessors, including International   
Lease Finance Corporation and General Electric Capital Aviation Services,       
compete with the Company to the extent that they include spare engine leases    
with their aircraft leases.                                                     

   With respect to engine marketing and spare parts and component sales, the
Company competes with airlines, aircraft manufacturers, aircraft, engine and    
parts brokers, and parts distributors. The Company's major competitors include  
the Allen Aircraft division of AAR Corp., The AGES Group, The Memphis Group,    
Aviation Sales Company, Kellstrom Industries and AVTEAM, Inc. Certain of these  
competitors may have, or may have access to, financial resources substantially  
greater than the Company. Significant competition encountered by the Company in 
the future may limit the Company's ability to expand its business, which would  
have a material adverse effect on the Company's business, financial condition   
and results of operations.                                                      

   Certain of the Company's competitors have substantially greater resources
than the Company, including greater name recognition, larger inventories, a     
broader range of material, complementary lines of business and greater          
financial, marketing and other resources. In addition, original equipment       
manufacturers ("OEMs"), aircraft maintenance providers, FAA certified repair    
facilities and other aviation aftermarket suppliers may vertically integrate    
into the aircraft engine leasing or aircraft engine/spare parts sales industry, 
thereby significantly increasing industry competition. A variety of potential   
actions by any of the Company's competitors, including a reduction of product   
prices or the establishment by competitors of long-term relationships with new  
or existing customers, could have a material adverse effect on the Company's    
business, financial condition and results of operations. There can be no        
assurance that the Company will continue to compete effectively against present 
and future competitors or that competitive pressures will not have a material   
adverse effect on the Company's business, financial condition or results of     
operations.                                                                     

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MANAGEMENT OF GROWTH                                                            

   The Company has recently experienced significant growth in revenues. Such
growth has placed, and is expected to continue to place, a significant strain on
the Company's managerial, operational and financial resources. Due to the       
Company's rapid pace of growth over the past year, the Company hired three new  
officers (an Executive Vice President and Chief Administrative Officer, an      
Executive Vice President and Chief Financial Officer and a Senior Vice President
and General Counsel) during the four months prior to September 30, 1997. There  
can be no assurance that the Company will be able to effectively manage the     
expansion of its operations, or that the Company's systems, procedures or       
controls will be adequate to support the Company's operations. An inability to  
effectively manage growth could have a material adverse effect on the Company's 
business, financial condition or results of operations.                         

ACQUISITION AND EXPANSION RISKS                                                 

One of the components of the Company's growth strategy is the select  
acquisition of businesses complementary to the Company's existing businesses and
possible expansion into new aviation-related activities. The inability of the   
Company to identify suitable acquisition candidates or to complete acquisitions 
or expansions on reasonable terms could adversely affect the Company's ability  
to grow. In addition, any acquisition or expansion made by the Company may      
result in potentially dilutive issuances of equity securities, the incurrence of
additional debt and future charges to earnings related to the amortization of   
goodwill and other intangible assets. The Company also may experience           
difficulties in the assimilation of operations, services, products and          
personnel, an inability to sustain or improve historical revenue levels, the    
diversion of management's attention from ongoing business operations and the    
potential loss of key employees. Any of the foregoing could have a material     
adverse effect on the Company's business, financial condition or results of     
operations. The acquisition of other equipment leasing companies or portfolios  
creates certain additional risks. For example, because acquired leases have been
originated by other companies, they are not subject to the Company's            
underwriting policies and procedures and, therefore, may be subject to greater  
risks of payment delinquencies and charge-offs. In addition, acquired leases may
consist of products not currently offered by the Company, or offered only on a  
limited basis. Acquired leases may also increase the concentration of the       
Company's portfolio of leases serviced in certain geographical regions or change
the relative concentration of such portfolio among geographical regions.        
Acquired leases may not contain the same indemnification provisions, maintenance
provisions, equipment residual value assumptions and other material terms as the
Company's current leases. Finally, the provisions of acquired leases may not    
adequately protect the Company from claims arising out of the lessee's use of   
the acquired lease equipment.                                                   

PRODUCT LIABILITY RISKS                                                         

  The Company is exposed to product liability claims in the event that the
use of its aircraft engines or parts is alleged to have resulted in bodily      
injury or property damage. In addition to requiring indemnification under the   
terms of the lease, the Company requires its lessees to carry the types of      
insurance customary in the air transportation industry, including comprehensive 
liability insurance and casualty insurance. The Company and, if applicable its  
lenders, are named as an additional insured on liability insurance policies     
carried by lessees, with the Company or its lenders normally identified as the  
payee for loss and damage to the equipment. The Company monitors compliance with
the insurance provisions of the leases. To date, the Company has not experienced
any significant uninsured or insured aviation-related claims and has not        
experienced any product liability claims related to its aircraft engines or     
parts. However, an uninsured or partially insured claim, or claim for which     
third-party indemnification is not available, could have a material adverse     
effect upon the Company's business, financial condition or results of           
operations.                                                                     

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RISK OF CHANGES IN TAX LAWS OR ACCOUNTING PRINCIPLES                            

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

DEPENDENCE ON KEY MANAGEMENT                                                    

    The Company's business operations are dependent in part upon the expertise
of certain key employees. Loss of the services of such employees, particularly  
Charles F. Willis, IV, Chief Executive Officer or Edwin F. Dibble, the President
of WASI, would have a material adverse effect on the Company's business. The    
Company has entered into an employment agreement with Mr. Dibble and the Company
maintains key man life insurance of $2.5 million on Mr. Willis and $1.5 million 
on Mr. Dibble. See "Management."                                                

GOVERNMENT REGULATION                                                           

The Company's customers are generally subject to a high degree of     
regulation in the various jurisdictions in which they operate. Such regulations 
also indirectly affect the Company's business operations. Under the provisions  
of the Transportation Act, as amended, the FAA exercises regulatory authority   
over the air transportation industry. The FAA regulates the manufacture, repair 
and operation of all aircraft engines operated in the United States. Its        
regulations are designed to insure that all aircraft and aviation equipment are 
continuously maintained in proper condition to ensure safe operation of the     
aircraft. Similar rules apply in other countries. All aircraft must be          
maintained under a continuous condition monitoring program and must periodically
undergo thorough inspection and maintenance. The inspection, maintenance and    
repair procedures for the various types of commercial aircraft equipment are    
prescribed by regulatory authorities and can be performed only by certified     
repair facilities utilizing certified technicians. Certification and conformance
is required prior to installation of a part on an aircraft. Presently, whenever 
necessary with respect to a particular engine or engine component, the Company  
utilizes FAA and/or Joint Aviation Authority certified repair stations to repair
and certify engines and components to ensure worldwide marketability. The FAA   
can suspend or revoke the authority of air carriers or their licensed personnel 
for failure to comply with regulations and ground aircraft if their             
airworthiness is in question. In addition, by the year 2000, federal regulations
will stipulate that all aircraft engines hold, or be capable of holding, a noise
certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the      
Chicago Convention, or have been shown to comply with Stage III noise levels set
out in Section 36.5 of Appendix C of Part 36 of the Federal Aviation Regulations
of the United States. As of September 30, 1997, all of the engines in the       
Company's lease portfolio were Stage III engines. See "Business -- Government   
Regulation."                                                                    

CONTROL BY PRINCIPAL SHAREHOLDER                                                

   Upon completion of the Offering, the Company's principal shareholder, Mr.
Willis, will beneficially own approximately 44% of the outstanding shares of    
Common Stock of the Company and therefore effectively control the Company.      
Accordingly, Mr. Willis will have the power to contest the outcome of           
substantially all matters, including the election of the Board of Directors of  
the Company, submitted to the shareholders for approval. In addition, future    
sales by the Company's principal shareholder of substantial amounts of Common   
Stock, or the potential for such sales, could adversely affect the prevailing   
market price of the Common Stock. See "Management's Discussion and Analysis of  
Financial Condition and Results of Operations," "Principal Shareholders,"       
"Description of Capital Stock" and "Shares Eligible for Future Sale."           

POSSIBLE VOLATILITY OF STOCK PRICE                                              

The market price of the Common Stock could be subject to significant  
fluctuations in response to operating results of the Company, changes in general
conditions in the economy, the financial markets, the airline industry, changes 
in accounting principles or tax laws applicable to the Company or its lessees,  
or other                                                                        

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developments affecting the Company, its customers or its competitors, some of   
which may be unrelated to the Company's performance, and changes in earnings    
estimates or recommendations by securities analysts.                            

ANTI-TAKEOVER PROVISIONS                                                        

    Certain provisions of law, and the Company's Amended and Restated Articles
of Incorporation (the "Articles of Incorporation") and Bylaws could make more   
difficult the acquisition of the Company by means of a tender offer, a proxy    
contest or otherwise, and the removal of incumbent officers and directors. These
provisions include authorization of the issuance of up to 5,000,000 shares of   
Preferred Stock, with such characteristics that may render it more difficult or 
tend to discourage a merger, tender offer or proxy contest. The Articles of     
Incorporation also provide that, for as long as the Company has a class of stock
registered pursuant to the Securities Exchange Act of 1934, as amended (the     
"Exchange Act"), shareholder action can be taken only at an annual or special   
meeting of shareholders and may not be taken by written consent. The Company's  
Bylaws also limit the ability of shareholders to raise matters at a meeting of  
shareholders without giving advance notice. In addition, the Company has        
qualified as a "listed corporation" as defined in Section 301.5(d) of the       
California Corporation Code and cumulative voting has been eliminated. These    
provisions are expected to discourage certain types of coercive takeover        
practices and inadequate takeover bids, and to encourage persons seeking to     
acquire control of the Company to negotiate first with the Company. See         
"Description of Capital Stock -- Certain Anti-Takeover Provisions."             

USE OF PROCEEDS 

  The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately    
$25.9 million, assuming an offering price of $18.75 per share (the closing price
per share of the Common Stock on November 14, 1997), less underwriting          
discounts, commissions and estimated expenses of the Offering. The Company      
intends to use the net proceeds of the Offering, together with debt financing:  
(a) to finance the continued growth of the Company, including the acquisition of
additional aircraft engines and aircraft equipment for lease or sale as well as 
the acquisition of engine and airframe component inventory, (b) to finance      
potential acquisitions of businesses complementary to the Company's existing    
businesses, (c) to finance the possible expansion into other aviation-related   
activities and businesses, and (d) for working capital and other general        
corporate purposes. The Company is continually engaged in discussions regarding 
possible acquisitions of businesses complementary to the Company's existing     
businesses and possible expansion into new aviation-related activities and such 
growth may involve acquisitions of existing companies or asset portfolios. There
are no present agreements to acquire any existing companies or asset portfolios.
There can be no assurance that any such acquisitions or expansions can be       
consummated on terms favorable to the Company, if at all. See "Risk             
Factors -- Acquisition and Expansion Risks." Pending the above-described uses,  
the Company will reduce its outstanding borrowing under its $30 million         
revolving credit facility with CoreStates Bank which bears interest at prime    
plus 50 basis points and expires on June 12, 1998.                              

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PRICE RANGE OF COMMON STOCK 

    The Initial Public Offering was completed on September 18, 1996 at a price
of $8.00 per share. The Company's Common Stock is quoted on the Nasdaq National 
Market System under the symbol "WLFC." The following table sets forth, for the  
periods indicated, the high and low sale prices per share of the Common Stock as
reported by Nasdaq.                                                             

                                                                [Download Table]

                                                          HIGH           LOW  
                                                         ------         ------
                                                                              
1996:                                                                         
  Third Quarter......................................    $10.00         $ 8.50
  Fourth Quarter.....................................     12.88           8.75
1997:                                                                         
  First Quarter......................................    $14.50         $12.25
  Second Quarter.....................................     12.50          10.38
  Third Quarter......................................     23.50          12.25
  Fourth Quarter (through November 14, 1997).........     24.13          17.50

    On November 14, 1997 the last reported sale price for the Common Stock was
$18.75 per share. As of September 30, 1997, there were approximately eight      
record holders of the Common Stock, which number does not reflect the number of 
individuals and institutional investors holding stocks in nominee name through  
banks, brokerage firms and others.                                              

DIVIDEND POLICY 

    The Company intends to retain all available funds for use in its business.
Accordingly, the Company does not anticipate declaring or paying any dividends  
on the Common Stock in the foreseeable future. The payment of cash dividends in 
the future would be made at the discretion of the Board of Directors of the     
Company and would depend on a number of factors, including future earnings,     
capital requirements, financial condition and future prospects of the Company   
and such other factors as the Board of Directors may deem relevant. See         
"Capitalization."                                                               

     In 1995 and 1996, the Company declared dividends to its sole shareholder in
the amounts of $255,000 and $951,475, respectively. Since the Initial Public    
Offering, the Company has not declared any dividends. See Note 8 to the Audited 
Financial Statements.                                                           

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CAPITALIZATION

The following table sets forth the capitalization of the Company at   
September 30, 1997, on an actual basis, and as adjusted to give effect to the   
sale of the 1,500,000 shares of Common Stock offered by the Company hereby      
(assuming an offering price of $18.75 per share, which was the closing price per
share of the Common Stock on November 14, 1997), after deducting underwriting   
discounts and commissions and estimated expenses of the Offering, and the       
application of the estimated net proceeds therefrom. See "Use of Proceeds."     

                                                        [Enlarge/Download Table]

                                                                        SEPTEMBER 30, 1997   
                                                                     ------------------------
                                                                      ACTUAL      AS ADJUSTED
                                                                     --------     -----------
                                                                          (IN THOUSANDS,     
                                                                        EXCEPT SHARE DATA)   
                                                                                             
Debt financing(1)................................................... $108,062      $  82,134 
Shareholders' equity:                                                                        
Preferred stock, no par value per share; 5,000,000 shares                                    
  authorized; none issued...........................................       --             -- 
Common stock, no par value per share; 20,000,000 shares authorized;                          
  5,452,320 shares outstanding, actual and 6,952,320 shares                                  
  outstanding, as adjusted(2).......................................   16,277         42,205 
Retained earnings...................................................   12,887         12,887 
                                                                      -------        ------- 
  Total shareholders' equity........................................   29,164         55,092 
                                                                      -------        ------- 
          Total capitalization...................................... $137,226      $ 137,226 
                                                                      =======        ======= 

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

(1) Inclusive of accrued interest and capital lease obligation and exclusive of 
residual share payable.                                                 

(2) Excludes (i) 438,500 shares of Common Stock issuable upon exercise of       
  options granted under the 1996 Plan and 71,500 additional shares of Common
Stock reserved for issuance under the 1996 Plan, (ii) 64,473 shares of  
Common Stock reserved for issuance under the Company's Employee Stock   
Purchase Plan and (iii) 100,000 shares of Common Stock issuable upon    
    exercise of outstanding warrants. See "Management -- 1996 Stock Option/Stock
Issuance Plan," and "Employee Stock Purchase Plan."                     

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

    The following selected consolidated financial and operating data should be
read in conjunction with the accompanying Unaudited Financial Statements and the
related Notes thereto and the accompanying Audited Financial Statements and the 
related Notes thereto included elsewhere in this Prospectus and "Management's   
Discussion and Analysis of Financial Condition and Results of Operations." The  
consolidated financial data set forth below as of and for the fiscal years ended
December 31, 1992, 1993, 1994, 1995 and 1996 have been derived from the         
consolidated financial statements of the Company audited by KPMG Peat Marwick   
LLP. The consolidated financial data as of and for the nine months ended        
September 30, 1996 and September 30, 1997 are unaudited, but have been prepared 
on the same basis as the audited financial statements and, in the opinion of    
management, reflect all adjustments, which consist only of normal recurring     
adjustments, necessary for the fair presentation of the financial position and  
results of operations for these periods. Consolidated operating results for the 
nine months ended September 30, 1997 are not necessarily indicative of the      
results that may be expected for the entire year.                               

                                                        [Enlarge/Download Table]

                                                                                                        NINE MONTHS ENDED   
                                                             YEAR ENDED DECEMBER 31,                      SEPTEMBER 30,     
                                               ----------------------------------------------------    -------------------- 
                                                1992       1993       1994       1995        1996        1996        1997   
                                               -------    -------    -------    -------    --------    --------    -------- 
                                                  (IN THOUSANDS, EXCEPT PER SHARE, PERCENTAGE AND LEASE PORTFOLIO DATA)     
                                                                                                                            
INCOME STATEMENT DATA:                                                                                                      
Revenue:                                                                                                                    
  Operating lease revenue..................... $ 8,744    $10,323    $13,636    $13,771    $ 13,740    $ 10,379    $ 13,481 

  Finance lease revenue.......................      --         --         --         --          --          --         223 
  Gain (loss) on sale of leased engines.......     659       (281)       633       (483)          2          --       1,333 
  Spare parts sales...........................      --         --        795      3,859       5,843       3,303      11,459 
  Sale of equipment acquired for resale.......   3,598         --      2,184      5,472      12,105       9,605      12,748 
  Interest and other income...................      70        938        542        119         618         197         544 
                                               -------    -------    -------    -------     -------     -------     ------- 
    Total revenue.............................  13,071     10,980     17,790     22,738      32,308      23,484      39,788 
Expenses:                                                                                                                   
  Interest expense............................   4,815      4,809      5,948      5,722       4,323       3,371       5,226 
  Depreciation expense........................   2,666      3,070      4,447      4,703       3,181       2,513       2,995 
  Residual share(1)...........................     279        445      1,284        408         723         536         598 
  Cost of spare parts sales...................      --         --        659      2,546       3,308       1,604       7,751 
  Cost of equipment acquired for resale.......   3,140         --      1,863      2,742      10,789       8,551      10,672 
  General and administrative expense..........   1,357      1,533      1,616      3,335       5,124       3,434       6,358 
                                               -------    -------    -------    -------     -------     -------     ------- 
    Total expenses............................  12,257      9,857     15,817     19,456      27,448      20,009      33,600 
Gain on modification of credit facility(2)....      --         --         --      2,203          --          --          -- 
                                               -------    -------    -------    -------     -------     -------     ------- 
Income before income taxes, minority interest                                                                               
  and extraordinary item......................     814      1,123      1,973      5,485       4,860       3,475       6,188 
Income taxes..................................    (327)      (454)      (797)    (2,212)     (1,976)     (1,395)     (2,456)
                                               -------    -------    -------    -------     -------     -------     ------- 
Income before minority interest and                                                                                         
  extraordinary item..........................     487        669      1,176      3,273       2,884       2,080       3,732 
Less: minority interest in net income of                                                                                    
  subsidiary..................................      --         --          4         57          79          79          -- 
                                               -------    -------    -------    -------     -------     -------     ------- 
Income before extraordinary item..............     487        669      1,172      3,216       2,805       2,001       3,732 
Extraordinary item less applicable income                                                                                   
  taxes(3)....................................      --         --         --         --          --          --       2,008 
                                               -------    -------    -------    -------     -------     -------     ------- 
Net income.................................... $   487    $   669    $ 1,172    $ 3,216    $  2,805    $  2,001    $  5,740 
                                               =======    =======    =======    =======     =======     =======     ======= 
Earnings per share before extraordinary                                                                                     
  item........................................   $0.16      $0.22      $0.38      $1.03       $0.74       $0.62       $0.65 
Extraordinary item............................      --         --         --         --          --          --       $0.36 
                                               -------    -------    -------    -------     -------     -------     ------- 
Earnings per share............................   $0.16      $0.22      $0.38      $1.03       $0.74       $0.62       $1.01 
                                               =======    =======    =======    =======     =======     =======     ======= 
Weighted average number of shares                                                                                           
  outstanding.................................   3,111      3,111      3,111      3,111       3,796       3,215       5,709 
Return on average assets(4)...................    0.79%      0.97%      1.54%      3.68%       2.59%       2.67%       3.34%
Return on average equity(4)...................  172.39%     82.90%     75.37%     94.99%      20.02%      21.26%      19.01%

BALANCE SHEET DATA:                                                                                                         
  Total assets................................ $69,711    $68,632    $83,542    $91,437    $124,933    $108,604    $173,018 
  Aircraft engines under lease, net...........  69,166     67,499     78,989     74,704      92,943      75,368     128,930 
  Other equipment under lease, net............      --         --         --         --       3,149          --       6,956 
  Debt financing(5)...........................  64,349     59,840     69,456     69,911      76,146      62,475     108,062 
  Shareholders' equity........................     463      1,151      1,959      4,812      23,202      20,288      29,164 
  Debt to equity ratio........................   139.0x      52.0x      35.5x      14.5x        3.3x        3.1x        3.7x

LEASE PORTFOLIO:                                                                                                            
  Engines in lease portfolio at end of the                                                                                  
    period(6).................................      26         25         26         31          32          28          43 

                                                   (footnotes on following page)

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

(1) The Company has negotiated a sharing of residual proceeds with certain      
 lenders in exchange for a higher percentage financing of certain aircraft
engines. Residual sharing arrangements apply to five of the Company's   
    engines (representing $15.5 million of book value) as of September 30, 1997.
The Company accrues for its residual sharing obligations using net book 
    value as a proxy for residual proceeds. See "Business -- Financing/Source of
Funds" and Note 1 to the Audited Financial Statements.                  

(2) Gain on modification of credit facility of $2.2 million represents the      
  elimination of residual share payable of $2.4 million less the net loss on
the sale of two engines to the lender of $199,000. See "Management's    
 Discussion and Analysis of Financial Condition and Results of Operations"
and Note 4 to the Audited Financial Statements.                         

(3) In February 1997, the Company obtained a new loan agreement for $41.5       
million to replace an existing loan of $44.2 million. The transaction   
resulted in an extraordinary gain of $2 million or $0.36 per weighted   
average share, net of tax.                                              

(4) Calculations are based on the average of beginning and end of period        
   balances. Results for periods less than one year are annualized and exclude
the extraordinary item.                                                 

(5) Inclusive of accrued interest and capital lease obligation and exclusive of 
residual share payable.                                                 

(6) At September 30, 1997, 42 of the 43 engines in the lease portfolio were on  
  lease. In addition, at September 30, 1997, eight parts packages with a net
book value of $7.0 million were on lease.                               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

   The following discussion of financial condition and results of operations
of the Company should be read in conjunction with the Unaudited Financial       
Statements and the related Notes thereto and the Audited Financial Statements   
and the related Notes thereto included elsewhere in this Prospectus. This       
Prospectus contains forward-looking statements which involve risks and          
uncertainties. The Company's actual results may differ from the results         
discussed in the forward-looking statements. Factors that might cause such a    
difference include, but are not limited to, those discussed in "Risk Factors."  

OVERVIEW                                                                        

     The Company's core business is acquiring and leasing, primarily pursuant to
operating leases, commercial aircraft spare engines and other aircraft          
equipment. The Company, through WASI, also specializes in the purchase and      
resale of aftermarket airframe and engine parts, engines, modules and rotable   
components. In addition, the Company engages in the selective purchase and      
resale of commercial aircraft engines.                                          

Revenue consists primarily of operating lease revenue, income from the
leasing and sale of spare parts and components and income from the sale of      
engines and equipment.                                                          

   Leasing Operations. Most of the Company's leases are operating leases for
accounting purposes. Under an operating lease, the Company retains title to the 
engine, thereby retaining the potential benefit and assuming the risk of the    
residual value of the engine. Operating leases require the Company to re-lease  
or sell an engine in a timely manner upon termination of a lease. Lease payments
are recorded as operating lease revenue and depreciation expense for engines is 
generally recognized on a straight line basis over 15 years to a 55% residual   
value.                                                                          

     In a typical term loan transaction, third party lenders will provide 80% to
85% of the financing for the acquisition of engines to be leased on an operating
lease basis, the lease payments and the underlying engine or parts package are  
pledged as collateral, and most of the lease payments associated with the       
financed engines are used to retire the underlying debt with the balance of the 
cash retained by the Company for operating purposes. Generally, the loans       
provide financing for the initial term of a lease but do not extend through the 
period of any lease renewal; however, financing extensions can generally be     
negotiated. Since the typical lease will have a term of approximately five      
years, the term loan facility will generally require payment of the balance of  
the loan at the end of the lease term. Thus, at the end of the lease term, the  
Company must either re-lease and refinance the engine or sell the engine.       

   In some instances, third party lenders have provided more than 85% of the
financing of engines, in which case the lenders have generally required a       
sharing of the residual value of the engine upon the sale of the engine. The    
Company accrues for its residual sharing obligations using net book value as a  
proxy for residual proceeds. Residual sharing arrangements apply to five of the 
Company's engines (representing $15.5 million of book value) as of September 30,
1997.                                                                           

    At the commencement of each lease, the Company typically collects security
deposits (normally equal to at least one month's lease payment) and maintenance 
reserves (normally equal to one month's estimated maintenance reserve) from the 
lessee. The security deposit is returned to the lessee after all return         
conditions have been met. Maintenance reserves are accumulated in accounts      
maintained by the Company or its lenders and are used when normal repair        
associated with engine use or maintenance is required. In many cases, to the    
extent that cumulative maintenance reserves are inadequate to fund normal       
repairs required prior to return of the engine to the Company, the lessee is    
obligated to cover the shortfall.                                               

Spare Parts Sales. Through its subsidiary, WASI, the Company acquires 
aviation equipment, such as whole engines and aircraft, which can be dismantled 
and sold as parts at a greater profit. The Company records the purchases at cost
and capitalizes additional costs relating to acquisition, overhaul, insurance   
and other direct costs. Gross revenue from the sale of parts is reflected as    
spare parts sales with the associated costs reflected as cost of spare parts    
sales.                                                                          

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    Equipment Sales. The Company engages in the selective purchase and sale of
commercial aircraft engines and engine components. Assets acquired for resale   
are recorded at the lower of cost or net realizable value. Gross revenue from   
the sale of equipment is reflected as sale of equipment acquired for resale with
the associated costs reflected as cost of equipment acquired for resale.        

See "Risk Factors" for various factors that may have an impact on the 
Company's results of operations and condition.                                  

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996                                                                        

Revenue is summarized as follows:                                     

                                                        [Enlarge/Download Table]

                                                    NINE MONTHS ENDED SEPTEMBER 30,     
                                                --------------------------------------- 
                                                      1997                  1996        
                                                -----------------     ----------------- 
                                                AMOUNT        %       AMOUNT        %   
                                                -------     -----     -------     ----- 
                                                        (DOLLARS IN THOUSANDS)          
                                                                                        
Leasing activities............................. $13,704     34.4 %    $10,379     44.2 %
Gain on sale of leased equipment...............   1,333      3.4           --       --  
Spare parts sales..............................  11,459     28.8        3,303     14.1  
Sale of equipment acquired for resale..........  12,748     32.0        9,605     40.9  
Interest and other income......................     544      1.4          197      0.8  
                                                -------     -----     -------     ----- 
          Total................................ $39,788     100.0%    $23,484     100.0%
                                                =======     =====     =======     ===== 

Gross profit (net of cost of sales, allowance for sales returns,      
depreciation and interest expense as applicable) before general and             
administrative expenses and income taxes is summarized as follows:              

                                                        [Enlarge/Download Table]

                                                    NINE MONTHS ENDED SEPTEMBER 30,     
                                                --------------------------------------- 
                                                      1997                  1996        
                                                -----------------     ----------------- 
                                                AMOUNT        %       AMOUNT        %   
                                                -------     -----     -------     ----- 
                                                        (DOLLARS IN THOUSANDS)          
                                                                                        
Leasing activities............................. $ 5,113     40.5 %    $ 4,103     59.0 %
Gain on sale of leased equipment...............   1,333     10.5           --       --  
Spare parts sales..............................   3,570     28.3        1,608     23.1  
Sale of equipment acquired for resale..........   2,076     16.4        1,054     15.1  
Interest and other income......................     544      4.3          197      2.8  
                                                -------     -----     -------     ----- 
          Total................................ $12,636     100.0%    $ 6,962     100.0%
                                                =======     =====     =======     ===== 

    Lease Portfolio. During the first nine months of 1997, sixteen engines and
five spare parts packages were added to the Company's lease portfolio at a total
cost of $52.8 million. Five engines were sold from the portfolio.               

Leasing Activities. Operating lease revenue for the nine months ended 
September 30, 1997, increased 30% to $13.5 million from $10.4 million from the  
comparable period in 1996. This increase reflects lease revenues from additional
engines and spare parts packages acquired after September 30, 1996. In late June
1997, the Company entered into two finance leases. Finance lease income         
generated from these transactions totaled $223,000 for the nine months ended    
September 30, 1997. There were no comparable transactions as of September 30,   
1996.                                                                           

     Expenses directly related to operating lease activity increased 37% to $8.6
million. Interest expense increased 55% to $5.0 million for the nine months     
ended September 30, 1997, from the comparable period in 1996, due primarily to  
an increased loan base and the replacement of the existing facility with a new  
loan agreement in the first quarter of 1997 bearing a higher interest rate.     
Depreciation expense increased 18% to $2.9 million for the nine months ended    
September 30, 1997, from the comparable period in 1996, due to the larger asset 
base in 1997. Residual sharing expense increased 12% to $598,000 for the nine   
months ended September 30, 1997, from the comparable period in 1996. This       
expense is calculated by comparing the net book value of the engines subject to 
such agreements to their related debt balances and adjusting the residual       

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share payable up or down to the appropriate amount representing the sharing     
percentage of any excess of the net book value over the corresponding debt      
balance for the five engines subject to residual sharing.                       

    Gain on Sale of Leased Engines. During the nine months ended September 30,
1997, the Company sold three engines from the lease portfolio. These engines had
a net book value of $6.1 million and they were sold for a gain of $1.3 million. 
There were no sales of leased engines for the nine months ended September 30,   
1996.                                                                           

    Spare Parts Sales. Revenues from spare parts sales increased 247% to $11.5
million. The gross margin, decreased to 32% in 1997, from 51% in the            
corresponding period in 1996. The Company does not believe that the relatively  
high margin in 1996 is indicative of future results.                            

Sale of Equipment Acquired for Resale. During the nine months ended   
September 30, 1997, the Company sold 10 engines for $12.7 million which resulted
in a gain of $2.1 million, compared to the nine months ended September 30, 1996,
during which the Company sold five engines for $9.6 million resulting in a gain 
of $1.1 million. Included in the 1997 sales was one transaction involving the   
sale of four engines acquired at a cost of $600,000 and sold for a gain of      
$100,000.                                                                       

  Interest and Other Income. Interest and other income for the nine months
ended September 30, 1997, increased to $544,000 from $197,000 for the nine      
months ended September 30, 1996. This is a result of interest earned on deposits
held, primarily the proceeds from the Initial Public Offering.                  

  General and Administrative Expenses. General and administrative expenses
increased 85% to $6.4 million for the nine months ended September 30, 1997, from
the comparable period in 1996. This increase reflects expenses associated with  
staff additions, increased rent due to the expansion of the WASI facility, as   
well as an increase in professional fees, insurance expense and public company  
costs.                                                                          

  Income Taxes. Income taxes for the nine months ended September 30, 1997,
increased to $2.5 million from $1.4 million for the comparable period in 1996.  
This increase reflects an increase in the Company's pre-tax earnings.           

Extraordinary Item. In February 1997, the Company obtained a new loan 
agreement for $41.5 million to replace an existing loan of $44.2 million. The   
transaction resulted in an extraordinary gain of $2 million, net of tax, or     
$0.36 per weighted average share.                                               

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995       

Revenue is summarized as follows:                                     

                                                        [Enlarge/Download Table]

                                                       YEAR ENDED DECEMBER 31,         
                                               --------------------------------------- 
                                                     1996                  1995        
                                               -----------------     ----------------- 
                                               AMOUNT        %       AMOUNT        %   
                                               -------     -----     -------     ----- 
                                                       (DOLLARS IN THOUSANDS)          
                                                                                       
Leasing activities............................ $13,740      42.5%    $13,771      60.6%
Gain (loss) on sale of leased equipment.......       2        --        (483)     (2.1)
Spare parts sales.............................   5,843      18.1       3,859      17.0 
Sale of equipment acquired for resale.........  12,105      37.5       5,472      24.0 
Interest and other income.....................     618       1.9         119       0.5 
                                               -------     -----     -------      ---- 
          Total............................... $32,308     100.0%    $22,738     100.0%
                                               =======     =====     =======     ===== 

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Gross profit (net of cost of sales, allowance for sales returns,      
depreciation and interest expense as applicable) before general and             
administrative expenses and income taxes is summarized as follows:              

                                                        [Enlarge/Download Table]

                                                       YEAR ENDED DECEMBER 31,         
                                                -------------------------------------- 
                                                      1996                  1995       
                                                -----------------     ---------------- 
                                                AMOUNT        %       AMOUNT       %   
                                                -------     -----     ------     ----- 
                                                        (DOLLARS IN THOUSANDS)         
                                                                                       
Leasing activities............................. $ 5,605      55.7%    $3,126      47.2%
Gain (loss) on sale of leased equipment........       2        --       (483)     (7.3)
Spare parts sales..............................   2,521      25.1      1,126      17.0 
Sale of equipment acquired for resale..........   1,316      13.1      2,730      41.3 
Interest and other income......................     617       6.1        119       1.8 
                                                -------     -----     -------    ----- 
          Total................................ $10,061     100.0%    $6,618     100.0%
                                                =======     =====     =======    ===== 

  Lease Portfolio. At December 31, 1995, the Company had 31 engines in its
operating lease portfolio. During 1996, four engines were either transferred or 
sold from the lease portfolio. One of the four engines was transferred at its   
net book value to WASI and dismantled for spare parts sales. The remaining three
engines were sold to third parties. In addition, another engine from the lease  
portfolio was sold under a sale and leaseback agreement and is now reflected on 
the Company's balance sheet as an engine on capital lease. In the third quarter 
of 1996, the Company acquired one engine for $2.8 million and in the fourth     
quarter of 1996, the Company acquired four engines for a total cost of          
approximately $16.3 million, as well as two auxiliary power units (APU's) and a 
spare parts package for a total cost of approximately $3.2 million. At December 
31, 1996, the Company held 32 engines in its lease portfolio.                   

   Operating Leases. Operating lease revenue for the year ended December 31,
1996 decreased to $13.7 million from $13.8 million for the corresponding period 
in 1995. This decrease is primarily due to a decrease in revenue from one engine
which was off-lease and in a repair facility for eight months in 1996 and two   
engines which were sold in 1996, offset slightly by five engines purchased and  
leased late in 1996.                                                            

    In 1996, expenses directly related to operating lease activity dropped 23%
to $8.1 million from $10.6 million in 1995. The reduction in expenses in 1996   
was due to a reduction in depreciation expenses of $1.6 million (33%) as a      
result of two engines in 1995 that were fully depreciated and the sale of two   
engines in the third quarter of 1996. Interest expense dropped $1.2 million     
(22%) in 1996 from 1995, due primarily to the modification of the then-existing 
term loan with Marine Midland Bank (the "Midland Loan") in June 1995 resulting  
in more favorable interest rates. Residual sharing expenses, however, increased 
77% to $723,000 in 1996 from the corresponding period in 1995 due to changes in 
the Company's portfolio of engines subject to such agreements. This expense is  
calculated by comparing the net book value of these engines to their related    
debt balances and adjusting the residual share payable up or down to the        
appropriate amount representing the sharing percentage of any excess of the net 
book value over the corresponding debt balance for the five engines subject to  
residual sharing.                                                               

     Gain (Loss) on Sale of Leased Engines. The loss in 1995 was attributable to
unanticipated overhaul expenses of $373,000 required in order to prepare an     
engine for resale and a $110,000 loss on the sale of the engine.                

  Spare Parts Sales. Revenues from spare parts sales increased 51% to $5.8
million primarily due to increased volume. Gross margin rose to 43% in 1996 from
34% in the corresponding period in 1995, primarily due to a change in the mix of
parts sold and the gross margins related thereto.                               

    Equipment Sales. During the year ended December 31, 1996, the Company sold
four engines for proceeds of $12.1 million, generating gains of $1.3 million. In
1995, the Company sold three engines for $4.8 million, a fuselage and           
miscellaneous components it acquired in connection with an aircraft purchase for
$572,000 and other components for $100,000. The aggregate cost of the equipment 
sold was $10.8 million and $2.7 million in 1996 and 1995, respectively. The     
Company expects that equipment sales opportunities and profitability will       
continue to vary materially from period to period.                              

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    Interest and Other Income. Interest and other income for 1996 increased to
$617,000 from $119,000 in 1995, an increase of 418%. This increase was due      
primarily to increased marketing/brokerage fee income earned on one engine,     
nonrecurring credits due the Company regarding excessive engine overhaul costs  
and an increase in interest earned on the net proceeds from the Initial Public  
Offering, as well as interest earned on certain engine security deposits.       

  General and Administrative Expenses. General and administrative expenses
increased 53% to $5.1 million in 1996, up from $3.3 million in 1995. This       
increase reflects additional compensation due to an increased workforce and     
increased bonus payments; increased telephone and travel costs due to increased 
marketing personnel and activity; increased rent due to the expansion of the    
WASI facility and an increase in professional fees and insurance as a result of 
the Initial Public Offering.                                                    

    Gain on Modification of Credit Facility. In 1995, the Company modified the
terms of the Midland Loan. The gain of $2.2 million in 1995 on the modification 
of credit facility reflects a gain from the removal of residual sharing         
provisions of $2.4 million and a $199,000 loss on the sale of two engines to the
lender.                                                                         

Income Taxes. Income taxes decreased to $2 million in 1996 from $2.2  
million in 1995. The Company's effective tax rates for Federal and state taxes  
was approximately 41% and 40% in 1996 and 1995, respectively. Therefore, the    
decrease in tax expense was due to the decrease in the Company's income before  
taxes and minority interest offset by a slight increase in the effective tax    
rate.                                                                           

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994       

Revenue is summarized as follows:                                     

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED DECEMBER 31,        
                                                    ------------------------------------ 
                                                          1995                1994       
                                                    ----------------     --------------- 
                                                    AMOUNT      %        AMOUNT      %   
                                                    -------   ------     -------   ----- 
                                                           (DOLLARS IN THOUSANDS)        
                                                                                         
Leasing activities................................. $13,771     60.6%    $13,636    76.7%
Gain (loss) on sale of leased equipment............    (483)    (2.1)       633      3.6 
Spare parts sales..................................   3,859     17.0        795      4.4 
Sale of equipment acquired for resale..............   5,472     24.0      2,184     12.3 
Interest and other income..........................     119      0.5        542      3.0 
                                                    -------    -----     -------   ----- 
          Total.................................... $22,738    100.0%    $17,790   100.0%
                                                    =======    =====     =======   ===== 

Gross profit (net of cost of sales, allowance for sales returns,      
depreciation and interest expense as applicable) before general and             
administrative expenses and income taxes is summarized as follows:              

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED DECEMBER 31,       
                                                      ---------------------------------- 
                                                           1995                1994      
                                                      ---------------     -------------- 
                                                      AMOUNT     %        AMOUNT     %   
                                                      ------   ------     ------   ----- 
                                                            (DOLLARS IN THOUSANDS)       
                                                                                         
Leasing activities................................... $3,126     47.2%    $2,007    56.0%
Gain (loss) on sale of leased equipment..............   (483)    (7.3)       633    17.6 
Spare parts sales....................................  1,126     17.0         85     2.4 
Sale of equipment acquired for resale................  2,730     41.3        321     8.9 
Interest and other income............................    119      1.8        542    15.1 
                                                      ------    -----     ------   ----- 
          Total...................................... $6,618    100.0%    $3,588   100.0%
                                                      ======    =====     ======   ===== 

     Lease Portfolio. During 1995, the Company acquired a total of eight engines
and sold three, for a net increase of five. Two of the acquired engines were    
overhauled in 1995 and became available for sale or lease in 1996 and two       
additional engines were purchased in late December 1995, both subject to        
existing leases. Thus, these four engines did not impact results in 1995. The   
four remaining engines were acquired in July 1995 and were leased on a          
short-term basis. At December 31, 1995, two of these remaining four engines were
on lease and the other two engines were being refurbished for ultimate sale. See
"Business -- Aircraft Engine                                                    

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Portfolio." Two of the engines sold during 1995 were sold as part of the 1995   
modification of the Midland Loan and the third engine was sold in June 1995.    

 Operating Leases. Operating lease revenue increased to $13.8 million in
1995 from $13.6 million in 1994, an increase of 1.5%. Although the Company's    
lease portfolio increased by a net of five engines in 1995, as discussed above a
number of the engines acquired did not impact revenue during 1995 and the lease 
revenue from the engines acquired in July 1995 were offset by the reduction in  
lease revenue from the engines sold in 1995.                                    

   Expenses directly related to operating lease activities declined to $10.6
million in 1995 from $11.6 million in 1994, a 9% decrease. The reduction in     
expenses was largely due to a $877,000 reduction in residual sharing in         
conjunction with the 1995 modification of the Midland Loan. A decrease in       
interest expense to $5.5 million in 1995 from $5.9 million in 1994 as a result  
of lower interest rates due to the 1995 modification of the Midland Loan        
contributed to the overall expense decrease. These decreases in expenses were   
partially offset by a $256,000 increase in depreciation as a result of a        
$300,000 write-down of one of the Company's engines in 1995 due to the Company's
implementation of Statement of Financial Accounting Standard No. 121 as of      
December 31, 1995 and increases in the lease portfolio discussed above.         

   Gain (Loss) on Sale of Leased Engines. The Company recorded a loss on the
sale of an engine at lease termination of $483,000 in 1995 compared to a gain of
$633,000 recorded in 1994, resulting in a $1.1 million reduction in total       
revenue. The loss in 1995 was attributable to unanticipated overhaul expenses of
$373,000 required in order to prepare an engine for resale and a $110,000 loss  
on the sale of the engine.                                                      

     Spare Parts Sales. Revenue from spare parts sales increased to $3.9 million
in 1995 from $795,000 in 1994, a 385% increase, while costs of sales increased  
to $2.5 million from $659,000, a 286% increase. Gross margin increased to 34% in
1995 from 17% in 1994. Interest expense related to spare parts sales activities 
was $187,000 in 1995 as compared to $51,000 in 1994, an increase of 267%. These 
increases resulted primarily from the commencement of operations by WASI in     
October of 1994.                                                                

    Equipment Sales. In 1995, the Company sold three engines for $4.8 million,
a fuselage and miscellaneous components it acquired in connection with an       
aircraft purchase for $572,000 and other components for $100,000. The aggregate 
cost of this equipment was $2.7 million. In 1994, the Company sold an engine for
$2.2 million with a related cost of equipment acquired for resale of $1.9       
million.                                                                        

    Interest and Other Income. Interest and other income decreased to $119,000
in 1995 from $542,000 in 1994 primarily due to the termination of a remarketing 
fee arrangement with the lender in connection with the 1995 modification of the 
Midland Loan. In addition, the Company earned broker fees of $137,000 in 1994   
which will not reoccur as the related agreement was terminated in 1994. The     
remaining decrease was due to management fees earned in 1994 for which no       
similar services were performed in 1995.                                        

General and Administrative Expense. General and administrative expense
increased to $3.3 million in 1995 from $1.6 million in 1994, an increase of     
106%. The increase resulted primarily from an increase in compensation and      
related benefits as a result of a full year of operations at WASI and the       
addition of staff in marketing and finance as well as increased travel,         
promotional and insurance expenses.                                             

    Gain on Modification of Credit Facility. In 1995, the Company modified the
terms of the Midland Loan. The gain of $2.2 million on modification of credit   
facility reflects a gain from the removal of residual sharing provisions of $2.4
million and a $199,000 loss on the sale of two engines to the lender.           

 Income Taxes. Income tax expense increased to $2.2 million in 1995 from
$797,000 in 1994, an increase of 178%. The Company's effective tax rate for     
Federal and state taxes is approximately 40% for both 1995 and 1994; therefore, 
the increase in tax expense is directly related to the increase in the Company's
income before taxes and minority interest to $5.5 million in 1995 from $2.0     
million in 1994.                                                                

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QUARTERLY RESULTS OF OPERATIONS                                                 

   The following table presents selected quarterly financial information for
each of the ten quarters ended September 30, 1997 both in dollars and as a      
percentage of total revenue. This information is unaudited, but, in the opinion 
of the Company's management, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the selected        
quarterly information when read in conjunction with the Unaudited Financial     
Statements and Notes thereto and Audited Financial Statements and Notes thereto 
included elsewhere herein. The operating results for any quarter are not        
necessarily indicative of results for any subsequent period or for the entire   
fiscal year.                                                                    

                                                        [Enlarge/Download Table]

                                                                        THREE MONTHS ENDED                                        
                                 ------------------------------------------------------------------------------------------------ 
                                  JUN       SEPT      DEC       MAR       JUN       SEP       DEC       MAR       JUN       SEP   
                                  30,       30,       31,       31,       30,       30,       31,       31,       30,       30,   
                                  1995      1995      1995      1996      1996      1996      1996      1997      1997      1997  
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
                                                                      (DOLLARS IN THOUSANDS)                                      
                                                                                                                                  
INCOME STATEMENT DATA:                                                                                                            
Revenue:                                                                                                                          
  Operating lease revenue......  $2,990    $3,865    $3,840    $3,454    $3,381    $3,544    $3,362    $4,115    $4,429    $4,937 
  Finance lease revenue........      --        --        --        --        --        --        --        --        --       223 
  Gain (loss) on sale of leased                                                                                                   
    engines....................    (110)       --      (373)       --        --        --         2       397        --       936 
  Spare parts sales............     761       794     1,654     1,286     1,148       869     2,540     2,222     3,656     5,582 
  Sale of equipment acquired                                                                                                      
    for resale.................      --     5,372       100     2,211     4,613     2,781     2,500     2,548     7,600     2,600 
  Interest and other income....      15        27        37        --        47       150       420       251       201        91 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Total revenue..........   3,656    10,058     5,258     6,951     9,189     7,344     8,824     9,533    15,886    14,369 
Expenses:                                                                                                                         
  Interest expense.............   1,544     1,174     1,367     1,147     1,124     1,101       951     1,472     1,684     2,069 
  Depreciation expense.........     938     1,228     1,625     1,100       678       735       668       875       979     1,141 
  Residual share...............     (45)      118       125       222       152       161       188       191       181       227 
  Cost of spare parts sales....     495       494     1,158       525       861       218     1,704     1,304     2,403     4,044 
  Cost of equipment acquired                                                                                                      
    for resale.................      --     2,740         2     1,600     3,933     3,018     2,238     2,253     6,385     2,034 
  General and administrative                                                                                                      
    expense....................     777       999     1,013       910     1,191     1,332     1,691     1,778     2,146     2,434 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Total expenses.........   3,709     6,753     5,290     5,504     7,939     6,565     7,440     7,873    13,778    11,949 
Gain on modification of credit                                                                                                    
  facility.....................   2,203        --        --        --        --        --        --        --        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Income before income taxes,                                                                                                       
  minority interest and                                                                                                           
  extraordinary item...........   2,150     3,305       (32)    1,447     1,250       779     1,384     1,660     2,108     2,420 
Income taxes...................    (864)   (1,316)       (5)     (583)     (512)     (301)     (581)     (645)     (842)     (969)
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Income before minority interest                                                                                                   
  and extraordinary item.......  1,286..    1,989       (37)      864       738       478       803     1,015     1,266     1,451 
Less: minority interest in net                                                                                                    
  income of subsidiary.........      10         8        28        27         7        45        --        --        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Net income before extraordinary                                                                                                   
  item.........................   1,276     1,981       (65)      837       731       433       803     1,015     1,266     1,451 
Extraordinary item less                                                                                                           
  applicable income taxes......      --        --        --        --        --        --        --     2,008        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Net income.............  $1,276    $1,981    $  (65)   $  837    $  731    $  433    $  803    $3,023    $1,266    $1,451 
                                 ======    ======    ======    ======    ======    ======    ======    ======    ======    ====== 
INCOME STATEMENT DATA AS A                                                                                                        
  PERCENTAGE OF REVENUE:                                                                                                          
Revenue:                                                                                                                          
  Operating lease revenue......    81.8%     38.4%     73.0%     49.7%     36.8%     48.3%     38.1%     43.2%     27.9%     34.4%
  Finance lease income.........      --        --        --        --        --        --        --        --        --       1.6 
  Gain (loss) on sale of leased                                                                                                   
    engines....................    (3.0)       --      (7.1)       --        --        --        --       4.2        --       6.5 
  Spare parts sales............    20.8       7.9      31.5      18.5      12.5      11.8      28.8      23.3      23.0      38.8 
  Sale of equipment acquired                                                                                                      
    for resale.................      --      53.4       1.9      31.8      50.2      37.9      28.3      26.7      47.8      18.1 
  Interest and other income....     0.4       0.3       0.7        --       0.5       2.0       4.8       2.6       1.3       0.6 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Total revenue..........   100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0 
Expenses:                                                                                                                         
  Interest expense.............    42.2      11.7      26.0      16.5      12.1      15.0      10.8      15.4      10.5      14.4 
  Depreciation expense.........    25.7      12.2      30.9      15.8       7.4      10.0       7.6       9.2       6.2       7.9 
  Residual share...............    (1.2)      1.2       2.4       3.2       1.7       2.2       2.1       2.0       1.1       1.6 
  Cost of spare parts sales....    13.5       4.9      22.0       7.6       9.4       3.0      19.3      13.7      15.1      28.1 
  Cost of equipment acquired                                                                                                      
    for resale.................      --      27.2        --      23.0      42.8      41.1      25.4      23.6      40.2      14.2 
  General and administrative                                                                                                      
    expense....................    21.2       9.9      19.3      13.1      13.0      18.1      19.2      18.7      13.6      16.9 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Total expenses.........   101.4      67.1     100.6      79.2      86.4      89.4      84.4      82.6      86.7      83.1 
Gain on modification of credit                                                                                                    
  facility.....................    60.2        --        --        --        --        --        --        --        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Income before income taxes,                                                                                                       
  minority interest and                                                                                                           
  extraordinary item...........    58.8      32.9      (0.6)     20.8      13.6      10.6      15.7      17.4      13.3      16.8 
Income taxes...................   (23.6)    (13.1)     (0.1)     (8.4)     (5.6)     (4.1)     (6.6)     (6.8)     (5.3)     (6.7)
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Income before minority interest                                                                                                   
  and extraordinary item.......    35.2      19.8      (0.7)     12.4       8.0       6.5       9.1      10.6       8.0      10.1 
Less: minority interest in net                                                                                                    
  income of subsidiary.........     0.3       0.1       0.5       0.4       0.1       0.6        --        --        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
Net income before extraordinary                                                                                                   
  item.........................    34.9      19.7      (1.2)     12.0       7.9       5.9       9.1      10.6       8.0      10.1 
Extraordinary item less                                                                                                           
  applicable income taxes......      --        --        --        --        --        --        --      21.1        --        -- 
                                 ------    ------    ------    ------    ------    ------    ------    ------    ------    ------ 
        Net income.............    34.9%     19.7%     (1.2)%    12.0%      7.9%      5.9%      9.1%     31.7%      8.0%     10.1%
                                 ======    ======    ======    ======    ======    ======    ======    ======    ======    ====== 

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     The Company has experienced fluctuations in its quarterly operating results
and anticipates that these fluctuations may continue. Such fluctuations may be  
due to a number of factors, including the timing of sales of engines and spare  
parts and engine remarketing activities, an unanticipated early lease           
termination, the timing of engine acquisitions or a default by a lessee. See    
"Risk Factors -- Quarterly Fluctuations in Operating Results."                  

LIQUIDITY AND CAPITAL RESOURCES                                                 

Historically, the Company has financed its growth through borrowings  
secured by its lease portfolio. See "Overview" above and                        
"Business -- Financing/Source of Funds." Cash of approximately $104.0 million,  
$16.1 million, $15.7 million and $19.3 million in the nine months ended         
September 30, 1997 and the years ended December 31, 1996, 1995 and 1994,        
respectively, was derived from this activity. In these same time periods, $71.6 
million, $13.5 million, $9.3 million and $11.5 million, respectively, was used  
to pay down related debt. In 1996, proceeds from the Initial Public Offering    
were approximately $15.9 million as discussed below. Cash flows from operating  
activities generated approximately $9.0 million, $9.6 million, $0.5 million and 
$8.9 million in the nine months ended September 30, 1997, and the years ended   
December 31, 1996, 1995 and 1994, respectively.                                 

 The Company's primary use of funds is for the purchase of equipment for
lease. Approximately $43.5 million, $25.3 million, $9.3 million and $17.6       
million of funds were used for this purpose in the nine months ended September  
30, 1997 and the years ended December 31, 1996, 1995 and 1994, respectively.    
Additional funds were used in these periods to finance the growth of inventories
to support parts sales.                                                         

 The Initial Public Offering was for 2,300,000 shares of Common Stock at
$8.00 per share. The proceeds to the Company, net of all expenses, was $15.9    
million. These proceeds were used to prepay $1.3 million of indebtedness under  
an existing term facility, and to purchase an amortizing interest rate cap to   
hedge a portion of the Company's exposure to increases in interest rates on its 
variable rate borrowings for a cost of $469,000. The balance of the proceeds,   
together with debt financing, were used to acquire additional engines for lease,
to acquire engine and airframe component inventory, and for working capital and 
other general corporate purposes.                                               

    Until February 1997, the Company's primary lender was Marine Midland Bank.
Prior to June 1995, the Midland Loan provided, among other things, for interest 
payable at LIBOR plus 3.5% to 5%, required a specified percentage of lease      
payments to be applied to debt service but required final payment only upon the 
sale of the subject engine, and provided to the lender a share of the residual  
value of financed engines. In June 1995, the Company modified the Midland Loan. 
As part of the modification, the Midland Loan was converted to a ten-year, full 
payout loan, the existing residual sharing arrangement with the lender was      
terminated, the interest rate was reduced to LIBOR plus 1%, and the lender      
acquired two engines from the Company with a net book value of $5.7 million.    
This modification resulted in a gain to the Company of $2.2 million. In         
February, 1997, the Company repaid the Midland Loan at a discount which resulted
in an extraordinary book gain, net of tax and related costs, of approximately   
$2.0 million. The transaction was financed through a loan of $41.5 million from 
U.S. Bancorp Leasing & Financial at an interest rate of LIBOR plus 2.5%. This   
loan matures in February 1998. At that time, the Company has the option to      
extend the facility for an additional six years. As of September 30, 1997, $6.4 
million was available under this facility.                                      

 The Company has a $30 million revolving credit facility with CoreStates
Bank, N.A. to finance the acquisition of engines and high-value spare parts for 
sale or lease. At September 30, 1997, $3.8 million was available under this     
facility. This facility, which expires on June 12, 1998, bears interest at prime
plus 50 basis points and may be renewed annually.                               

 The Company has a $15 million secured term facility with Finova Capital
Corporation for the acquisition of engines for lease. At September 30, 1997,    
approximately $2.4 million was available under this facility. This term         
facility, which expires on December 29, 2001, bears interest on each drawdown at
a rate equal to the rate on five-year Treasury notes at the date of drawdown    
plus 5.55%. Advances against this facility are for not more than 80% of the     
appraised value of the engine. The loan is repaid by applying not less than 90% 
of the                                                                          

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underlying lease payment to debt service, and at the end of 60 months, the loan 
must have amortized at least 40% of its original balance.                       

   The Company also has a $15.0 million financial program with Fleet Capital
Corporation for the financing of the acquisition of engines for lease to U.S.   
domestic entities. Fleet Capital Corporation evaluates each proposed engine     
financing to determine whether it will participate. The interest rate under this
program is dependent upon the quality of the credit and the underlying          
collateral. Advances under the program are for an amount up to 80% of the fair  
market value of the equipment, not to exceed 100% of the purchase price.        
Advances are repaid from the lease payments associated with the financed        
engines. In September 1997, the Company financed two engines using this program.
The amount borrowed was $6.3 million with interest rates varying from 8.9% to   
10%. As of September 30, 1997, approximately $8.7 million was available under   
this program.                                                                   

     The Company also has a $3 million secured working capital facility with The
Pacific Bank, N.A. for the acquisition of engines to be dismantled and sold for 
parts through WASI. This facility provides for 80% advances against the purchase
price of parts for resale and bears interest at prime plus 1%. This facility    
requires interest-only payments for the first five months with the principal    
balance due six months after drawdown and expires on January 31, 1998. The      
Company directly guarantees WASI's obligations under this facility. As of       
September 30, 1997, approximately $1.2 million was available under this         
facility.                                                                       

The Company has received a letter of commitment from a financial      
institution to provide an $80 million warehouse facility to a special purpose   
finance subsidiary of the Company, for the financing of jet aircraft engines to 
be transferred by the Company to such finance subsidiary. The facility will     
become available immediately upon completion of definitive agreements. This     
transaction's structure is intended to facilitate future public or private      
securitized note issuances by the special purpose finance subsidiary. This      
facility is expected to have an eight year term and to bear interest at LIBOR   
plus 225 basis points. This facility requires the issuer to hedge 50% of the    
facility against interest rate changes. The Company expects to use some of the  
proceeds of the facility distributed to it by its finance subsidiary to pay down
a portion of the U.S. Bancorp Leasing & Financial loan and the CoreStates Bank  
loan.                                                                           

  The Company believes that its current and anticipated credit facilities,
internally generated funds, cash-on-hand and the net proceeds of this Offering  
will be sufficient to fund the Company's anticipated operations for at least 12 
months, at which time additional equity or debt capital is anticipated to be    
required to fund projected growth.                                              

The Company's ability to successfully execute its business strategy is
dependent in part on its ability to raise equity capital and to obtain debt     
capital. There can be no assurance that the necessary amount of such equity or  
debt capital will continue to be available to the Company on favorable terms, or
at all. If the Company were unable to continue to obtain required financing on  
favorable terms, the Company's ability to add new engines and parts packages to 
its portfolio or to conduct profitable operations with its existing asset base  
would be impaired, which would have a material adverse effect on the Company's  
business, financial condition and results of operations.                        

  The Company has entered into commitments for the purchase of an aircraft
for disassembly by WASI, the purchase of two engines for the lease portfolio and
the purchase of three commuter aircraft with three spare engines for the lease  
portfolio. The aggregate purchase price for the assets is $19.9 million and as  
of September 30, 1997, deposits of $310,000 have been made in connection with   
these purchases. The Company has arranged financing for one engine and is in the
process of arranging financing for the other purchases. In addition, as of      
September 30, 1997, the Company had four engines and three spare parts packages 
which had not been financed. The Company will seek permanent financing for this 
equipment, although no assurance can be given that such financing will be       
available on favorable terms, if at all. In addition, certain of the Company's  
engines have been financed under floating rate facilities. Until fixed rate     
financing for these assets is in place, the Company is subject to interest rate 
risk, since the underlying lease revenue is fixed.                              

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MANAGEMENT OF INTEREST RATE EXPOSURE                                            

    At September 30, 1997, $66.6 million of the Company's borrowings were on a
variable rate basis at various interest rates tied to either LIBOR or the prime 
rate. The Company's equipment leases are generally structured at fixed rental   
rates for specified terms. To date, this variable rate borrowing has resulted in
lower interest expense for the Company. Increases in interest rates could narrow
or eliminate the spread, or result in a negative spread, between the rental     
revenue the Company realizes under its leases and the interest rate that the    
Company pays under its borrowings. See "Risk Factors -- Interest Rate Risks."   

     In September 1996, the Company purchased an amortizing interest rate cap at
a cost of $469,000 from an investment grade financial institution (the "Counter 
Party") in order to limit its exposure to increases in interest rates on a      
portion of its current variable rate borrowings. Pursuant to this cap, the      
Counter Party will make payments to the Company, based on the notional amount of
the cap, if the three month LIBOR rate is in excess of 7.66%. As of September   
30, 1997, the notional principal amount of the cap was $37.2 million and said   
amount will decline to $26 million at the end of its term. The cost of the cap  
is being amortized as an expense over a four-year period. The Company will be   
exposed to credit risk in the event of non-performance by the Counter Party.    

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BUSINESS

     The Company is a leading provider of operating leases of Aircraft Equipment
worldwide. The Company's core business is acquiring and leasing Aircraft        
Equipment to domestic and international airlines, manufacturers and             
overhaul/repair facilities pursuant to operating leases. As of September 30,    
1997, the Company had 42 engines under lease to 29 customers in 17 countries and
eight spare parts packages under lease to seven customers in seven countries    
(for a net total of 34 customers in 20 countries). Through WASI, the Company    
also acquires engine parts and other aviation equipment, such as whole engines  
and aircraft, which can be dismantled and sold as parts at a greater profit. In 
addition, the Company engages in the selective purchase and resale of commercial
aircraft engines and engine components in the aftermarket. Integrating these    
three activities improves the Company's ability to maximize the residual and    
resale values of its engines, equipment and parts.                              

INDUSTRY BACKGROUND                                                             

   Commercial airlines typically maintain a number of spare aircraft engines
to ensure that their aircraft are not grounded when engines or parts are removed
for normal maintenance or as a result of failure. Industry analysts estimate    
that the worldwide fleet of approximately 11,500 commercial aircraft utilizes   
approximately 30,000 engines, including approximately 5,000 spare engines valued
at over $11 billion. The Boeing Report estimates 16,160 new commercial aircraft 
will be added over the next 20 years, resulting in a projected worldwide fleet  
of approximately 23,600 commercial aircraft in 2016, net of retired aircraft.   
These 16,160 new deliveries, which represent a mixture of two-, three- and      
four-engined aircraft, will require approximately 35,000 installed engines and, 
assuming a ratio of approximately 15% spare engines to installed engines,       
approximately 5,300 additional spare engine acquisitions over the next 20 years.
Moreover, the Boeing Report, and the foregoing numbers, do not address the      
additional number of aircraft and engines which will be required to service the 
commuter or corporate markets.                                                  

    Airlines have increasingly turned to operating leases as an alternative to
traditional financing of their aircraft, engines and spare parts. Aviation Week 
reports that leasing will be the primary means by which the global air transport
industry acquires new aircraft between now and 1999, and probably beyond.       
Aviation Week, based upon data provided by GE Capital Aviation Services, states 
that in 1986, 41% of the world's airlines owned all of their equipment, 15%     
leased all of their equipment and 44% used a mix of the two (with 80% owned and 
20% leased). By contrast, in 1996, only 16% owned all of their equipment, while 
42% leased all of their equipment and 42% used a mix of the two (with 40% owned 
and 60% leased).                                                                

Advantages to airlines of leasing include greater flexibility in fleet
management, off-balance sheet treatment of operating leases, the ability to     
employ funds without affecting debt-to-equity ratios, and the shifting of       
residual value risk to a third party. The Company believes that airlines are    
increasingly considering their spare aircraft engines as significant capital    
assets suitable for lease. Due to the increasing cost of newer aircraft engines,
the anticipated modernization of the worldwide aircraft fleet and the           
significant cost associated therewith, and the emergence of new niche-focused   
airlines which generally use leasing for capital asset acquisitions, the Company
believes this trend toward operating leases will continue.                      

STRATEGY                                                                        

  The Company's strategy for its leasing business is to focus primarily on
operating leases of commercial aircraft engines and parts worldwide while       
maximizing residual values. Key elements of the Company's business strategy     
include the following:                                                          

 Focus on Aftermarket Commercial Aircraft Engines. The Company purchases
primarily aftermarket commercial aircraft engines and parts for lease and       
resale. By focusing on this market, the Company is able to take advantage of the
background and capability of its management, most of whom have extensive        
expertise in the aircraft engine industry, and to service a niche which is not  
the focus of the major commercial aircraft lessors.                             

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    Focus on Operating Leases. The Company believes that airlines are becoming
increasingly aware of the benefits of financing their fleet equipment on an     
operating lease basis, including preservation of cash flow, off balance sheet   
financing, shifting residual risk to a third party and flexibility in managing  
fleet size and composition.                                                     

 Maximize Residual Value. In order to maximize the value of engines when
they are re-leased or sold at the end of a lease, the Company focuses on noise  
compliant Stage III commercial jet aircraft engines. As of September 30, 1997,  
all of the Company's engines were Stage III engines and were generally suitable 
for use on one or more commonly used aircraft. The Company also believes that   
its attention to maintenance and inspection of engines contributes to residual  
values.                                                                         

   Capitalize on Complementary Spare Parts Business. Through the spare parts
and component sales operations of its WASI subsidiary, the Company sells        
aircraft spare parts to commercial passenger airlines, air cargo carriers,      
overhaul/repair facilities and other spare parts distributors. The Company      
believes that WASI complements the Company's core business of leasing           
aftermarket commercial aircraft engines and parts. WASI can provide some parts  
for maintenance and overhaul of the Company's engines at prices lower than the  
Company could obtain from third parties. As engines in the Company's leasing    
portfolio age and reach the point at which they are more valuable as component  
parts, the Company expects that WASI will be able to salvage valuable components
and thereby maximize the residual value of the engines.                         

     Access a Diversified Global Client Base. For 1996 and the first nine months
of 1997, approximately 61% and 64%, respectively, of the Company's lease revenue
was from foreign customers, with no one customer or country (other than the     
United States) accounting for more than 14% of lease revenue. The Company       
believes that this diversity reduces the risks associated with dependence on one
or more significant customers in one country. To date, all of the Company's     
leases and sales contracts are denominated and payable in U.S. Dollars.         

Capitalize on Complementary Aviation-Related Businesses. The Company  
believes that there are numerous opportunities to expand into aviation-related  
niche businesses representing growth prospects for the Company. The Company     
intends to expand its existing businesses to include similar assets in          
additional markets such as the corporate, commuter and cogeneration markets. In 
October 1997, the Company paid a nonrefundable deposit of $100,000 for the      
purchase of three commuter aircraft and three spare engines for $12.3 million   
and is presently in negotiations with lenders to provide financing for this     
package. The Company may engage in the selective purchase of additional aircraft
in the future. The Company is also continually engaged in discussions regarding 
possible acquisitions of companies and asset portfolios relating and            
complementary to the Company's existing businesses. In addition, the Company    
constantly evaluates de novo expansion opportunities. There can be no assurance 
that any such acquisitions or expansions can be consummated on terms favorable  
to the Company, if at all. See "Risk Factors Acquisition and Expansion Risks."  

AIRCRAFT ENGINE LEASING                                                         

 Most of the Company's current leases to air carriers, manufacturers and
overhaul/repair facilities are operating leases as opposed to finance leases.   
Under an operating lease, the Company retains title to the aircraft engine      
thereby retaining the benefit and assuming the risk of the residual value of the
aircraft engine. Operating leases allow airlines greater fleet and financial    
flexibility due to their shorter-term nature and the relatively small initial   
capital outlay necessary to obtain use of the aircraft engine. Operating lease  
rates are generally priced higher than finance lease rates, in part because of  
the risks associated with the residual value. See "Risk Factors -- Ownership    
Risks."                                                                         

  The Company targets the medium-term engine lease market, which generally
consists of leases with three to ten year lease terms. Airlines, manufacturers  
and overhaul/repair facilities leasing for this term generally do so when their 
projected utilization of a specific engine is deemed to be less than its useful 
life, or when they seek to manage their cash flow more efficiently while        
strengthening their balance sheets. All of the Company's engine lease           
transactions with three to ten year lease terms are triple-net leases. A        
triple-net lease requires the lessee to make the full lease payment and pay any 
other expenses associated with the use of the engine, such                      

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as maintenance, casualty and liability insurance, sales or use taxes and        
personal property taxes. The leases contain detailed provisions specifying      
maintenance standards and the required condition of the aircraft engine upon    
return at the end of the lease. During the term of the lease, the Company       
generally requires the lessee to maintain the aircraft engine in accordance with
an approved maintenance program designed to ensure that the aircraft engine     
meets applicable regulatory requirements in the jurisdictions in which the      
lessee operates. Under short-term leases and certain medium-term leases, the    
Company undertakes a portion of the maintenance and regulatory compliance risk. 
To date, the Company has attempted to minimize its currency and exchange risks  
by negotiating all of its aircraft engine lease transactions in U.S. Dollars. In
addition, to date, all guarantees obtained to support various lease agreements  
are denominated and payable in U.S. Dollars. See "Risk Factors -- International 
Risks."                                                                         

   The Company typically collects maintenance reserves and security deposits
from the lessee. Generally, the Company collects, in advance, a security deposit
equal to at least one month's lease payment, together with one month's estimated
maintenance reserve. The security deposit is returned to the lessee after all   
return conditions have been met. Maintenance reserves are accumulated in        
accounts maintained by the Company or its lenders and are used when normal      
repair associated with engine use or maintenance is required. In many cases, to 
the extent that cumulative maintenance reserves are inadequate to fund normal   
repairs required prior to return of the engine to the Company, the lessee is    
obligated to cover the shortfall.                                               

 The Company makes an independent analysis of the credit risk associated
with each lessee before entering into a lease transaction. The Company's credit 
analysis generally consists of evaluating the prospective lessee's financial    
standing utilizing financial statements and trade and banking references. In    
certain circumstances, where the Company or its lenders believe necessary, the  
Company may require its lessees to obtain a partial letter of credit or a       
guarantee from a bank or a third party. The Company also evaluates insurance and
expropriation risk and evaluates and monitors the political and legal climate of
the country in which a particular lessee is located in order to determine its   
ability to repossess its collateral should the need arise. While the Company has
experienced some collection problems, including delay in lease rental payments, 
to date the Company has not experienced material losses attributable to such    
problems; however, there can be no assurance that the Company will not          
experience collection problems or significant losses in the future. See "Risk   
Factors -- Customer Credit Risks."                                              

   During a given lease period, the Company's leases require that the leased
engines undergo regular maintenance and inspection at pre-approved engine       
maintenance facilities certified by the FAA or its foreign equivalent. In       
addition, when engines come off-lease, they undergo thorough inspections to     
verify compliance with lease return conditions. Regular maintenance and thorough
inspections during and after the lease term help ensure that the Company's      
leased engines maintain their residual value. While there can be no assurance   
that the Company's maintenance and inspection requirements will result in a     
realized return to the Company upon termination of a lease, the Company believes
that its emphasis on maintenance and inspection generally helps it to recover   
its investment in the engines.                                                  

     Upon termination of a lease, the Company will re-lease or sell the aircraft
engine or will have the engine dismantled and will sell the parts. The demand   
for aftermarket aircraft engines and parts for either sale or re-lease may be   
affected by a number of variables including general market conditions,          
regulatory changes (particularly those imposing environmental, maintenance and  
other requirements on the operation of aircraft engines), changes in the supply 
and cost of aircraft engines and technological developments. In addition, the   
value of a particular used aircraft engine varies greatly depending upon its    
condition, the maintenance services performed during the lease term and the     
number of hours remaining until the next major maintenance of the engine is     
required. If the Company is unable to re-lease or sell an engine on favorable   
terms, its ability to service debt may be adversely affected. See "Risk         
Factors -- Ownership Risks" and "Business -- Aircraft Engine Portfolio."        

ENGINE LESSEES                                                                  

As of September 30, 1997, the Company had 42 engines under lease to 29
customers in 17 countries. As of September 30, 1997: (a) the Company's domestic 
engine lessees were Alaska Airlines, Inc., Continental                          

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Airlines, Inc., Delta Air Lines, Inc., Evergreen International Airlines, Inc.,  
Frontier Airlines, Inc., General Electric Engine Services, Inc., Reno Air, Inc.,
Tower Air, Western Pacific Airlines, Inc. and World Airways, Inc., and (b) the  
Company's foreign engine lessees were AerLingus (Ireland), Aerovias de Mexico,  
S.A. de C.V., Air Atlanta Icelandic (Iceland), Air Canada, Air Liberte S.A.     
(France), Air 2000 Ltd. (United Kingdom), Air New Zealand Limited, Asiana       
Airlines, Inc. (Korea), Avianca (Colombia), BWIA International Airways Limited  
(Trinidad & Tobago), Canada 3000 Airlines Limited, Gulf Aircraft Maintenance    
Company (United Arab Emirates), P.T. Garuda Indonesia, General Electric Capital 
Aviation Services, Inc. (United Kingdom), Scandinavian Airlines System (Sweden),
Spanair (Spain), Jet Airways (India), Ltd., Transportes Aeroes Portugueses, S.A.
(Portugal) and Virgin Atlantic Airways, Limited (United Kingdom).               

   The following table displays the regional profile of the Company's engine
lessee customer base by operating lease revenue for the year ended December 31, 
1996 and the nine months ended September 30, 1997.                              

                                                        [Enlarge/Download Table]

                                       NINE MONTHS ENDED                                       
                                       SEPTEMBER 30, 1997         YEAR ENDED DECEMBER 31, 1996 
                                 ------------------------------  ------------------------------
                                 OPERATING LEASE                 OPERATING LEASE               
                                     REVENUE         PERCENTAGE      REVENUE         PERCENTAGE
                                 ---------------     ----------  ---------------     ----------
                                                                                               
United States...................   $ 4,878,121             36%     $ 5,295,084           39%   
Europe..........................     4,099,725             30        2,840,428            21   
Mexico..........................     1,855,994             14        1,865,118            14   
Canada..........................     1,030,785              8        1,291,000             9   
Australia/New Zealand...........       772,200              6        1,029,600             7   
Asia............................       512,832              4          889,208             6   
South America...................       275,042              2          530,000             4   
Middle East.....................        56,333             --               --            --   
                                   -----------          -----      -----------         -----   
Total operating lease revenue...   $13,481,032            100%     $13,740,438          100%   
                                   ===========          =====      ===========         =====   

   For the year ended 1996 and for the nine-months ended September 30, 1997,
Aerovias de Mexico, S.A. de C.V., a lessee customer of the Company, contributed 
approximately 14% of operating lease revenue.                                   

AIRCRAFT ENGINE PORTFOLIO                                                       

The Company's management frequently reviews opportunities to acquire  
suitable aircraft engines based on market demand, customer airline requirements 
and in accordance with the Company's engine portfolio mix criteria and planning 
strategies for leasing. Before committing to purchase specific engines, the     
Company generally takes into consideration such factors as estimates of future  
values, potential for remarketing, trends in supply and demand for the          
particular make, model and configuration of the engines and their anticipated   
obsolescence. As a result, certain types and configurations of engines do not   
necessarily fit the profile for inclusion in the Company's portfolio of engines 
owned and used in its leasing operation. The Company focuses particularly on the
noise compliant Stage III aircraft engines. As of September 30, 1997, all of the
engines in the Company's lease portfolio were Stage III engines and were        
generally suitable for use on one or more commonly used aircraft. The Company   
purchases a majority of its engines in the aftermarket, primarily from airlines 
or other leasing companies.                                                     

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 The Company's commercial aircraft engine portfolio consists of aircraft
engines manufactured by CFM, General Electric (CF), Pratt & Whitney (JT and PW) 
and Rolls Royce (RB). The following tables show by engine type the number of    
engines owned by the Company, the aircraft type on which each engine type is    
generally used, and the scheduled lease terminations of the Company's lease     
portfolio at September 30, 1997:                                                

ENGINE TYPE AND AIRCRAFT APPLICATION

                                                                [Download Table]

ENGINE TYPE                      AIRCRAFT APPLICATION             QUANTITY
------------                 -----------------------------        --------
                                                                          
CF6-50 C2                    A300, DC10-30                           3    
CF6-80 C2A2                  A310-300/-200 Advanced                  1    
                             ADV/300                                      
CF6-80 C2B6                  767-300ER                               1    
CF6-80 C2B6F                 767-300ER                               1    
CF6-80E1                     A330-300                                1    
CFM56-3B1                    737-300/-500                            2    
CFM56-3B2                    737-300/-400                            5    
CFM56-3C1                    737-300/-400/-500                       6    
CFM56-5A3                    A320/100/200, A319                      2    
CFM56-5C4                    A340/300                                1    
JT8D-217C                    MD82/83/87/88                           1    
JT8D-219                     MD82/83/87/88                          10    
JT9D-7AH                     747-100/-200                            1    
JT9D-7A                      747-100/-200                            1    
JT9D-7J                      747-100/-200/SP                         1    
PW2037                       757-200                                 1    
PW2040                       757-200                                 1    
PW4060                       747-400, 767-300ER                      2    
RB211-535E4                  757-200/-200PF/-200CB                   2    
                                                                   -----  
  Total                                                             43    
                                                                   =====  

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SCHEDULE OF ENGINE LEASE TERMINATIONS 

                                                                [Download Table]

                                     ENGINE               NET BOOK VALUE  
                                ----------------         ---------------- 
                                NUMBER       %           AMOUNT       %   
                                ------     -----         ------     ----- 
                                                           (DOLLARS IN    
                                                            MILLIONS)     
                                                                          
1997..........................     5        11.6%        $ 12.2       9.5%
1998..........................    12        28.0           30.4      23.5 
1999..........................     4         9.3            9.1       7.1 
2000..........................     4         9.3           11.0       8.5 
2001..........................     4         9.3           14.5      11.2 
2002..........................     7        16.3           25.2      19.6 
2003..........................     3         7.0           10.6       8.2 
2004..........................     1         2.3            4.2       3.3 
2005..........................     1         2.3            6.0       4.7 
2006..........................     1         2.3            2.9       2.2 
Off Lease.....................     1         2.3            2.8       2.2 
                                  --                                      
                                           -----         ------     ----- 
          Total...............    43       100.0%        $128.9     100.0%
                                  ==       =====         ======     ===== 

    The Company anticipates that current lessees will extend three of the five
leases which terminate in 1997 and is negotiating with a different lessee to    
lease an engine which is the subject of another lease which terminates in 1997. 
The fifth 1997 lease terminated in early October 1997, and the engine (a        
JT9D-7AH engine with a book value of $431,250) has been relocated to the WASI   
facility for the sale of its parts. The Company is actively marketing the engine
which is off lease.                                                             

ENGINE PORTFOLIO VALUE                                                          

    The Company has obtained an updated appraisal of its engines from Aircraft
Information Services, Inc. ("AISI"), a recognized appraiser of aircraft engines.

     A copy of the appraisal begins at page A-1 of this Prospectus and should be
reviewed for a discussion of the assumptions utilized and various factors       
considered by AISI. AISI has rendered its opinion that the aggregate "Current   
Market Value" of the Company's aircraft engine portfolio (excluding the JT9D-7AH
engine relocated to WASI), assuming the engines are in average half-life        
condition, is $143.1 million, which compares favorably to the aggregate net book
value at September 30, 1997 of $128.5 million of the Company's appraised engine 
portfolio. "Current Market Value" is the appraiser's opinion as to the value of 
the aircraft engines under market conditions that are perceived to exist at a   
specific point in time for a sale between equally willing and informed buyers   
and sellers, neither under compulsion to buy or sell, in a single unit cash     
transaction with no hidden value or liability and with supply and demand of the 
sale item roughly in balance. "Average half-life" condition assumes that every  
component or maintenance service which has a prescribed interval that determines
its service life, overhaul interval or interval between maintenance services is 
at a condition which is one-half of the total interval.                         

   The Company, through the return conditions required by its leases and the
maintenance reserves collected by the Company from its lessees, attempts to put 
its engines in the equivalent of a "freshly refurbished" condition, after       
application of the maintenance reserves. "Freshly refurbished" condition is     
defined to be that of an engine immediately after a major shop visit which      
refurbished all engine modules or all engine compressor and combustor/turbine   
stages, as appropriate, with all life-limited components at half-life. AISI has 
rendered its opinion that the "Current Market Value" of the Company's aircraft  
engines appraised, assuming the engines are in freshly refurbished condition, is
$157.1 million.                                                                 

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The following table sets forth the opinion of AISI as to the aggregate
"Future Value Forecast" for the aircraft engines appraised as of October 28,    
1997, for the periods indicated below:                                          

                                                                [Download Table]

 1998       1999       2000       2001       2002 
-------    ------     ------     ------     ------
                  (IN MILLIONS)                   
                                                  
$139.4     $135.8     $132.4     $128.9     $125.7

     "Future Value Forecast" is the appraiser's opinion as to the expected value
of an asset at a specific date in the future and assumes "Base Value" criteria, 
half-life condition and an assumed annual inflation rate of 3.0%. "Base Value"  
is similar to Current Fair Market Value; however it assumes theoretically       
balanced market conditions rather than actual present market conditions or      
assumed market conditions at a specified future date.                           

 Since appraisals are only estimates of residual values, there can be no
assurance that the appraised value is accurate or that it will not materially   
change due to factors beyond the Company's control, including but not limited   
to, obsolescence and changing market conditions, lack of support by relevant    
airframe, engine or component manufacturers. Nor can there be assurance that,   
upon expiration of the leases, the Company will realize the then book or        
appraised value through either sale or re-leasing of the engines in the event of
an absence of purchasers or re-lease demand.                                    

     AISI was paid $10,350, plus out-of-pocket expenses, for its services to the
Company in connection with its appraisal.                                       

   In the future, the Company does not intend to include the appraised value
of its engines in its reports and registration statements filed with the SEC.   

FINANCING/SOURCE OF FUNDS                                                       

    The Company typically acquires the engines it leases with a combination of
equity capital and funds borrowed from financial institutions. See "Management's
Discussion and Analysis of Financial Condition and Results of                   
Operations -- Liquidity and Capital Resources" and "Risk Factors -- Back        
Leveraging." The Company can typically borrow 80% to 100% of the engine purchase
price on a recourse, non-recourse or partial recourse basis. Under most of the  
Company's term loans, the lender is entitled to receive most of the lease       
payments associated with the financed engines to apply to debt service. Under   
the Company's warehouse facilities, the lender is paid interest only until such 
time as loans under the facilities become due. Generally, lenders take a        
security interest in the engines. The Company retains ownership of the engines, 
subject to such security interest. Loan interest rates often reflect the        
financial condition of the underlying lessees, the terms of the lease and       
percentage of purchase price advanced, and for full or partial recourse loans,  
the financial condition of the Company. The Company obtains the balance of the  
purchase price of the engine, the "equity" portion, from internally generated   
funds, cash-on-hand, and going forward, the net proceeds of this Offering.      

    The loans available to the Company under recourse arrangements are secured
by the financed engines and the assignment of lease payments due under the      
related leases. Upon default under a loan covering equipment financed through   
recourse borrowings, the lender providing the financing can foreclose on the    
equipment, repossess and sell such equipment and seek any balance due on such   
financing from the Company to the extent of the recourse.                       

The credit standing of certain of the Company's customers and the long
operating life of aircraft engines allows the Company to finance some of its    
equipment on a non-recourse basis. Certain of the Company's engines are owned in
wholly-owned subsidiaries set up for financing purposes. Non-recourse loans     
represent loans to the Company's subsidiaries which own only the assets securing
the loan and as to which the Company has not guaranteed the loan. The Company   
and its subsidiaries at September 30, 1997 had borrowings of $7.8 million of    
non-recourse loans and $96.9 million of full or partial recourse loans. The     
Company is not liable for the repayment of the non-recourse loans unless the    
Company breaches certain limited representations and warranties under the       
applicable pledge agreement. The lender assumes the credit risk of each such    
lease, and its only recourse, upon a default under a lease, is against the      
lessee and the leased engine.                                                   

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The Company has negotiated a sharing of residual proceeds with certain
lenders in exchange for a higher percentage financing of certain aircraft       
engines. Residual sharing arrangements apply to five of the Company's engines   
(representing $15.5 million of book value) as of September 30, 1997. The Company
accrues for its residual sharing obligations using net book value as a proxy for
residual proceeds.                                                              

SPARE PARTS SALES                                                               

     As a significant corollary to its core business, the Company, through WASI,
specializes in the purchase and resale of aftermarket engine parts, engines,    
modules and rotable components. WASI purchases individual engine parts from     
airlines and others in the aftermarket or acquires whole airframes or engines   
and contracts to have the airframes or engines dismantled into their component  
parts for resale by WASI. Some of the acquired component parts are overhauled   
for WASI by FAA-authorized repair agencies and then offered for sale to         
airlines, maintenance and repair facilities, and distributors. To date, WASI has
targeted primarily General Electric CF6-50, Pratt & Whitney JT9D, PW 4000 and   
JT8D aircraft engines and components. These engines are the most widely used    
aircraft engines in the world, powering the Boeing 747, 727 and 737, McDonnell  
Douglas DC10 and DC9 and Airbus A-300 series of aircraft. WASI has begun to     
expand into engine components for the CFM-56, a high thrust engine used on the  
popular Boeing 737.                                                             

   The Company believes that the operations of WASI complement the Company's
core leasing business. To date, WASI's operations have afforded the Company     
additional contacts and opportunities in the aircraft engine market. WASI can   
provide some parts for maintenance and overhaul of the Company's engines at     
prices lower than the Company could obtain from third parties. As engines in the
Company's leasing portfolio age and reach the point at which they are more      
valuable as component parts, the Company expects that WASI will be able to have 
them dismantled, salvage valuable components and thereby maximize the residual  
value of the engines.                                                           

WASI has strict guidelines regulating how parts are procured and      
overhauled. After the completion of an extensive facilities audit and numerous  
meetings with the Company's management, the Airline Suppliers Association, an   
FAA recognized independent quality assurance organization, accredited WASI as an
aftermarket parts supplier. When procuring aircraft parts, great emphasis is    
placed on source and traceability. At September 30, 1997, at least 95% of WASI's
inventory on hand was acquired from a certified commercial air carrier or others
operating under recognized regulatory agencies accepted by the FAA. Less than 5%
of the inventory was acquired from trading companies and in all such cases the  
parts are certified by the seller as to origin. WASI does not trade in          
consumable parts such as hardware/fasteners. Hardware/fasteners are the most    
difficult to identify as unapproved material and in many cases are impossible to
identify as unapproved material without conducting detailed analysis. WASI's    
trades in life-limited parts are restricted to parts that have complete         
traceability back to the OEM or in few cases traceability from a commercial air 
carrier back to the OEM. See "Risk Factors -- Government Regulation."           

 WASI advertises its aircraft engine parts availability on the Inventory
Locator Service ("ILS") electronic database. Users of ILS can access the        
database and determine which companies have the desired inventory. The Company  
also advertises in industry publications and receives a number of customers     
through referrals.                                                              

    WASI may from time to time enter into consignment agreements with airlines
or related companies to acquire surplus inventories for the purpose of marketing
and selling such consigned parts. Consignment allows WASI to access inventory   
for sale without the cost and risk of ownership.                                

EQUIPMENT ACQUIRED FOR RESALE                                                   

The Company engages in the selective purchase and resale of commercial
aircraft engines and engine components in the aftermarket to complement its     
engine and parts leasing business. It is the Company's general policy to        
minimize risk by not purchasing engines or components on speculation; however,  
on occasion, the Company purchases engines and components without having a      
commitment for their sale. The Company normally makes a contractual commitment  
to purchase specific engines or components for its own account only after, or   
concurrently with, obtaining a firm customer purchase commitment. Although the  

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Company usually has purchase commitments at delivery, it would have financial   
exposure if it purchased an engine or components which could not immediately be 
resold. The Company assesses the supply and demand of target engines and        
components through its sales force and relies, to a lesser extent, on referrals 
and advertising in industry publications. The Company also subscribes to a data 
package that provides it with access to lists composed of operators and their   
specific engine inventories and engines on order. The Company does not refurbish
or perform other maintenance on the engines or components it sells; however,    
from time to time, the Company has hired third party contractors to refurbish or
repair such engines and components.                                             

COMPETITION                                                                     

In the medium-term engine lease market segment, which is the Company's
target market, the Company principally competes with Shannon Engine Services,   
headquartered in Shannon, Ireland, which is owned by CFM and Rolls Royce. Rolls 
Royce limits its leasing activities to products of its parent company and       
related parties. The Bank of Tokyo-Mitsibishi, through its affiliate Engine     
Lease Finance in Shannon, Ireland, also competes with the Company. Each of these
competitors is substantially larger and has greater financial resources than the
Company which may permit, among other things, greater access to capital markets 
at more favorable terms. In addition, major aircraft lessors, including         
International Lease Finance Corporation and General Electric Capital Aviation   
Services, compete with the Company to the extent that they include spare engine 
leases with their aircraft leases.                                              

   With respect to engine marketing and spare parts and component sales, the
Company competes with airlines, aircraft manufacturers, aircraft, engine and    
parts brokers, and parts distributors. The Company's major competitors include  
the Allen Aircraft division of AAR Corp., The AGES Group, The Memphis Group,    
Aviation Sales Company, Kellstrom Industries and AVTEAM, Inc. Certain of these  
competitors may have, or may have access to, financial resources substantially  
greater than the Company. Significant increases in competition encountered by   
the Company in the future may limit the Company's ability to expand its         
business, which would have a material adverse effect on the Company's business, 
financial condition and results of operations.                                  

   The Company believes that the primary competitive factors in the aircraft
engine leasing industry are flexibility in leasing terms, including price,      
return conditions and term of lease, and availability of engines. The Company   
believes that it is able to compete favorably in leasing commercial aircraft    
engines and parts due to its experience in the industry and reputation and      
expertise in acquiring and leasing commercial aircraft engines at economical    
prices which allows the Company to re-lease or sell such engines and parts at a 
competitive price. See "Risk Factors -- Competition."                           

INSURANCE                                                                       

    The Company requires its lessees to carry the types of insurance customary
in the air transportation industry, including comprehensive liability insurance 
and casualty insurance. In addition to requiring full indemnification under the 
terms of the lease, the Company is named as an additional insured on liability  
insurance policies carried by lessees, with the Company or its lenders normally 
identified as the payee for loss and damage to the equipment. All policies      
contain a breach of warranty endorsement or severability of interest clause so  
that the Company continues to be protected even if the operator/lessee violates 
one or more of the warranties or conditions of the insurance policy. The Company
monitors compliance with the insurance provisions of the leases. The Company    
also carries contingency and product liability insurance.                       

GOVERNMENT REGULATION                                                           

The Company's customers are generally subject to a high degree of     
regulation in the various jurisdictions in which they operate. Such regulations 
also indirectly affect the Company's business operations. Under the provisions  
of the Transportation Act, as amended, the FAA exercises regulatory authority   
over the air transportation industry. The FAA regulates the manufacture, repair 
and operation of all aircraft engines operated in the United States. Its        
regulations are designed to insure that all aircraft and aviation equipment are 
continuously maintained in proper condition to ensure safe operation of the     
aircraft. Similar rules apply in                                                

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other countries. All aircraft must be maintained under a continuous condition   
monitoring program and must periodically undergo thorough inspection and        
maintenance. The inspection, maintenance and repair procedures for the various  
types of commercial aircraft equipment are prescribed by regulatory authorities 
and can be performed only by certified repair facilities utilizing certified    
technicians. Certification and conformance is required prior to installation of 
a part on an aircraft. Presently, whenever necessary, with respect to a         
particular engine or engine component, the Company utilizes FAA and/or Joint    
Aviation Authority certified repair stations to repair and certify engines and  
components to ensure worldwide marketability. The FAA can suspend or revoke the 
authority of air carriers or their licensed personnel for failure to comply with
regulations and ground aircraft if their airworthiness is in question. In       
addition, by the year 2000, federal regulations will stipulate that all aircraft
engines hold, or be capable of holding, a noise certificate issued under Chapter
3 of Volume 1, Part II of Annex 16 of the Chicago Convention, or have been shown
to comply with Stage III noise levels set out in Section 36.5 of Appendix C of  
Part 36 of the Federal Aviation Regulations of the United States. As of         
September 30, 1997, all of the engines in the Company's lease portfolio were    
Stage III engines.                                                              

LEGAL PROCEEDINGS                                                               

The Company is not a party to any material legal proceedings.         

EMPLOYEES                                                                       

   As of September 30, 1997, the Company had 40 full-time employees and four
part-time employees (excluding consultants), including 22 employees in equipment
leasing and trading and 22 employees in airframe and engine component sales.    
None of the Company's employees is covered by a collective bargaining agreement 
and the Company believes its employee relations are good.                       

FACILITIES                                                                      

     The Company's principal offices are located at 180 Harbor Drive, Suite 200,
Sausalito, California 94965. The Company occupies space in Sausalito under a    
lease that covers approximately 5,500 square feet of office space and expires on
March 14, 1999. Engine financing, sales, trading and general administrative     
activities are conducted from the Sausalito location. The Company also leases   
approximately 22,800 square feet of office and warehouse space for WASI's       
operations at 291 Harbor Way, South San Francisco, California 94080. This lease 
expires on May 31, 1998. See Note 10 to the Audited Financial Statements. In    
addition, the Company leases approximately 10,730 square feet of space at 1769  
West University Drive, Suite 177, Tempe, Arizona 85821, which is used for parts 
storage and distribution. This lease expires on July 31, 1999. The Company      
believes that its current facilities may not be adequate for its needs and      
anticipates acquiring additional facilities as needed.                          

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS                                                

 The following table sets forth certain information with respect to each
person who is a director or executive officer of the Company.                   

                                                        [Enlarge/Download Table]

               NAME                  AGE*                    POSITION                 
-----------------------------------  -----  ------------------------------------------
                                                                                      
Charles F. Willis, IV                 49    President and Chief Executive Officer,    
                                            Chairman of the Board of Directors        
Donald A. Nunemaker                   50    Executive Vice President and Chief        
                                            Administrative Officer                    
James D. McBride                      41    Executive Vice President and Chief        
                                            Financial Officer                         
William L. McElfresh                  51    Director and Executive Vice President --  
                                            Strategic Development                     
Steven D. Oldenburg                   48    Senior Vice President -- Sales and        
                                            Marketing                                 
Rae A. Capps                          45    Senior Vice President and General Counsel 
Elliot M. Fischer                     49    Vice President -- Syndications            
Edwin F. Dibble                       54    President -- WASI                         
Ross K. Anderson (1)                  56    Director                                  
William M. LeRoy (1)                  55    Director                                  
Willard H. Smith, Jr. (1)             60    Director                                  

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

*Age listed as of September 30, 1997                                            

(1) Member of the Audit and Compensation Committees of the Board of Directors   

  Set forth below is certain information with respect to each director and
executive officer of the Company.                                               

  CHARLES F. WILLIS, IV is the founder of the Company, has served as Chief
Executive Officer, President and a Director since its incorporation in 1985 and 
has served as Chairman of the Board of Directors since 1996. Mr. Willis has 31  
years of experience in the aviation industry. He has provided a wide range of   
consulting services for the aviation industry, including fleet planning, cost of
recertification estimation, assistance with purchase and lease documentation,   
appraisal of competing equipment and evaluation of financing proposals. From    
1975 to 1985, Mr. Willis served as President of the Company's predecessor,      
Charles F. Willis Company, which purchased, financed and/or sold a variety of   
large commercial transport aircraft and provided consulting services to the     
aviation industry. During 1974, Mr. Willis operated a small business not        
involved in the aviation industry. From 1972 through 1973, Mr. Willis was       
Assistant Vice President of Sales at Seaboard World Airlines, a freight carrier.
From 1965 through 1972, he held various positions at Alaska Airlines, including 
positions in the departments of flight operations, sales and marketing.         

  DONALD A. NUNEMAKER has served as the Company's Executive Vice President
and Chief Administrative Officer since July of 1997. Mr. Nunemaker is           
responsible for managing the day-to-day operation of the Company and has been   
extensively involved in the equipment leasing industry since 1973. From 1995 to 
1996, Mr. Nunemaker was President and Chief Executive Officer of LeasePartners, 
Inc., a small ticket vendor leasing company based in Burlingame, California,    
which was acquired by Newcourt Credit Group. From 1990 to 1994, Mr. Nunemaker   
was Executive Vice President of Concord Asset Management, Inc., an aircraft and 
computer leasing subsidiary of Concord Leasing, Inc., which was owned by the    
HSBC Group. Before joining Concord in 1990, Mr. Nunemaker was President of Banc 
One Leasing Corporation of New Jersey, which was Banc One's small ticket leasing
subsidiary. Prior to that he spent thirteen years with Chase Manhattan Leasing  
Company in a variety of senior line and staff positions. His last position at   
Chase was that of Senior Vice President & Division Executive -- Special Products
Division, which included management responsibility for Chase Aircraft Finance   
Company, Chase/Horizon Creditcorp and the AT&T Finance Group. Mr. Nunemaker has 
an M.B.A. from Indiana University.                                              

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   JAMES D. MCBRIDE has served as the Company's Executive Vice President and
Chief Financial Officer since September of 1997. Prior to joining the Company,  
Mr. McBride was Senior Vice President and the Chief Financial Officer of Triton 
Container International Limited, an international lessor serving intermodal     
shipping companies worldwide. During his twelve year tenure at Triton, in       
addition to the position of Senior Vice President, Mr. McBride held the         
positions of Vice President, Finance; Vice President, Treasurer; and Director of
Finance. Prior to joining Triton, Mr. McBride held various positions at Crocker 
National Bank and Bank of America. Mr. McBride has been involved in leasing and 
financial services for over twenty years. He has significant experience in the  
areas of capital formation, accounting and control, domestic and international  
operations, information systems and risk management. Mr. McBride holds a M.B.A. 
from the Haas School of Business at the University of California, Berkeley.     

     WILLIAM L. MCELFRESH was named as the Company's Executive Vice President of
Strategic Development in February 1997. Prior to that, he served as the         
Company's Executive Vice President-Marketing since 1989 and was named a Director
of the Company in 1996. For approximately 29 years, Mr. McElfresh has been      
involved with commercial jet engine sales and support. From 1987 through 1989,  
he was a partner with Turbine Engine Support Co., Inc. and provided sales,      
brokerage, exchange and monitoring programs for aircraft engines and parts. As  
Vice President, Sales and Marketing for International Aircraft Support, Inc.    
from 1983 through 1987, Mr. McElfresh found and exploited new market            
opportunities for commercial jet aircraft engines and spare parts. From 1977    
through 1983, he developed and managed the worldwide spares support and overall 
operations for the Power Accessories Division of TRW, Inc. From 1972 to 1983, he
established a marketing program in Asia and Pacific island markets to support   
the growth for the new Component Repair Group of TRW Inc., which manufactured   
the major aircraft engine components for Pratt and Whitney, General Electric and
CFM. From 1968 to 1972, he was an Aircraft Maintenance Officer in the United    
States Air Force assigned to VIP and NASA Operations Support. Mr. McElfresh     
holds a B.A. from the University of Kansas and an M.B.A. from Pepperdine        
University.                                                                     

STEVEN D. OLDENBURG was named as the Company's Senior Vice            
President -- Sales and Marketing in August 1997. Prior to that, he served as the
Company's Senior Vice President -- Capital Markets since November 1995. For over
19 years, Mr. Oldenburg has been involved in the leasing industry, providing and
arranging debt and equity. Mr. Oldenburg has structured and negotiated several  
hundred millions of dollars in equipment financings for national and            
international leveraged and single investor leases. As Vice President,          
Syndications, for Marine Midland Business Loans, Inc. (formerly Concord Leasing,
Inc.) from 1991 through 1994, he specialized in financing commercial aircraft   
and other transportation-related equipment. From 1976 through 1991, he also     
managed the financing for high tech equipment, medical equipment, rail equipment
and corporate aircraft for other international lessors. Mr. Oldenburg holds a   
B.S. in Management from the University of Vermont and a Certificate in          
Accounting from Bentley College in Boston.                                      

    RAE A. CAPPS has served as the Company's Senior Vice President and General
Counsel since June of 1997 and is responsible for overseeing the legal affairs  
of the Company. Ms. Capps was Vice President, General Counsel and Corporate     
Secretary of Hawaiian Airlines from 1993 to June of 1997. She was an attorney in
the law firm of Goodsill Anderson Quinn & Stifel in Honolulu, Hawaii from 1990  
to 1993 and an attorney in the law firm of Gendel, Raskoff, Shapiro & Quittner  
in Los Angeles from 1987 to 1990. Ms. Capps holds a B.A. from the University of 
Texas and a J.D. from the University of Utah.                                   

ELLIOT M. FISCHER has served as the Company's Vice                    
President -- Syndications since September of 1997. From March of 1995 to        
September of 1997, he served as the Company's Chief Financial Officer and       
Controller. During the 15 years prior to joining the Company, Mr. Fischer held  
senior level finance positions at several leasing companies, including          
LeasePartners, Inc. from 1994 to 1995; USL Capital from 1990-1994; and Chrysler 
Capital Corporation from 1980 to 1987. During 1994, Mr. Fischer was Corporate   
Controller at LeasePartners, a vendor leasing company in Burlingame, California.
His experience includes financial reporting and controls, forecasting,          
budgeting, strategic planning and reporting systems. Prior experience includes  
financial reporting in manufacturing environments, and a three-year assignment  
with International Paper Company as Chief Financial Officer of a paper          
converting facility in Japan. Mr. Fischer worked in public accounting for three 
years and is a Certified Public Accountant, holding a B.B.A. in accounting from 
Pace University in New York.                                                    

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     EDWIN F. DIBBLE has served as President of WASI since May of 1997 and was a
Vice President of WASI from October of 1994 to May of 1997. From 1986 to 1994,  
Mr. Dibble served as Vice President of engines and parts sales for Turbine      
Engine Support Co., Inc. From 1984 to 1986, Mr. Dibble worked in purchasing for 
International Aircraft Support, Inc. From 1964 to 1984, Mr. Dibble held various 
positions with United Airlines in the areas of maintenance sales and services.  
Mr. Dibble also worked in the Powerplant Planning Department, coordinating the  
support for all types of aircraft engines operated by United Airlines.          

    ROSS K. ANDERSON has served as a Director of the Company since 1996. Since
1993, Mr. Anderson has been President and Chief Executive Officer of Astech     
Manufacturing, Inc. ("Astech"), an aerospace company manufacturing proprietary  
metal honeycomb products using high temperature alloys. Astech's principal      
customers include Boeing, Pratt & Whitney and General Electric for commercial   
aircraft engines. From 1991 to 1993, Mr. Anderson was employed at Teledyne      
Aircraft Group as Group Executive. From 1987 to 1991, Mr. Anderson served as    
President of Teledyne Picco. Mr. Anderson received his M.S. in Aeronautical     
Engineering from California Institute of Technology, his M.B.A. from Stanford   
Graduate School of Business and his B.S. from the United States Naval Academy.  

 WILLIAM M. LEROY has served as a Director of the Company since 1996. In
1993, Mr. LeRoy established the LeRoy Accountancy Corporation, an audit firm    
specializing in the audits of employee benefit plans. From 1965 to 1993, Mr.    
LeRoy served in various positions at Ernst & Young LLP an independent accounting
firm, in the Chicago, San Jose and San Francisco offices including as audit     
partner responsible for the financial institution and leasing company practice  
in northern California. Mr. LeRoy received his M.B.A. from Golden Gate          
University and his B.S. in Accounting from Northern Illinois University.        

   WILLARD H. SMITH, JR. has served as a Director of the Company since 1996.
From 1979 through 1995, Mr. Smith was employed at Merrill Lynch, Pierce Fenner &
Smith Incorporated ("Merrill Lynch") and served as Managing Director since 1983 
in their Equity Capital Markets Division. From 1992 through 1995, Mr. Smith's   
primary focus was the real estate investment trust industry. His duties as      
Managing Director at Merrill Lynch included evaluating companies' structure and 
equity requirements, coordinating the placement of equity offerings with Merrill
Lynch's retail and institutional client base, and assessing the market's demand 
for potential offerings. Mr. Smith is also a Board Member of the Cohen & Steers 
Realty Shares, Cohen & Steers Realty Income Fund, the Cohen & Steers Total      
Return Realty Fund, the Cohen & Steers Special Equity Fund, Inc., Cohen & Steers
Equity Income Fund, Essex Property Trust, Inc., Highwoods Properties, Inc. and  
Realty Income Corporation. Prior to joining Merrill Lynch, Mr. Smith worked at  
F. Eberstadt & Co. from 1971 to 1979. Mr. Smith received his B.S. in Business   
Administration, and B.S. in Industrial Engineering from the University of North 
Dakota in 1959 and 1960, respectively.                                          

    All directors hold office until the next annual meeting of shareholders or
until their successors have been elected. Executive officers serve at the       
discretion of the Board. There are no family relationships between any of the   
directors or executive officers of the Company.                                 

DIRECTOR COMPENSATION                                                           

  Non-employee members of the Board are each paid an annual fee of $10,000
and are reimbursed for their out-of-pocket expenses incurred to attend Board of 
Directors or Committee meetings. They also receive $1,000 for each Board meeting
and $500 for each Committee meeting which they attend in person, and $500 for   
each Board and Committee meeting held by telephone. Pursuant to the automatic   
option grant program under the 1996 Plan, each individual who first becomes a   
non-employee Board member after the effective date of the Plan is eligible to   
receive an option grant for 5,000 shares of Common Stock at an exercise price   
per share equal to 100% of the fair market value on the date of grant. In       
addition, at each annual shareholders meeting, beginning with the 1997 Annual   
Meeting, each individual who is to continue to serve as a non-employee Board    
member after the meeting will receive an additional option grant to purchase    
1,000 shares of Common Stock whether or not such individual has been in the     
prior employ of the Company.                                                    

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INDEMNIFICATION AND LIMITATION OF LIABILITY                                     

  The Company has adopted provisions in its Articles of Incorporation that
eliminate the personal liability of its directors for monetary damages arising  
from a breach of their fiduciary duties in certain circumstances to the fullest 
extent permitted by law and that authorize the Company to indemnify its         
directors and officers to the fullest extent permitted by law. Such limitation  
of liability does not affect the availability of equitable remedies such as     
injunctive relief or rescission.                                                

    The Company has entered into indemnification agreements with its directors
and certain officers containing provisions which are in some respects broader   
than the specific indemnification provisions contained in the California        
Corporation Code. The indemnification agreements may require the Company, among 
other things, to indemnify such officers and directors against certain          
liabilities that may arise by reason of their status or service as directors or 
officers (other than liabilities arising from willful misconduct of a culpable  
nature), to advance their expenses incurred as a result of any proceeding       
against them as to which they could be indemnified, and to obtain directors and 
officers' insurance if available on reasonable terms.                           

At present, there is no pending litigation or proceeding involving a  
director, officer, employee or agent of the Company where indemnification will  
be required or permitted. The Company is not aware of any threatened litigation 
or proceeding that may result in a claim for such indemnification.              

AUDIT COMMITTEE                                                                 

   The Audit Committee, whose members are Ross K. Anderson, William M. LeRoy
and Willard H. Smith, Jr., meets with the Company's financial management and its
independent public accountants to review internal financial information, audit  
plans and results, and financial reporting procedures.                          

COMPENSATION COMMITTEE                                                          

    The Compensation Committee, whose members are Ross K. Anderson, William M.
LeRoy and Willard H. Smith, Jr., reviews and approves the Company's compensation
arrangements for senior management and administers the Company's 1996 Plan.     

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EXECUTIVE COMPENSATION                                                          

 The following table provides certain summary information concerning the
compensation earned by (i) the Company's Chief Executive Officer and (ii) each  
of the four other most highly compensated executive officers of the Company     
serving as such as of the end of the last fiscal year whose total annual salary 
and bonus exceeded $100,000 for the fiscal year ended December 31, 1996. Such   
individuals will be hereafter referred to as the "Named Executive Officers."    

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                                                       LONG-TERM     
                                                                                  COMPENSATION AWARDS
                                                    ANNUAL COMPENSATION           -------------------
                                           -------------------------------------      SECURITIES     
                                   FISCAL                          OTHER ANNUAL       UNDERLYING     
   NAME AND PRINCIPAL POSITION      YEAR    SALARY       BONUS     COMPENSATION         OPTIONS      
---------------------------------  ------  --------     --------   -------------  -------------------
                                                                                                     
Charles F. Willis, IV               1996   $448,488     $175,000           --                --      
  Chief Executive Officer           1995   $577,704           --           --                --      
William L. McElfresh                1996   $150,833     $ 63,265           --           150,000      
  Executive Vice President          1995   $116,000     $134,892           --                --      
John F. Votruba                     1996   $164,956     $ 40,000           --            30,000      
  General Counsel (1)               1995   $141,908           --           --                --      
Edwin F. Dibble                     1996   $100,000     $264,615(2)         --           30,000      
  Vice President-WASI               1995   $100,000     $ 94,485(2)         --               --      
Steven D. Oldenburg                 1996   $ 94,792     $ 31,000      $23,387(3)         30,000      
  Senior Vice President             1995   $ 86,969(4)  $ 30,000           --                --      

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

(1) Mr. Votruba resigned from the Company in June of 1997.                      

(2) Mr. Dibble's bonus is determined as a percentage of pre-tax profits of WASI.

(3) Represents relocation expenses paid by the Company.                         

(4) Includes $73,995 in consulting fees paid by the Company to Mr. Oldenburg    
before he became an employee of the Company.                            

COMPENSATION ARRANGEMENTS AND EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE        
OFFICERS                                                                        

  CHARLES F. WILLIS, IV. Mr. Willis' base salary for 1997 will be $250,000
and his maximum bonus will be $350,000.                                         

WILLIAM L. MCELFRESH. Effective July 1, 1996, Mr. McElfresh signed a  
five-year employment agreement with the Company. The agreement automatically    
renews for additional one year terms unless either party gives notice of        
nonrenewal six months prior to expiration of the current term. Mr. McElfresh's  
base salary is $150,000 per year, subject to adjustment by the Company's Board  
of Directors. Mr. McElfresh is entitled to receive bonuses under the Company's  
Incentive Compensation Plan.                                                    

STEVEN D. OLDENBURG. Effective July 1, 1996, Mr. Oldenburg signed a   
five-year employment agreement with the Company. The agreement automatically    
renews for additional one year terms unless either party gives notice of        
nonrenewal six months prior to expiration of the current term. Mr. Oldenburg's  
base salary is $150,000 per year, subject to adjustment by the Company's Board  
of Directors. Mr. Oldenburg is entitled to receive bonuses under the Company's  
Incentive Compensation Plan. The Company must provide Mr. Oldenburg with at     
least six months' notice prior to termination of his employment.                

EDWIN F. DIBBLE. Effective January 1, 1997, Mr. Dibble has signed a   
five-year employment agreement with WASI. The agreement automatically renews for
an additional year unless WASI gives notice of termination sixty days prior to  
the expiration of the employment period. Mr. Dibble's base salary is $100,000   
per year, subject to adjustment by WASI's Board of Directors.                   

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INCENTIVE COMPENSATION PLAN                                                     

  The Company has established an incentive compensation plan for executive
officers, certain independent contractors and sales personnel (the "Incentive   
Compensation Plan"). This plan became effective as of July 1, 1996 and generally
provides for payments expressed as a percentage of a participant's base         
compensation upon achievement of pre-agreed financial and qualitative           
objectives. The bonus percentages are established annually by the Compensation  
Committee of the Board of Directors. Bonuses can be tiered depending upon       
individual, profit center and Company performance. Generally, performance       
criteria are based on achievements of annual budgets, return on equity and      
assets and, to a lesser degree, on subjective evaluations of performance and    
individual relative contribution to the Company's goals and objectives. A       
portion of any bonus over a specific amount will be paid out by the Company over
a one year period and is subject to forfeiture if the participant terminates his
relationship with the Company prior to the scheduled payment date.              

1996 STOCK OPTION/STOCK ISSUANCE PLAN                                           

   The Company's 1996 Plan was adopted by the Board of Directors on June 21,
1996. 525,000 shares of Common Stock have been authorized for issuance under the
1996 Plan.                                                                      

The 1996 Plan is divided into three separate components: (i) the      
Discretionary Option Grant Program under which eligible individuals may, at the 
discretion of the Plan Administrator, be granted options to purchase shares of  
Common Stock at an exercise price not less than 100% of their fair market value 
on the grant date, (ii) the Stock Issuance Program under which such individuals 
may, in the Plan Administrator's discretion, be issued shares of Common Stock   
directly, through the purchase of such shares at an exercise price equal to 100%
of their fair market value at the time of issuance or as a bonus tied to the    
performance of services and (iii) the Automatic Option Grant Program under which
option grants will automatically be made at periodic intervals to eligible      
non-employee Board members to purchase shares of Common Stock at an exercise    
price equal to 100% of their fair market value on the grant date.               

   The Discretionary Option Grant Program and the Stock Issuance Program are
administered by the Compensation Committee. The Compensation Committee as Plan  
Administrator has complete discretion to determine which eligible individuals   
are to receive option grants or stock issuances, the time or times when such    
option grants or stock issuances are to be made, the number of shares subject to
each such grant or issuance, the status of any granted option as either an      
incentive stock option or a non-statutory stock option under the Federal tax    
laws, the vesting schedule to be in effect for the option grant or stock        
issuance and the maximum term for which any granted option is to remain         
outstanding. However, in no event may any one participant in the 1996 Plan      
receive option grants or direct stock issuances for more than 250,000 shares per
calendar year.                                                                  

 In the event that the Company is acquired by merger or asset sale, each
outstanding option under the Discretionary Option Grant Program, which is not to
be assumed or replaced by the successor corporation, will automatically         
accelerate in full, and all unvested shares under the Stock Issuance Program    
will immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are to be assigned to the successor corporation. The    
Plan Administrator has the authority under the Discretionary Option Grant and   
Stock Issuance Programs to grant options and to structure repurchase rights so  
that the shares subject to those options or repurchase rights will automatically
vest in the event of a change in control of the Company effected by a successful
tender offer for more than 50% of the outstanding voting stock or by proxy      
contest for the election of Board members. The Plan Administrator also has the  
authority to provide for automatic vesting of options and unvested shares upon  
the individual's service being terminated, whether involuntarily or through a   
resignation for good reason, within twelve (12) months following either a merger
or asset sale or a change in control.                                           

Stock appreciation rights are authorized for issuance under the       
Discretionary Option Grant Program which provide the holders with the election  
to surrender their outstanding options for an appreciation distribution from the
Company equal to the excess of (i) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (ii) the aggregate exercise 
price payable for such shares. Such appreciation distribution may be made in    
cash or in shares of Common Stock. The Plan                                     

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Administrator also has discretion to issue limited stock appreciation rights    
under the Discretionary Option Grant Program to certain officers and directors  
of the Company which will provide the holders with the election, upon the       
successful completion of a hostile tender offer for more than 50% of the        
Company's outstanding voting securities, to surrender their outstanding options 
for a cash distribution from the Company in an amount per surrendered option    
share equal to the excess of (i) the highest reported price per share paid in   
effecting the take-over (ii) the option exercise price payable per share.       

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program in return for  
the grant of new options for the same or different number of option shares with 
an exercise price per share based upon the fair market value of the Common Stock
on the new grant date.                                                          

 Under the Automatic Option Grant Program, each individual who becomes a
non-employee Board member after the effective date of the Plan will receive an  
option grant on such date for 5,000 shares of Common Stock exercisable at an    
exercise price per share equal to 100% of the fair market value on the date of  
grant, provided such individual has not otherwise been in the prior employ of   
the Company. In addition, at each annual shareholders meeting, beginning with   
the 1997 Annual Meeting, each individual who is to continue to serve as a       
non-employee Board member after the meeting will receive an additional option   
grant to purchase 1,000 shares of Common Stock whether or not such individual   
has been in the prior employ of the Company.                                    

Each automatic grant will have a term of 10 years, subject to earlier 
termination following the optionee's cessation of Board service. Each automatic 
option will be immediately exercisable; however, any shares purchased upon      
exercise of the option will be subject to repurchase should the optionee's      
service as a non-employee Board member cease prior to vesting of the shares. The
initial 5,000-share grant will vest in four equal and successive annual         
installments over the optionee's period of Board service. Each additional 1,000-
share grant will vest upon the optionee's completion of one year of Board       
service measured from the grant date. However, each outstanding option will     
immediately vest upon (i) certain changes in the ownership or control of the    
Company or (ii) the death or disability of the optionee while serving as a Board
member.                                                                         

     The Board may amend or modify the 1996 Plan at any time. The 1996 Plan will
terminate on June 20, 2006, unless sooner terminated by the Board.              

 The following table sets forth information concerning the stock options
granted by the Company during the 1996 fiscal year to the Named Executive       
Officers. No stock appreciation rights were granted during the 1996 fiscal year 
to the Named Executive Officers.                                                

OPTIONS GRANTS IN 1996 FISCAL YEAR

                                                        [Enlarge/Download Table]

                                                                                POTENTIAL       
                                                                            REALIZABLE VALUE    
                                                                               AT ASSUMED       
                                      PERCENT OF                             ANNUAL RATES OF    
                           NUMBER       TOTAL                                     STOCK         
                             OF        OPTIONS                             PRICE APPRECIATION   
                          SECURITIES   GRANTED    EXERCISE                         FOR          
                          UNDERLYING  EMPLOYEES    OR BASE                   OPTION TERM(1)     
                          OPTIONS     IN FISCAL   PRICE PER  EXPIRATION  -----------------------
          NAME            GRANTED     YEAR 1996   SHARE (2)    DATE         5%           10%    
------------------------  --------    ----------  ---------  --------    --------     ----------
                                                                                                
Charles F. Willis, IV...        --         NA          NA          NA    $     --     $       --
William L. McElfresh....   150,000       47.6%      $8.00     9/16/06     754,673      1,912,491
John F. Votruba.........    30,000        9.5%      $8.00     9/16/06     150,935        382,498
Edwin F. Dibble.........    30,000        9.5%      $8.00     9/16/06     150,935        382,498
Steven D. Oldenburg.....    30,000        9.5%      $8.00     9/16/06     150,935        382,498

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

(1) There is no assurance provided to the option holder or any other holder of  
  the Company's securities that the actual stock price appreciation over the
10-year option term will be at the 5% and 10% assumed annual rates of   
compounded stock price appreciation.                                    

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(2) The exercise price may be paid in cash, in shares of Common Stock valued at 
fair market value on the exercise date or through a cashless exercise   
    procedure involving a same-day sale of the purchased shares. The Company may
    also finance the option exercise by loaning the optionee sufficient funds to
 pay the exercise price for the purchased shares and the Federal and state
  income and employment tax liability incurred by the optionee in connection
with such exercise.                                                     

The following table sets forth certain information with respect to the
Named Executive Officers concerning shares of the Company's Common Stock subject
to exercisable and unexercisable stock options which the Named Executive        
Officers held at the end of the 1996 fiscal year. No options or SARs were       
exercised by any Named Executive Officer during the 1996 fiscal year. Except to 
the extent of any limited stock appreciation rights awarded in connection with  
outstanding options, none of the Named Executive Officers held any stock        
appreciation rights at the end of that fiscal year.                             

                                                        [Enlarge/Download Table]

                                                            FISCAL YEAR-END OPTION VALUES                 
                                           ---------------------------------------------------------------
                                               NUMBER OF SECURITIES              VALUE OF UNEXERCISED     
                                              UNDERLYING UNEXERCISED            IN-THE-MONEY OPTIONS AT   
                                            OPTIONS AT FISCAL YEAR-END            FISCAL YEAR-END(1)      
                                           -----------------------------     -----------------------------
                  NAME                     EXERCISABLE     UNEXERCISABLE     EXERCISABLE     UNEXERCISABLE
-----------------------------------------  -----------     -------------     -----------     -------------
                                                                                                          
Charles F. Willis, IV....................           --                --      $      --        $      --  
William L. McElfresh.....................       37,500           112,500        182,813          548,438  
John F. Votruba..........................        7,500            22,500         36,563          109,688  
Edwin F. Dibble..........................        7,500            22,500         36,563          109,688  
Steven D. Oldenburg......................        7,500            22,500         36,563          109,688  

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

(1) Based on the fair market value of the shares at the end of the 1996 fiscal  
 year ($12.875 per share) less the option exercise price payable for those
shares.                                                                 

As of September 30, 1997, 453,500 options have been awarded (15,000 of
which have been exercised) and 71,500 shares of Common Stock were reserved for  
issuance under the 1996 Plan.                                                   

EMPLOYEE STOCK PURCHASE PLAN                                                    

The Company's Employee Stock Purchase Plan (the "Purchase Plan") was  
adopted by the Board of Directors on June 21, 1996. The Purchase Plan is        
designed to allow eligible employees of the Company and participating           
subsidiaries to purchase shares of Common Stock, at semi-annual intervals,      
through their periodic payroll deductions. A reserve of 75,000 shares of Common 
Stock was established for this purpose.                                         

  Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent      
semi-annual entry date (the first business day of February and August each      
year). Individuals who first become eligible employees after the start date of  
the offering period may join the Purchase Plan on any subsequent semi-annual    
entry date within that period.                                                  

   Payroll deductions may not exceed 10% of base salary, and the accumulated
payroll deductions of each participant will be applied to the purchase of shares
on his or her behalf on each semi-annual purchase date (the last business day in
January and July) at a purchase price per share equal to eighty-five percent    
(85%) of the lower of (i) the fair market value of the Common Stock on the      
participant's entry date into the offering period or (ii) the fair market value 
on the semi-annual purchase date. In no event, however, may any participant     
purchase more than 500 shares on any one semi-annual purchase date.             

  The Purchase Plan will terminate on the earlier of (i) the last business
day of July 2006, (ii) an earlier date determined by the Board or (iii) the date
all shares available for issuance have been sold.                               

    As of September 30, 1997, 10,527 shares of Common Stock had been issued by
the Company as a result of employee stock purchases under the Purchase Plan and 
64,473 shares of Common Stock remain reserved for issuance under the Purchase   
Plan.                                                                           

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CERTAIN TRANSACTIONS

   Related Party Transactions. In September 1993, the Company entered into a
management agreement with T-4 Inc. ("T-4"), an entity owned by Mr. Willis, to   
provide administrative and management services for the relative cost of such    
services. For the years ended December 31, 1994 and 1995, the Company recognized
$120,000 and $30,000 in management fee income under this agreement. At December 
31, 1995, the Company wrote off its $30,000 receivable. Effective July 1, 1996, 
the Company purchased T-4 for a nominal cash amount.                            

     Loans to Shareholder. During 1994 and 1995, the Company made loans totaling
$19,600 and $165,635, respectively, to Mr. Willis. Between January 1, 1996 and  
July 31, 1996 the Company made loans totaling $265,478 to Mr. Willis. The       
outstanding balance on loans from the Company to Mr. Willis was $373,845 as of  
December 31, 1994, $481,789 as of December 31, 1995 and $743,731 as of July 31, 
1996. Of such loans, $10,000 were represented by a promissory note that bears   
interest at 8% per annum. The remainder of such loans are non-interest bearing. 
Immediately prior to the consummation of the Initial Public Offering, the       
Company declared a cash dividend to Mr. Willis in the amount of approximately   
$951,475 in order to facilitate the repayment in full of the loans described    
above and to pay related income tax liabilities.                                

     Contribution of Minority Interest in WASI. Upon consummation of the Initial
Public Offering, Mr. Dibble, Vice President of WASI, together with his wife,    
contributed all of the shares owned by them in WASI (approximately a 20%        
interest) to the Company in exchange for 16,136 shares of Common Stock of the   
Company. The number of shares of Common Stock was determined by dividing        
$129,091 by the initial price to the public in the Initial Public Offering. The 
Company believes that this method of valuation was no less favorable to the     
Company than would otherwise have been received in a similar transaction with an
unaffiliated third party.                                                       

  Any future transactions between the Company and its officers, directors,
and affiliates will be on terms no less favorable to the Company than can be    
obtained from unaffiliated third parties. Such transactions with such persons   
will be subject to approval by a majority of the Company's outside directors or 
will be consistent with policies approved by such outside directors.            

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PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial   
ownership of the Company's Common Stock as of September 30, 1997 by: (i) each   
person who is known to the Company to own beneficially more than five percent of
the outstanding shares of the Company's Common Stock; (ii) each director; (iii) 
each officer listed on the Summary Compensation Table; and (iv) all directors   
and executive officers as a group.                                              

                                                        [Enlarge/Download Table]

                                                                 COMMON STOCK                 
                                                 ---------------------------------------------
                                                               PERCENTAGE OF     PERCENTAGE OF
                                                               CLASS BEFORE       CLASS AFTER 
    NAME AND ADDRESS OF BENEFICIAL OWNER(1)       SHARES         OFFERING          OFFERING   
-----------------------------------------------  ---------     -------------     -------------
                                                                                              
Charles F. Willis, IV(2).......................  3,060,657(3)       56.1%             44.0%   
William L. McElfresh(2)........................     77,939           1.4               1.1    
Steven D. Oldenburg(2).........................     15,849         *                 *        
Edwin F. Dibble(2)(4)..........................     37,760         *                 *        
Ross K. Anderson(2)............................      7,000         *                 *        
William M. LeRoy(2)............................      6,000         *                 *        
Willard H. Smith, Jr.(2).......................      7,000         *                 *        
All directors and executive officers as a group                                               
  (11 persons).................................  3,244,205          59.5%             46.7%   

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

*  Less than one percent                                                      

(1) Except as indicated in the footnotes to this table, the shareholders named  
in the table are known to the Company to have sole voting and investment
    power with respect to all shares of Common Stock shown as beneficially owned
   by them, subject to community property laws where applicable. The number of
    shares beneficially owned includes Common Stock of which such individual has
    the right to acquire beneficial ownership either currently or within 60 days
   after September 30, 1997 including, but not limited to, shares beneficially
owned upon the exercise of an option.                                   

(2) The mailing address for each individual is c/o Willis Lease Finance         
Corporation, 180 Harbor Drive, Suite 200, Sausalito, CA 94965.          

(3) All of the 3,060,657 shares are held by CFW Partners, L.P., a California    
   Limited Partnership of which Charles F. Willis, IV holds a one percent (1%)
    interest as the sole general partner and of which he holds an eighty percent
   (80%) interest as a limited partner. A trust for the benefit of Mr. Willis'
son holds the remaining nineteen percent (19%) interest as a limited    
partner.                                                                

(4) 16,136 of the shares were received in exchange for a minority interest in   
WASI, and are held by Mr. Dibble and his wife.                          

DESCRIPTION OF CAPITAL STOCK

   The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, no par value, and 5,000,000 shares of Preferred Stock, no par  
value. After giving effect to the Offering, there will be 6,952,320 shares of   
Common Stock outstanding. No shares of the Company's Preferred Stock will be    
outstanding upon consummation of the Offering.                                  

COMMON STOCK                                                                    

  Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is       
entitled to receive such dividends as may be declared by the Board of Directors 
out of funds legally available therefor, and, in the event of liquidation, to   
share pro rata in any distribution of the Company's assets after payment or     
providing for the payment of liabilities and the liquidation preference of any  
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters      
presented to a vote of shareholders. Holders of Common Stock have no preemptive 
rights to purchase or subscribe for any stock or                                

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other securities and there are no conversion rights or redemption or sinking    
fund provisions with respect to such Common Stock. All outstanding shares of    
Common Stock are, and the shares of Common Stock offered hereby will be when    
issued, fully paid and nonassessable.                                           

PREFERRED STOCK                                                                 

   The Company is authorized to issue 5,000,000 shares of Preferred Stock in
one or more series, and to designate the rights, preferences, limitations,      
restrictions of and upon shares of each series, including voting, redemption and
conversion rights. The Board of Directors may also designate dividend rights and
preferences in liquidation. It is not possible to state the effect of the       
authorization and issuance of any series of Preferred Stock upon the rights of  
holders of Common Stock until the Board of Directors determines the specific    
terms, rights and preferences of such a series of Preferred Stock. However, such
effects might include, among other things, restricting dividends on the Common  
Stock, diluting the voting power of the Common Stock or impairing the           
liquidation rights of such shares without further action by holders of Common   
Stock. In addition, under certain circumstances, the issuance of Preferred Stock
may render more difficult or tend to discourage a merger, tender offer or proxy 
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management, which could thereby depress  
the market price of the Company's Common Stock. At present, the Company has no  
plans to issue any shares of Preferred Stock.                                   

CERTAIN ANTI-TAKEOVER PROVISIONS                                                

   Certain provisions of law and the Company's Articles of Incorporation and
Bylaws could make more difficult the acquisition of the Company by means of a   
tender offer, a proxy contest or otherwise, and the removal of incumbent        
officers and directors. These provisions include authorization of the issuance  
of up to 5,000,000 shares of Preferred Stock, with such characteristics that may
render it more difficult or tend to discourage a merger, tender offer or proxy  
contest, as described in "Preferred Stock" above. The Company's Articles of     
Incorporation also provide that, for as long as the Company has a class of stock
registered pursuant to the Exchange Act, shareholder action can be taken only at
an annual or special meeting of shareholders and may not be taken by written    
consent. The Company's Bylaws also limit the ability of shareholders to raise   
matters at a meeting of shareholders without giving advance notice. In addition,
cumulative voting has been eliminated. These provisions are expected to         
discourage certain types of coercive takeover practices and inadequate takeover 
bids, and to encourage persons seeking to acquire control of the Company to     
negotiate first with the Company. The Company believes that the benefits of     
increased protection of the Company's potential ability to negotiate with the   
proponent of an unfriendly or unsolicited proposal to acquire or restructure the
Company, outweigh the disadvantages of discouraging such proposals because,     
among other things, negotiation of such proposals could result in an improvement
of their terms.                                                                 

TRANSFER AGENT AND REGISTRAR                                                    

The Transfer Agent and Registrar of the Common Stock is American Stock
Transfer & Trust Company.                                                       

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UNDERWRITING

Under the terms of, and subject to the conditions in, the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration         
Statement of which this Prospectus forms a part, the Underwriters named below,  
for whom Lehman Brothers Inc. and Dain Bosworth Incorporated are acting as      
representatives (the "Representatives"), have severally agreed to purchase from 
the Company, and the Company has agreed to sell to each Underwriter, the        
aggregate number of shares of Common Stock set forth opposite the name of each  
such Underwriter below:                                                         

                                                                [Download Table]

                                                                    NUMBER OF
                                UNDERWRITERS                         SHARES  
                                                                    ---------
                                                                             
Lehman Brothers Inc...............................................           
Dain Bosworth Incorporated........................................           
                                                                    ---------
          Total...................................................  1,500,000
                                                                    =========

The Underwriting Agreement provides that the obligations of the       
Underwriters to purchase shares of Common Stock are subject to certain          
conditions, and that if any of the foregoing shares of Common Stock are         
purchased by the Underwriters pursuant to the Underwriting Agreement, all the   
shares of Common Stock agreed to be purchased by the Underwriters must be so    
purchased.                                                                      

 The Company has been advised that the Underwriters propose to offer the
shares of Common Stock directly to the public at the public offering price set  
forth on the cover page of this Prospectus, and to certain selected dealers (who
may include the Underwriters) at such public offering price less a selling      
concession not in excess of $          per share. The selected dealers may      
reallow a concession not in excess of $          per share to certain brokers   
and dealers. After the public offering, the offering price, the concession to   
selected dealers and the reallowance may be changed by the Representatives.     

The Company has agreed in the Underwriting Agreement to indemnify the 
Underwriters against certain liabilities, including liabilities under the       
Securities Act of 1933, as amended (the "Securities Act") and to contribute to  
payments that the Underwriters may be required to make in respect thereof.      

    The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 225,000 shares of Common Stock, on the same terms and          
conditions as set forth above to cover over-allotments, if any. To the extent   
that the option is exercised, each Underwriter will be committed, subject to    
certain conditions, to purchase a number of the additional shares of Common     
Stock proportionate to such Underwriter's initial commitment as indicated in the
preceding table.                                                                

 CFW Partners, L.P., and all the directors and executive officers of the
Company have agreed that they will not, subject to certain limited exceptions,  
directly or indirectly, offer, sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for any 
such shares for a period of 90 days after the effective date of the Offering    
without the prior written consent of Lehman Brothers Inc. In addition, the      
Company has agreed that it will not, subject to certain limited exceptions,     
directly or indirectly, offer, sell or otherwise dispose of any shares of Common
Stock or any securities convertible into or exchangeable for such shares without
the prior written consent of Lehman Brothers Inc. for 90 days after the         
effective date of the Offering.                                                 

Until the distribution of the Common Stock is completed, rules of the 
Commission may limit the ability of the Underwriters and certain selling group  
members to bid for and purchase shares of Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that 
stabilize the price of the Common Stock. Such transactions may consist of bids  
or purchases for the purpose of pegging, fixing or maintaining the price of the 
Common Stock.                                                                   

 In addition, if the Representatives over-allot (i.e., if they sell more
shares of Common Stock than are set forth on the cover page of this Prospectus),
and thereby create a short position in the Common Stock in connection with the  
Offering, the Representatives may reduce that short position by purchasing      
Common Stock in the open market. The Representatives also may elect to reduce   
any short position by exercising all or part of the over-allotment option       
described herein.                                                               

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    In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be   
higher than it might otherwise be in the absence of such purchases.             

     Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions 
described above may have on the price of the Common Stock. In addition, neither 
the Company nor any of the Underwriters makes any representation that the       
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.                             

Dain Bosworth Incorporated holds a warrant to acquire 50,000 shares of
Common Stock exercisable at a price of $10.40 per share. The warrant was        
acquired in connection with the participation by Dain Bosworth Incorporated in  
the Initial Public Offering.                                                    

LEGAL MATTERS 

   The validity of the securities offered hereby will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, San Francisco, California. Certain legal
matters in connection with the sale of the securities offered hereby will be    
passed upon for the Underwriters by O'Melveny & Myers LLP, Los Angeles,         
California. An attorney with Gibson, Dunn & Crutcher LLP participating in the   
preparation of this Prospectus beneficially owns shares of Common Stock, in an  
amount less than 0.1% of the outstanding Common Stock of the Company, that were 
purchased after the Initial Public Offering in an open market transaction.      

EXPERTS 

    The Consolidated Financial Statements as of December 31, 1995 and December
31, 1996 and for each of the years in the three-year period ended December 31,  
1996 have been included herein and in the registration statement in reliance    
upon the report of KPMG Peat Marwick LLP, independent certified public          
accountants, appearing elsewhere herein, and upon the authority of said firm as 
experts in accounting and auditing.                                             

ADDITIONAL INFORMATION

  The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other      
information with the Securities and Exchange Commission (the "Commission").     
Reports, proxy statements and other information filed by the Company can be     
inspected without charge at the public reference facilities maintained by the   
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at 
the Commission's Regional Offices located at Northwest Atrium Center, Suite     
1400, 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade       
Center, New York, New York 10048 and may be copied at prescribed rates. The     
Commission also maintains a site on the World Wide Web that contains reports,   
proxy and information statements and other information regarding the Company.   
The address for this site is: http://www.sec.gov.                               

    The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act (together with all amendments and exhibits thereto,
the "Registration Statement") with respect to the securities offered hereby.    
This Prospectus, filed as part of such Registration Statement, does not contain 
all of the information set forth in the Registration Statement, certain portions
of which have been omitted in accordance with the rules and regulations of the  
Commission. Statements made in this Prospectus as to the contents of any        
contract, agreement or other document referred to are not necessarily complete  
and are qualified in their entirety by reference to each such contract,         
agreement or other document which is filed as an exhibit to the Registration    
Statement. The Registration Statement may be inspected without charge at the    
Commission's principal office in Washington, D.C. or at the Commission's        
Regional Offices described above, and copies of such materials can be obtained  
from the Commission's Public Reference Section referred to above at prescribed  
rates.                                                                          

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        [Enlarge/Download Table]

                                                                                        PAGE
                                                                                        ----
                                                                                            
Consolidated Balance Sheet as of September 30, 1997 (unaudited).......................   F-2
Consolidated Statements of Income for the nine months ended September 30, 1997 and the      
  nine months ended September 30, 1996 (unaudited)....................................   F-3
Consolidated Statements of Shareholders' Equity for the nine months ended September         
  30, 1997 (unaudited)................................................................   F-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and      
  September 30, 1996 (unaudited)......................................................   F-5
Notes to Unaudited Consolidated Financial Statements..................................   F-6
Report of Independent Accountants dated March 6, 1997.................................   F-8
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995.............   F-9
Consolidated Statements of Income for the years ended December 31, 1996, December 31,       
  1995 and December 31, 1994..........................................................  F-10
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996,      
  December 31, 1995 and December 31, 1994.............................................  F-11
Consolidated Statements of Cash Flows for the years ended December 31, 1996, December       
  31, 1995 and December 31, 1994......................................................  F-12
Notes to Consolidated Financial Statements............................................  F-13

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEET

ASSETS

                                                        [Enlarge/Download Table]

                                                                              SEPTEMBER 30, 1997
                                                                              ------------------
                                                                                 (UNAUDITED)    
                                                                                                
Cash and cash equivalents...................................................     $  6,603,045   
Deposits....................................................................       14,220,403   
Equipment held for operating lease, less accumulated depreciation of                            
  $17,154,618 at September 30, 1997.........................................      125,924,782   
Net investment in direct finance lease......................................        9,961,033   
Property, equipment and furnishings, less accumulated depreciation of                           
  $240,275 at September 30, 1997............................................          507,638   
Spare parts inventory.......................................................        9,569,416   
Maintenance billings receivable.............................................        1,078,400   
Operating lease rentals receivable..........................................          108,712   
Receivables from spare parts sales..........................................        3,342,133   
Other receivables...........................................................           82,304   
Other assets................................................................        1,620,590   
                                                                                 ------------   
          Total assets......................................................     $173,018,456   
                                                                                 ============   

                              LIABILITIES AND SHAREHOLDERS' EQUITY                              
Liabilities:                                                                                    
  Accounts payable and accrued expenses.....................................     $  2,144,727   
  Salaries and commissions payable..........................................          909,982   
  Deferred income taxes.....................................................        8,980,369   
  Deferred gain.............................................................          189,902   
  Notes payable and accrued interest........................................      105,224,643   
  Capital lease obligation..................................................        2,837,703   
  Residual share payable....................................................        1,797,404   
  Maintenance deposits......................................................       17,925,155   
  Security deposits.........................................................        2,480,392   
  Unearned lease revenue....................................................        1,364,679   
                                                                                 ------------   
          Total liabilities.................................................      143,854,956   
Shareholders' equity:                                                                           
  Common stock, no par value. Authorized 20,000,000 shares; 5,452,320 issued                    
     and outstanding at September 30, 1997..................................       16,276,933   
  Retained earnings.........................................................       12,886,567   
                                                                                 ------------   
          Total shareholders' equity........................................       29,163,500   
                                                                                 ------------   
          Total liabilities and shareholders' equity........................     $173,018,456   
                                                                                 ============   

See accompanying notes to the unaudited consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME 

                                                        [Enlarge/Download Table]

                                                                        NINE MONTHS ENDED      
                                                                          SEPTEMBER 30,        
                                                                   --------------------------- 
                                                                      1997            1996     
                                                                   -----------     ----------- 
                                                                           (UNAUDITED)         
                                                                                               
REVENUE:                                                                                       
  Operating lease revenue......................................... $13,481,032     $10,379,013 
  Finance lease revenue...........................................     222,763              -- 
  Gain on sale of leased equipment................................   1,333,448              -- 
  Spare part sales................................................  11,459,311       3,303,123 
  Sale of equipment acquired for resale...........................  12,747,840       9,605,315 
  Interest and other income.......................................     543,660         196,702 
                                                                   -----------     ----------- 
          Total revenue...........................................  39,788,054      23,484,153 
EXPENSES:                                                                                      
  Interest expense................................................   5,225,603       3,371,351 
  Depreciation expense............................................   2,995,121       2,512,585 
  Residual share..................................................     598,125         535,795 
  Cost of spare part sales........................................   7,751,179       1,603,609 
  Cost of equipment acquired for resale...........................  10,671,668       8,551,229 
  General and administrative......................................   6,358,000       3,434,216 
                                                                   -----------     ----------- 
          Total expenses..........................................  33,599,696      20,008,785 
Income before income taxes, minority interest and extraordinary                                
  item............................................................   6,188,358       3,475,368 
Income taxes......................................................  (2,456,283)     (1,394,943)
                                                                   -----------     ----------- 
Income before minority interest and extraordinary item............   3,732,075       2,080,425 
Less: minority interest in net income of subsidiary...............          --         (79,053)
                                                                   -----------     ----------- 
Income before extraordinary item..................................   3,732,075       2,001,372 
Extraordinary item less applicable income taxes...................   2,007,929              -- 
                                                                   -----------     ----------- 
          Net income.............................................. $ 5,740,004     $ 2,001,372 
                                                                   ===========     =========== 
Earnings per common share:                                                                     
Income before extraordinary item..................................       $0.65           $0.62 
Extraordinary item................................................        0.36              -- 
                                                                   -----------     ----------- 
          Net income..............................................       $1.01           $0.62 
                                                                   ===========     =========== 
Weighted average number of shares outstanding.....................   5,708,569       3,215,148 

See accompanying notes to the unaudited consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                             ISSUED AND                                          
                                            OUTSTANDING                                 TOTAL    
                                             SHARES OF      COMMON      RETAINED    SHAREHOLDERS'
                                            COMMON STOCK     STOCK      EARNINGS       EQUITY    
                                            ------------  -----------  -----------  -------------
                                                                                                 
Balances at December 31, 1996..............   5,426,793   $16,055,689  $ 7,146,563   $ 23,202,252
Shares issued..............................      25,527       221,244           --        221,244
Net income.................................          --            --    5,740,004      5,740,004
                                              ---------   -----------  -----------    -----------
Balances at September 30, 1997.............   5,452,320   $16,276,933  $12,886,567   $ 29,163,500
                                              =========   ===========  ===========    ===========

See accompanying notes to unaudited consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                  NINE MONTHS ENDED SEPTEMBER   
                                                                              30,               
                                                                 ------------------------------ 
                                                                     1997              1996     
                                                                 ------------       ----------- 
                                                                          (UNAUDITED)           
                                                                                                
Cash flows from operating activities:                                                           
  Net income...................................................  $  5,740,004       $ 2,001,372 
  Adjustments to reconcile net income to net cash provided by                                   
     operating activities:                                                                      
  Depreciation of equipment held for lease.....................     2,905,016         2,460,703 
  Depreciation of property, equipment and furnishings..........        90,105            51,882 
  (Gain) loss on sale of property, equipment and furnishings...       (45,122)            5,700 
  Gain on sale of leased equipment.............................    (1,333,448)               -- 
  Increase in residual share payable...........................       598,125           535,795 
  Minority interest in net income of subsidiary................            --           (84,774)
Changes in assets and liabilities:                                                              
  (Increase) decrease in deposits..............................      (620,199)          246,955 
  Increase in spare parts inventory............................    (5,511,768)         (681,650)
  Increase in receivables......................................    (1,414,577)         (771,175)
  Increase in other assets.....................................      (667,171)       (1,281,508)
  (Decrease) increase in accounts payable and accrued                                           
     expenses..................................................      (608,914)        5,198,453 
  Increase in salaries and commission payable..................       371,324           163,544 
  Increase in deferred income taxes............................     3,030,693         1,387,088 
  Decrease in deferred gain....................................       (19,872)               -- 
  (Decrease) increase in accrued interest......................      (364,270)           25,045 
  Increase in maintenance deposits.............................     6,244,630           952,088 
  Increase in security deposits................................       501,887           619,188 
  Increase (decrease) in unearned lease revenue................        90,410           (95,785)
                                                                  -----------       ----------- 
  Net cash provided by operating activities....................     8,986,853        10,732,921 
Cash flows from investing activities:                                                           
  Proceeds from sale of equipment held for operating lease (net                                 
     of selling expenses)......................................    12,083,807           997,350 
  Proceeds from sale of property, equipment and furnishings                                     
     ..........................................................        80,500            28,200 
  Purchase of equipment held for operating lease...............   (43,487,728)       (4,121,670)
  Purchase of property, equipment and furnishings..............      (174,341)         (236,558)
  Investment in direct finance lease...........................   (10,095,000)               -- 
  Principal payments received on direct finance lease..........       133,967                -- 
                                                                  -----------       ----------- 
  Net cash used in investing activities........................   (41,458,795)       (3,332,678)
Cash flows from financing activities:                                                           
  Repayments from shareholder, net.............................            --           476,204 
  Proceeds from issuance of notes payable......................   104,038,706         2,484,467 
  Proceeds from issuance of common stock.......................       221,244        13,949,759 
  Principal payments on notes payable..........................   (71,635,450)       (9,945,597)
  Cash dividends paid on common stock..........................            --          (500,000)
  Principal payments on capital lease obligation...............      (122,754)               -- 
                                                                  -----------       ----------- 
Net cash provided by financing activities......................    32,501,746         6,464,833 
Increase in cash and cash equivalents..........................        29,804        13,865,076 
Cash and cash equivalents at beginning of period...............     6,573,241           815,649 
                                                                  -----------       ----------- 
Cash and cash equivalents at end of period.....................  $  6,603,045       $14,680,725 
                                                                  ===========       =========== 

See accompanying notes to the unaudited consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION                                                       

The accompanying unaudited consolidated financial statements of Willis
Lease Finance Corporation and its subsidiaries (the "Company") have been        
prepared pursuant to the rules and regulations of the Securities and Exchange   
Commission. Pursuant to such rules and regulations, certain information and     
footnote disclosures normally included in financial statements prepared in      
accordance with generally accepted accounting principles have been condensed or 
omitted. The accompanying unaudited interim financial statements should be read 
in conjunction with the audited consolidated financial statements and notes     
thereto included elsewhere in this Prospectus, together with "Management's      
Discussion and Analysis of Financial Condition and Results of Operations."      

In the opinion of management, the accompanying unaudited consolidated 
financial statements contain all adjustments (consisting of only normal and     
recurring adjustments) necessary to present fairly the financial position of the
Company as of September 30, 1997, and the results of its operations for the nine
month periods ended September 30, 1997 and 1996 and its cash flows for the nine 
month periods ended September 30, 1997 and 1996. The results of operations and  
cash flows for the nine month period ended September 30, 1997, are not          
necessarily indicative of the results of operations or cash flows which may be  
reported for the remainder of 1997.                                             

(2) MANAGEMENT ESTIMATES                                                        

The preparation of financial statements, in conformity with generally 
accepted accounting principles, requires management to make estimates and       
assumptions that affect the reported amounts of assets and liabilities and      
disclosures of contingent assets and liabilities at the date of the financial   
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.                       

During the quarter ended September 30, 1997, the Company recorded an  
allowance for estimated returns of spare parts based on recent experience. Such 
returns occur in the ordinary course of the Company's business.                 

(3) SHARES ISSUED                                                               

The Company's Employee Stock Purchase Plan (the "Purchase Plan") was  
adopted by the Board of Directors on June 21, 1996. The Purchase Plan is        
designed to allow eligible employees of the Company and participating           
subsidiaries to purchase shares of Common Stock, at semi-annual intervals,      
through their periodic payroll deduction under the Purchase Plan. The purchase  
price is the lesser of 85% of the market price of the Common Stock at the       
beginning of each purchase interval or 85% of the market price of the Common    
Stock at the end of each purchase interval. A reserve of 75,000 shares of Common
Stock has been established for this purpose. During the nine month period ended 
September 30, 1997, the Company issued 10,527 shares of Common Stock as a result
of employee stock purchases under the Purchase Plan.                            

Under the 1996 Stock Option/Stock Issuance Plan, 525,000 shares of the
Company's Common Stock were set aside to provide eligible persons with the      
opportunity to acquire a proprietary interest in the Company. During the nine   
month period ended September 30, 1997, 15,000 stock options were exercised in   
connection with this agreement.                                                 

(4) FINANCING                                                                   

In February 1997, the Company obtained a new loan agreement for $41.5 
million to replace an existing loan of $44.2 million. The transaction resulted  
in an extraordinary gain of $2 million or $0.36 per weighted average share, net 
of tax. The new facility bears interest at LIBOR plus 2.5% and matures in       
February, 1998. At that time, the Company has the option to extend the facility 
for an additional six years.                                                    

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    In June 1997, the Company obtained a $15 million revolving credit facility
to finance the acquisition of engines and high-value spare parts for sale or    
lease. In July 1997, the Company increased this facility to $30 million. This   
facility, which expires on June 12, 1998, bears interest at prime plus 50 basis 
points and may be renewed annually.                                             

(5) SUBSEQUENT EVENT                                                            

  On October 5, 1997, Western Pacific Airlines, Inc., a domestic lessee of
three engines with a combined net book value of $8.7 million filed a petition   
under Chapter 11 of the Bankruptcy Code in the District of Colorado. Western    
Pacific has 60 days from October 5, 1997, to agree to perform its obligations   
and to cure any defaults under its leases with the Company. Although the Company
has not received any payments from Western Pacific in October 1997, the Company 
has security deposits and prepaid rents totaling $284,500 relating to these     
engines. At this time, the Company does not anticipate that the bankruptcy will 
have a material adverse effect on the Company's financial position or results of
operations.                                                                     

(6) EARNINGS PER SHARE                                                          

     For the purposes of calculating earnings per share, weighted average shares
outstanding includes the effect, if any, of outstanding options and warrants.   

(7) COMMITMENTS                                                                 

    In June 1997, the Company committed to purchase nine aircraft engines. The
Company is obligated to purchase these engines by December 31, 1997. The        
agreement provides that, to the extent that a purchased engine will be          
overhauled by the seller, the payment of both the purchase price and the cost of
the overhauled engine will be deferred until the engine is overhauled and       
delivered to the Company. It is not known at this time how many engines will be 
overhauled. As of September 30, 1997, three of the nine engines subject to this 
agreement have been purchased.                                                  

  The Company has entered into commitments for the purchase of an aircraft
for disassembly by WASI, the purchase of two engines for the lease portfolio and
the purchase of three commuter aircraft with three spare engines for the lease  
portfolio. The aggregate purchase price for these assets is $19.9 million and as
of September 30, 1997, deposits of $310,000 have been made in connection with   
these purchases. The Company has arranged financing for one engine and is in the
process of arranging financing for the other purchases.                         

(8) NEW ACCOUNTING PRONOUNCEMENT                                                

    In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share" which requires the Company to replace its presentation
of primary earnings per share with a presentation of basic earnings per share   
and requires dual presentation of basic and diluted earnings per share on the   
face of the income statement. The principal difference between primary earnings 
per share under current accounting standards and basic earnings per share under 
the new statement is that basic earnings per share does not consider common     
stock equivalents such as stock options and warrants. Diluted earnings per share
under the new Statement will include potential dilution of convertible          
securities, stock options and warrants. The Statement is effective for the      
Company's third quarter of 1997 and requires restatement of all prior periods   
presented under the new Statement. Basic earnings per share under the new       
Statement would have been $1.05 and $.62 for the nine months ended September 30,
1997 and 1996. Diluted earnings per share under the new Statement would have    
been $1.03 and $.62 for the nine months ended September 30, 1997 and 1996.      

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Board of Directors                                                       
of Willis Lease Finance Corporation and Subsidiaries                            

We have audited the accompanying consolidated balance sheets of Willis
Lease Finance Corporation and subsidiaries (formerly Charles F. Willis Company) 
(the "Company") as listed in the accompanying index. These consolidated         
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these consolidated financial         
statements based on our audits.                                                 

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

 In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Willis Lease
Finance Corporation and subsidiaries (formerly Charles F. Willis Company) as of 
December 31, 1996 and 1995, and the results of their operations and their cash  
flows for each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.                       

As discussed in Note 1 to the Consolidated Financial Statements, the  
Company changed its method of computing depreciation in 1995.                   

                         KPMG PEAT MARWICK LLP

San Francisco, California                                                       
March 6, 1997                                                                   

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

ASSETS

                                                        [Enlarge/Download Table]

                                                                       AS OF DECEMBER 31,       
                                                                  ----------------------------- 
                                                                      1996             1995     
                                                                  ------------     ------------ 
                                                                                                
Cash and cash equivalents.......................................  $  6,573,241     $    815,649 
Deposits........................................................    13,600,204       11,320,617 
Aircraft engines held for operating lease, less accumulated                                     
  depreciation of $16,372,418 in 1996 and $13,681,211 in 1995...    93,131,972       74,704,379 
Aircraft engines on capital leases..............................     2,960,457               -- 
Property, equipment and furnishings, less accumulated                                           
  depreciation of $160,407 in 1996 and $86,695 in 1995..........       458,780          207,784 
Spare parts inventory...........................................     4,057,648        2,916,003 
Maintenance billings receivable.................................     1,107,283          408,454 
Operating lease rentals receivable..............................       405,601           73,658 
Receivables from spare parts sales..............................       854,566          772,474 
Other receivables...............................................       829,522           10,481 
Other assets....................................................       953,419          207,894 
                                                                  ------------     ------------ 
          Total assets..........................................  $124,932,693     $ 91,437,393 
                                                                  ============     ============ 

                             LIABILITIES AND SHAREHOLDERS' EQUITY                               
Liabilities:                                                                                    
  Accounts payable and accrued expenses.........................  $  2,753,641     $  1,052,455 
  Salaries and commissions payable..............................       538,658          163,961 
  Deferred income taxes.........................................     5,949,676        4,092,325 
  Deferred gain.................................................       209,774               -- 
  Notes payable and accrued interest............................    73,185,657       69,910,797 
  Capital lease obligation......................................     2,960,457               -- 
  Residual share payable........................................     1,199,279          476,526 
  Maintenance deposits..........................................    11,680,525        8,717,170 
  Security deposits.............................................     1,978,505        1,270,021 
  Unearned lease revenue........................................     1,274,269          857,087 
                                                                  ------------     ------------ 
          Total liabilities.....................................   101,730,441       86,540,342 
Minority interest in net assets of subsidiary...................            --           84,774 
Shareholders' equity:                                                                           
  Common stock, no par value. Authorized 20,000,000 and 10,000                                  
     shares, 5,426,793 and 1,500 issued and outstanding at                                      
     December 31, 1996 and 1995, respectively...................    16,055,689              500 
  Retained earnings.............................................     7,146,563        5,293,566 
  Advances to shareholder.......................................            --         (481,789)
                                                                  ------------     ------------ 
          Total shareholders' equity............................    23,202,252        4,812,277 
                                                                  ------------     ------------ 
          Total liabilities and shareholders' equity............  $124,932,693     $ 91,437,393 
                                                                  ============     ============ 

See accompanying notes to consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF INCOME 

                                                        [Enlarge/Download Table]

                                                             YEARS ENDED DECEMBER 31,           
                                                    ------------------------------------------- 
                                                       1996            1995            1994     
                                                    -----------     -----------     ----------- 
                                                                                                
REVENUE:                                                                                        
  Operating lease revenue.........................  $13,740,438     $13,770,730     $13,635,934 
  Gain (loss) on sale of leased engines...........        2,208        (482,894)        632,578 
  Spare part sales................................    5,842,607       3,858,610         795,262 
  Sale of equipment acquired for resale...........   12,105,315       5,472,362       2,184,000 
  Interest and other income.......................      617,144         119,188         541,900 
                                                    -----------     -----------     ----------- 
          Total revenue...........................   32,307,712      22,737,996      17,789,674 
EXPENSES:                                                                                       
  Interest expense................................    4,323,276       5,721,811       5,947,843 
  Depreciation expense............................    3,181,216       4,703,487       4,447,082 
  Residual share..................................      722,753         407,684       1,284,523 
  Cost of spare part sales........................    3,307,928       2,545,872         658,864 
  Cost of sold equipment acquired for resale......   10,788,730       2,742,262       1,863,000 
  General and administrative......................    5,123,813       3,334,768       1,615,585 
                                                    -----------     -----------     ----------- 
          Total expenses..........................   27,447,716      19,455,884      15,816,897 
Gain on modification of credit facility...........           --       2,202,928              -- 
                                                    -----------     -----------     ----------- 
Income before income taxes and minority                                                         
  interest........................................    4,859,996       5,485,040       1,972,777 
Income taxes......................................   (1,976,471)     (2,212,280)       (797,159)
                                                    -----------     -----------     ----------- 
Income before minority interest...................    2,883,525       3,272,760       1,175,618 
Less: minority interest in net income of                                                        
  subsidiary......................................      (79,053)        (56,343)         (3,431)
                                                    -----------     -----------     ----------- 
          Net income..............................  $ 2,804,472     $ 3,216,417     $ 1,172,187 
                                                    ===========     ===========     =========== 
          Net income per share (pro forma for 1995                                              
            and 1994).............................  $      0.74     $      1.03     $      0.38 
                                                    ===========     ===========     =========== 
Weighted average number of shares outstanding.....    3,796,182       3,110,657       3,110,657 

See accompanying notes to consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                    ISSUED AND                                                         
                                   OUTSTANDING                                               TOTAL     
                                    SHARES OF      COMMON      RETAINED    ADVANCES TO   SHAREHOLDERS' 
                                   COMMON STOCK     STOCK      EARNINGS    SHAREHOLDER      EQUITY     
                                   ------------  -----------  ----------   -----------   ------------- 
                                                                                                       
Balances at December 31, 1994.....       1,500   $       500  $2,332,149    $ (373,845)   $  1,958,804 
Advances to shareholder, net of                                                                        
  repayments......................          --            --          --      (107,944)       (107,944)
Dividends.........................          --            --    (255,000)           --        (255,000)
Net income........................          --            --   3,216,417            --       3,216,417 
                                     ---------   -----------  ----------     ---------     ----------- 
Balances at December 31, 1995.....       1,500           500   5,293,566      (481,789)      4,812,277 
Common stock issue and proceeds                                                                        
  from IPO, net...................   5,425,293    16,055,189          --            --      16,055,189 
Repayments to shareholders, net...          --            --          --       481,789         481,789 
Dividends.........................          --            --    (951,475)           --        (951,475)
Net income........................          --            --   2,804,472            --       2,804,472 
                                     ---------   -----------  ----------     ---------     ----------- 
Balances at December 31, 1996.....   5,426,793   $16,055,689  $7,146,563    $       --    $ 23,202,252 
                                     =========   ===========  ==========     =========     =========== 

See accompanying notes to consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                      YEARS ENDED DECEMBER 31,            
                                                           ---------------------------------------------- 
                                                               1996             1995             1994     
                                                           ------------     ------------     ------------ 
                                                                                                          
Cash flows from operating activities:                                                                     
  Net income.............................................  $  2,804,472     $  3,216,417     $  1,172,187 
  Adjustments to reconcile income to net cash provided by                                                 
    operating activities:                                                                                 
  Depreciation of aircraft engines held for operating                                                     
    lease................................................     3,103,601        4,663,949        4,431,039 
  Depreciation of property, equipment and furnishings....        77,615           39,538           16,043 
  Gain on modification of credit facility................            --       (2,202,928)              -- 
  Loss (gain) on sale of property, equipment,                                                             
    furnishings..........................................         5,701           (5,536)          (1,530)
  Loss (gain) on sale of leased aircraft engines.........        (2,208)         482,894         (632,578)
  Increase in residual share payable.....................       722,753          407,684        1,284,523 
  Minority interest in net income of subsidiary..........        79,053           56,343            3,431 
Changes in assets and liabilities:                                                                        
  (Increase) in deposits.................................    (2,279,587)     (11,061,221)         (56,564)
  (Increase) in spare parts inventory....................    (1,176,384)        (940,494)        (100,871)
  (Increase) in receivables..............................    (1,931,905)        (359,173)        (538,921)
  (Increase) decrease in other assets....................      (745,525)          54,785          (67,248)
  Increase in accounts payable and accrued expenses......     1,701,186          606,656          239,797 
  Increase in salaries and commission payable............       374,697           77,201           46,760 
  Increase in deferred income taxes......................     1,857,351        2,179,381          791,559 
  Increase in deferred gain on sale of aircraft engine...       209,774               --               -- 
  Increase (decrease) in accrued interest................       666,571         (341,379)         259,918 
  Increase in maintenance deposits.......................     2,963,355        3,294,179        1,637,050 
  Increase in security deposits..........................       708,484          124,444          407,697 
  Increase in unearned lease revenue.....................       417,182          243,726           44,702 
                                                            -----------      -----------      ----------- 
  Net cash provided by operating activities..............     9,556,186          536,466        8,936,994 
Cash flows from investing activities:                                                                     
  Proceeds from sale of aircraft engines (net of selling                                                  
    expenses)............................................     3,748,035        2,600,000        2,000,644 
  Proceeds from sale of property, equipment and                                                           
    furnishings..........................................        28,198           38,500            3,000 
  Purchase of aircraft engines held for operating                                                         
    lease................................................   (25,277,021)      (9,258,379)     (17,634,027)
  Purchase of property, equipment and furnishings........      (362,510)        (194,403)         (62,603)
                                                            -----------      -----------      ----------- 
  Net cash (used in) investing activities................   (21,863,298)      (6,814,282)     (15,692,986)
                                                            -----------      -----------      ----------- 
Cash flows from financing activities:                                                                     
  Repayments from (advances to) shareholder, net.........       481,789         (107,944)         (18,827)
  Proceeds from issuance of notes payable................    16,086,621       15,730,277       19,300,445 
  Proceeds from issuance of common stock.................    15,926,101               --               -- 
  Principal payments on notes payable....................   (13,478,332)      (9,337,852)     (11,473,474)
  Cash dividends paid on common stock....................      (951,475)        (255,000)        (345,280)
  Minority interest in net assets of subsidiary..........            --               --           25,000 
                                                            -----------      -----------      ----------- 
Net cash provided by financing activities................    18,064,704        6,029,481        7,487,864 
                                                            -----------      -----------      ----------- 
Increase (decrease) in cash and cash equivalents.........     5,757,592         (248,335)         731,872 
Cash and cash equivalents beginning of period............       815,649        1,063,984          332,112 
                                                            -----------      -----------      ----------- 
Cash and cash equivalents end of period..................  $  6,573,241     $    815,649     $  1,063,984 
                                                            ===========      ===========      =========== 

See accompanying notes to consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                 

(a) Organization                                                            

Willis Lease Finance Corporation (formerly Charles F. Willis Company) 
(Willis) is a California corporation which began leasing operations in 1988.    
Willis is a provider of operating leases of spare commercial aircraft engines   
worldwide. Willis is primarily engaged in acquiring aftermarket commercial      
aircraft spare engines and providing operating leases of such engines to foreign
and domestic airlines, manufacturers and overhaul/repair facilities.            

  Terandon Leasing Corporation (Terandon), T-2 Inc. (T-2), T-4 Inc. (T-4),
T-5 Inc. (T-5), T-7 Inc. (T-7), T-8 Inc. (T-8) and T-10 Inc. (T-10) are         
wholly-owned subsidiaries of Willis. They are all California corporations and   
were established to purchase and lease commercial aircraft engines. Terandon,   
T-2 and T-5 were incorporated in 1986, 1991 and 1993, respectively, T-7 and T-8 
were both incorporated in 1994, and T-10 was incorporated in 1995. T-4 was      
acquired by Willis in 1996 and was incorporated in 1993.                        

   Willis Aeronautical Services, Inc. (WASI) is a wholly-owned subsidiary of
Willis. WASI is a California corporation established in 1994 for the purpose of 
commercial aircraft, airframe and powerplant component marketing and sales.     

(b) Principles of Consolidation                                             

The consolidated financial statements include the accounts of Willis, 
Terandon, T-2, T-4, T-5, T-7, T-8, T-10, and WASI (together, the Company).      
Minority interest includes a twenty percent minority interest in WASI which was 
acquired by the Company on September 18, 1996 through the issuance of $129,088  
in common stock. All significant intercompany balances and transactions have    
been eliminated in consolidation.                                               

(c) Advances to Shareholder                                                 

    The advances to the sole shareholder are noninterest bearing (except for a
$10,000 interest bearing note). All such notes were repaid in 1996. Advances are
accounted for through a reduction of shareholders' equity.                      

(d) Revenue Recognition                                                     

   Revenue from leasing of aircraft engines is recognized as operating lease
revenue over the terms of the applicable lease agreements. The Company includes 
in operating lease revenue non-refundable maintenance payments received from    
lessees to the extent that, in the Company's opinion, it would not be           
economically advantageous to overhaul the engine the next time the life-limited 
parts need to be replaced. In this circumstance, the engines are normally       
dismantled and sold as parts.                                                   

(e) Aircraft Engines Held for Operating Lease and Capital Lease             

Aircraft engines held for operating lease are stated at cost, less    
accumulated depreciation. Certain professional fees incurred in connection with 
the acquisition of aircraft engines are capitalized as part of the cost of the  
engines.                                                                        

     Effective January 1, 1995, the Company changed its depreciation policy with
respect to engines on long-term lease and has restated its previously issued    
financial statements. Previously, the Company depreciated such assets on a      
straight line basis over their estimated useful life of 25 years to a salvage   
value of 15%. The Company has changed its methodology to depreciate the engine  
on a straight line basis over a 15 year period from the acquisition date to a   
55% residual value. The Company believes that this methodology more accurately  
reflects the Company's typical holding period for the assets and, further, that 
the residual value assumption reasonably approximates the selling price of the  
assets in 15 years from date of acquisition. The                                

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

effect of this change in accounting principle was a reduction of depreciation   
expense of $357,999 and $405,657 for the years ended December 31, 1995 and 1994,
respectively.                                                                   

 This change in accounting principle also resulted in an increase in net
loss on sale of leased aircraft engines of $48,237 in 1995 and a reduction in   
net gain on sale of leased aircraft engines of $176,788 in 1994.                

Engines that in the Company's opinion would not be economically       
advantageous to overhaul the next time the life-limited parts need to be        
replaced, are depreciated over the remaining life using component depreciation  
based on usage as reported monthly by the lessees.                              

     In March of 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of    
Long-Lived Assets and for Long-Lived Assets to be Disposed of," (SFAS 121). SFAS
121 requires that (i) long-lived assets and certain identifiable intangibles to 
be held and used by an entity be reviewed for impairment whenever events or     
changes in circumstances indicate that the carrying amount of an asset may not  
be recoverable and (ii) long-lived assets and certain identifiable intangibles  
to be disposed of generally be reported at the lower of carrying amount or fair 
value less cost to sell. The Company adopted SFAS 121 in 1995 and reviewed the  
carrying value of its equipment considering residual values and release rates.  
This review resulted in a loss on revaluation related to one engine of $300,000 
in 1995, which has been included in depreciation expense. There were no         
write-downs required during 1996.                                               

(f) Spare Parts Inventory                                                   

  The Company, through one or more of its subsidiaries, buys used aircraft
spare parts for resale. This inventory is valued at the lower of cost or market 
value. Costs of such sales are specifically identified.                         

(g) Loan Commitment and Related Fees                                        

   To the extent that the Company is required to pay loan commitment fees in
order to secure debt, such fees are amortized over the life of the related loan 
on a straight-line basis.                                                       

(h) Maintenance Costs                                                       

  Maintenance costs under the Company's long-term leases are generally the
responsibility of the lessees. Maintenance deposits in the accompanying balance 
sheet include refundable maintenance payments and certain non-refundable        
maintenance payments received from the lessees. If in the Company's opinion, it 
would not be economically advantageous to overhaul the engine the next time the 
life-limited parts need to be replaced, the maintenance fees are included in    
operating lease revenue. Major overhauls paid for by the Company are capitalized
and depreciated over the estimated remaining useful life of the engine.         

(i) Interest Rate Hedge                                                     

   In 1996, the Company purchased an interest rate cap in order to hedge its
exposure to increases in interest rates on a portion of its variable rate       
borrowings. The instrument minimizes the Company's exposure to interest rate    
fluctuations for a period of four years. The cost of this instrument is         
amortized on a straight-line basis over the four year period.                   

(j) Income Taxes                                                            

  The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred income taxes are          
recognized for the tax consequences of "temporary differences" by applying      
enacted statutory tax rates applicable to future years to differences between   
the financial statement                                                         

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

carrying amounts and the tax bases of existing assets and liabilities. The      
effect on deferred taxes of a change in the tax rates is recognized in income in
the period that includes the enactment date.                                    

(k) Property, Equipment and Furnishings                                     

     Property, equipment and furnishings are recorded at cost and depreciated by
the straight-line method over the estimated useful lives of the related assets, 
which range from three to seven years.                                          

(l) Residual Sharing with Lenders                                           

 Certain of the Company's credit agreements require the Company to share
"residual proceeds" as defined in the agreements with the lenders upon sale of  
engines held for operating lease. The Company provides for its residual sharing 
obligation with respect to each engine by a charge or credit to income or       
expense, each period, sufficient to adjust the residual share payable at the    
balance sheet date to the amount that would be payable at that date if all      
engines under said agreements were sold on the balance sheet date at their net  
book values.                                                                    

   Residual share payable totaled $1,199,279 and $476,526 as of December 31,
1996 and 1995, respectively. As of December 31, 1996 and 1995, a total of six   
and nine engines, respectively, with a net book value of $16,457,439 and        
$17,866,935, respectively, were subject to residual value arrangements (notes 4,
5 and 14).                                                                      

(m) Equipment Acquired for Resale                                           

     The Company periodically engages in transactions involving the purchase and
immediate resale of aircraft engines. Generally, the Company makes a contractual
commitment to purchase specific assets for its own account for resale only after
or concurrently with obtaining a firm order from a customer. All aircraft       
engines purchased by the Company for such transactions during 1996 and 1995 were
sold in the year acquired.                                                      

(n) Reclassifications                                                       

    Certain items in the consolidated financial statements of prior years have
been reclassified to conform to the current year's presentation.                

(o) Management Estimates                                                    

These financial statements have been prepared on the accrual basis of 
accounting in accordance with generally accepted accounting principles. This    
requires management to make estimates and assumptions that affect the reported  
amounts of assets and liabilities and disclosures of contingent assets and      
liabilities at the date of the financial statements and the reported amounts of 
revenue and expenses during the reporting period. Actual results could differ   
from those estimates.                                                           

(p) Per share information                                                   

Per share information is computed using the weighted average number of
common and diluted common equivalent shares outstanding. For primary and fully  
diluted earnings per share, common equivalent shares consist of the incremental 
shares issued upon the assumed exercise of diluted stock options, using the     
treasury stock method.                                                          

(2) AIRCRAFT ENGINES HELD FOR OPERATING LEASE                                   

 At December 31, 1996, the Company owned 31 aircraft engines and related
equipment with an aggregate original cost of $109,504,390. At December 31, 1995,
the Company owned 31 aircraft engines with an aggregate original cost of        
$88,385,590.                                                                    

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 As of December 31, 1996, minimum future rentals under the noncancelable
operating leases of these aircraft engines are as follows:                      

                                                                [Download Table]
                                              
1997..........................     $13,845,290
1998..........................      10,828,463
1999..........................       7,423,338
2000..........................       5,736,712
2001..........................       2,926,444
Thereafter....................       2,021,000
                                   -----------
                                   $42,781,247
                                   ===========

Approximately 90% of these future rentals will be applied to service  
principal and interest payments on outstanding notes payable (notes 5 and 14).  

  Contingent rentals included in operating lease revenue totaled $266,000,
$362,000 and $145,000 for the years ended December 31, 1996, 1995 and 1994,     
respectively.                                                                   

Certain of the Company's aircraft engines are leased and operated     
internationally. All leases relating to this equipment are denominated and      
payable in U.S. dollars.                                                        

The Company leases its aircraft engines to lessees domiciled in seven 
geographic regions: United States, Canada, Mexico, Australia/New Zealand,       
Europe, South America and Asia. The tables below set forth geographic           
information about the Company's aircraft engines grouped by domicile of the     
lessee.                                                                         

                                                                [Download Table]

                                             YEARS ENDED DECEMBER 31,          
                                    -------------------------------------------
             REGION:                   1996            1995            1994    
----------------------------------  -----------     -----------     -----------
                                                                               
Operating lease revenue:                                                       
United States.....................  $ 5,295,084     $ 4,560,472     $ 4,851,286
Canada............................    1,291,000       1,080,000         964,666
Mexico............................    1,865,118       1,900,699       1,178,474
Australia/New Zealand.............    1,029,600       1,339,433       1,689,600
Europe............................    2,840,428       3,858,792       2,762,629
South America.....................      530,000         308,316         716,575
Asia..............................      889,208         723,018       1,472,704
                                     ----------      ----------      ----------
          Total operating lease                                                
            revenue...............  $13,740,438     $13,770,730     $13,635,934
                                     ==========      ==========      ==========

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                                                [Download Table]

                                                YEARS ENDED DECEMBER 31,          
                                       ------------------------------------------ 
               REGION:                    1996            1995            1994    
-------------------------------------  ----------      ----------      ---------- 
                                                                                  
Operating lease revenue less                                                      
  depreciation, interest, spare parts                                             
  interest and residual share:                                                    
  United States......................  $2,405,061      $  463,336      $  275,681 
  Canada.............................     548,769         301,039         185,746 
  Mexico.............................     306,007         348,900         307,843 
  Australia/New Zealand..............     471,293         271,355         410,112 
  Europe.............................   1,409,631       1,521,563         675,408 
  South America......................     185,297          77,569          82,059 
  Asia...............................     339,545         185,196         125,121 
  Off-lease and other................     (60,711)       (231,210)       (105,484)
                                       ----------      ----------       --------- 
Total operating lease revenue less                                                
  depreciation, interest, spare parts                                             
  interest and residual share........  $5,604,892      $2,937,748      $1,956,486 
                                       ==========      ==========       ========= 

                                                                [Download Table]

                                               YEARS ENDED DECEMBER 31,           
                                      ------------------------------------------- 
              REGION:                    1996            1995            1994     
------------------------------------  -----------     -----------     ----------- 
                                                                                  
Net book value of engines:                                                        
  United States.....................  $31,332,388     $24,138,266     $23,601,123 
  Canada............................    7,115,984       7,356,011       7,596,038 
  Mexico............................   13,441,445       9,255,029       9,506,072 
  Australia/New Zealand.............    5,509,070       5,706,410       9,332,036 
  Europe............................   30,051,738      19,056,190      16,921,539 
  South America.....................    2,033,831       1,951,012       4,829,647 
  Asia..............................    4,109,446       4,243,830       7,202,126 
  Off-lease.........................    2,498,527       2,997,631              -- 
                                      ------------    ------------    ------------
Total net book value of engines                                                   
  owned and a capital lease.........  $96,092,429     $74,704,379     $78,988,581 
                                      ============    ============    ============

(3) PROPERTY, EQUIPMENT AND FURNISHINGS                                         

Property, equipment and furnishings consist of the following:         

                                                                [Download Table]

                                                          AS OF DECEMBER 31,   
                                                         --------------------- 
                                                           1996         1995   
                                                         --------     -------- 
                                                                               
Automobiles............................................  $140,297     $ 36,049 
Computer equipment.....................................   186,272       93,726 
Furniture and equipment................................   292,618      164,704 
                                                         --------     -------- 
                                                          619,187      294,479 
Accumulated depreciation...............................  (160,407)     (86,695)
                                                         --------     -------- 
Net book value.........................................  $458,780     $207,784 
                                                         ========     ======== 

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) GAIN ON MODIFICATION OF CREDIT FACILITY                                     

    In June 1995, the Company's primary credit facility was modified into a 10
year full payout loan. As part of this transaction, the residual sharing        
agreement was terminated. Furthermore, the lender agreed to acquire two engines 
from the portfolio, with a net book value of $5,724,045, as payment in full for 
the respective outstanding loan balance on each of the engines. The modification
resulted in a net gain of $2,202,928.                                           

(5) NOTES PAYABLE AND ACCRUED INTEREST                                          

Notes payable consisted of the following:                             

                                                        [Enlarge/Download Table]

                                                                        AS OF DECEMBER 31,     
                                                                    ---------------------------
                                                                       1996            1995    
                                                                    -----------     -----------
                                                                                               
Notes payable with an interest rate of LIBOR plus 1.0%. Secured by                             
aircraft engines and rental payments on leased aircraft engines.                               
The loan requires quarterly payments in arrears, through June 30,                              
2005. This note is the result of the credit facility modification                              
(notes 4 and 14)..................................................  $44,221,306     $48,400,889
Notes payable with fixed interest rates ranging between 8% and                                 
10%. Secured by aircraft engines and rental payments on leased                                 
aircraft engines. These notes mature in 1998 or are due upon the                               
sale of the collateral property...................................    5,982,236       6,513,190
Notes payable with an interest rate of LIBOR plus 5%. Secured by                               
aircraft engines and rental payments on leased aircraft engines.                               
The notes mature in the year 2001 or are due upon the sale of the                              
collateral property...............................................    5,189,286       6,617,509
Note payable for a spare parts purchase. Interest accrued at 8% on                             
the unpaid balance. This note was secured by the spare parts. The                              
note matured in August 1996.......................................           --       1,332,641
Notes payable at an interest rate of 11.03%. Secured by aircraft                               
engines. The notes mature on December 29, 2000....................    3,128,943       3,360,000
Note payable at an interest rate of 11.68%. Secured by an aircraft                             
engine. The note matures on December 31, 2001. This note and the                               
preceding 11.03% notes are part of a $15 million secured term                                  
facility for the acquisition of engines...........................    2,368,242              --
Note payable at a fixed interest rate of 9.0%. Secured by aircraft                             
engines and subordinated to the $3,128,943 note discussed above...           --         420,000
Notes payable with a variable interest rate of LIBOR plus 1.5%                                 
secured by four engines. Fixed principal payments plus interest                                
are made monthly, and the notes have maturity dates ranging from                               
August 1996 through July 1997.....................................      325,000       1,358,333
Note payable, secured by two engines. This note was non-interest                               
bearing until August, 1996 and thereafter, interest bearing at the                             
Paris Interbanking Operations Rate plus 2%. The note was paid on                               
December 30, 1996.................................................           --       1,395,874
Capital line of credit extended to WASI not to exceed $1,000,000.                              
Interest accrued at prime plus 1%, with repayment terms of                                     
interest only for 6 months. The loan was secured by all of the                                 
assets of WASI. This facility expired on October 31,1996..........           --         282,139

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                                        [Enlarge/Download Table]

                                                                        AS OF DECEMBER 31,     
                                                                       1996            1995    
                                                                    -----------     -----------
                                                                                               
Capital line of credit extended to WASI for $3,000,000. Interest                               
accrues at prime plus 1%, with repayment terms of interest only                                
for 6 months. The loan is secured by all of the assets of WASI.                                
This facility expires on October 31, 1997.........................      661,000              --
Notes payable to two employees of the Company ($25,000 of the                                  
notes bears interest at 8%). The remaining balance was noninterest                             
bearing and both notes were paid on September 18, 1996............           --          50,000
Short-term bridge note with an interest rate of 7%. Secured by                                 
aircraft engines and spare parts purchased 12/31/96. The note                                  
matures on January 31, 1997 (note 14).............................    8,632,313              --
Note payable at a fixed interest rate of 7%. Secured by aircraft                               
engines and spare parts. This note is subordinated to the bridge                               
note discussed above and also to the permanent notes replacing the                             
bridge note. The note matures on June 30, 2004....................    1,830,538              --
                                                                    -----------     -----------
                                                                    $72,338,864     $69,730,575
                                                                    ===========     ===========

   The Company also has a $15.0 million term facility for the acquisition of
engines for lease. This term facility allows for an advance rate of 80% of fair 
market value of the equipment, not to exceed 100% of the purchase price. The    
facility is to be used for domestic lessees. Interest rate under this facility  
will be dependent upon the quality of the credit and the underlying collateral. 
As of December 31, 1996, no drawdowns had taken place under this facility.      

     The fair value of the Company's long-term debt is estimated based on quoted
market prices for the same or similar issues or on the current rates offered to 
the Company for debt of the same remaining maturities. The fair value of the    
Company's debt is estimated by the Company to be $72,202,487 at December 31,    
1996.                                                                           

The fair value of the interest rate cap, as estimated by the financial
institution providing the instrument is $266,257 at December 31, 1996.          

    In accordance with three of the loan agreements, the Company must maintain
certain net worth levels and, additionally, with respect to one of these loans, 
must maintain a certain current ratio and certain earnings levels. In addition, 
the Company must prepay loan amounts in the event a collateral engine is sold or
otherwise disposed of. Repayment schedules as of December 31, 1996 for the notes
payable for each of the next five years are presented below. A substantial      
amount of operating lease revenue is applied to the repayment of principal and  
interest. Principal outstanding at December 31, 1996 is repayable as follows:   

                                                                [Download Table]

              YEAR                           
--------------------------------             
                                             
1997............................  $14,516,505
1998............................   10,194,820
1999............................    4,492,805
2000............................    7,920,608
2001............................   12,667,933
Thereafter......................   22,546,193
                                  -----------
          Total.................  $72,338,864
                                  ===========

As of December 31, 1996 and 1995, accrued interest in the amounts of  
$846,793 and $180,222, respectively, is included in notes payable and accrued   
interest. At December 31, 1996 and 1995, the Company held deposits in the amount
of $13,600,204 and $11,320,617, respectively, consisting of bank accounts that  
are                                                                             

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

subject to withdrawal restrictions as per lease or loan agreements. The deposits
received in prior years are reflected as a reduction of the note payable balance
in accordance with the terms of the previous loan agreement (note 4). Certain   
lease agreements require prepayments to the Company for periodic engine         
maintenance. In addition, this account includes security deposits held.         
Substantially all of the deposits bear interest for the Company's benefit.      

In February 1997, the Company obtained a new credit facility for $41.5
million and repaid the $44.2 million existing note payable (note 14).           

   In February 1997, the Bridge Loan noted above was replaced with permanent
financing in the amount of $11,010,875. This financing has an interest rate of  
10.52% and has a maturity date of January 30, 2002 (note 14).                   

(6) INCOME TAXES                                                                

                                                                [Download Table]

                                           FEDERAL        STATE         TOTAL   
                                          ----------     --------     ----------
                                                                                
December 31, 1996:                                                              
  Current.............................    $   93,864     $ 25,256     $  119,120
  Deferred............................     1,580,360      276,991      1,857,351
                                          ----------     --------     ----------
                                          $1,674,224     $302,247     $1,976,471
                                          ==========     ========     ==========
December 31, 1995:                                                              
  Current.............................    $   25,833     $  7,066     $   32,899
  Deferred............................     1,670,220      509,161      2,179,381
                                          ----------     --------     ----------
                                          $1,696,053     $516,227     $2,212,280
                                          ==========     ========     ==========
December 31, 1994:                                                              
  Current.............................    $       --     $  5,600     $    5,600
  Deferred............................       612,877      178,682        791,559
                                          ----------     --------     ----------
                                          $  612,877     $184,282     $  797,159
                                          ==========     ========     ==========

The following is a reconciliation of the statutory federal income tax 
expense to the effective income tax expense:                                    

                                                                [Download Table]

                                                 YEARS ENDED DECEMBER 31,       
                                          --------------------------------------
                                             1996           1995          1994  
                                          ----------     ----------     --------
                                                                                
Statutory federal income tax                                                    
  expense.............................    $1,652,397     $1,864,914     $670,744
State taxes, net of federal benefit...       298,307        340,710      121,626
Other.................................        25,767          6,656        4,789
                                          ----------     ----------     --------
Effective income tax expense..........    $1,976,471     $2,212,280     $797,159
                                          ==========     ==========     ========

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:        

                                                                [Download Table]

                                                        AS OF DECEMBER 31,      
                                                   ---------------------------- 
                                                       1996            1995     
                                                   ------------     ----------- 
                                                                                
Deferred tax assets:                                                            
  Prepaid rent...................................  $    511,466     $   344,018 
  Residual sharing expenses......................       481,367         191,268 
  Uniform capitalization expenses................        48,166          26,394 
  Other..........................................         7,462           2,403 
  Passive activity loss carryforwards............     6,185,615       4,325,565 
                                                    -----------      ---------- 
     Total gross deferred tax assets.............     7,234,076       4,889,648 
     Less valuation allowances...................            --              -- 
                                                    -----------      ---------- 
     Net deferred tax assets.....................     7,234,076       4,889,648 
Deferred tax liabilities:                                                       
  Depreciation on aircraft engines...............   (13,183,752)     (8,981,973)
                                                    -----------      ---------- 
     Net deferred tax liability..................  $ (5,949,676)    $(4,092,325)
                                                    ===========      ========== 

     As of December 31, 1996 the Company has passive activity loss carryforwards
totaling $17,706,748 for federal and $2,693,391 for state income tax purposes   
which have no expiration date and will be available to offset future passive    
revenue.                                                                        

(7) SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION                          

During the years ended December 31, 1996 and 1995, the Company paid   
interest totaling $3,656,707 and $6,063,190, respectively. Income taxes paid    
were $31,552 and $13,218 for the years ended December 31, 1996 and 1995.        

   During the years ended December 31, 1996, 1995 and 1994, the Company made
loans of $265,478, $165,635 and $19,600 to a Company shareholder. Repayments on 
such loans for the years ended December 31, 1996, 1995 and 1994 were $747,267,  
$57,691 and $773, respectively. The outstanding balance as of December 31, 1996 
and 1995 were $0 and $481,789, respectively.                                    

(8) DIVIDENDS                                                                   

During the years ended December 31, 1996 and 1995, the Company paid   
dividends totaling $951,475 and $255,000 to a Company shareholder, respectively.

(9) CONCENTRATION OF CREDIT RISK                                                

Financial instruments which potentially subject the Company to        
concentrations of credit risk consist principally of cash deposits and          
receivables.                                                                    

    The Company places its cash deposits with financial institutions and other
creditworthy issuers and limits the amount of credit exposure to any one party. 
Concentrations of credit risk with respect to lease receivables are limited due 
to the large number of customers comprising the Company's customer base, and    
their dispersion across different geographic areas.                             

  As of December 31, 1996 and 1995, management believes the Company had no
significant concentrations of credit risk.                                      

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For the year ended December 31, 1996, the Company had one significant 
customer, Aerovias Mexico, S.A. de C.V., which accounted for approximately 14%  
of lease revenue. The Company does not believe that the loss of this customer   
would have a material impact on its operations.                                 

(10) COMMITMENTS                                                                

   The Company has two leases for its office and warehouse space. The annual
lease rental commitments are $123,408 and $124,692 and the leases expire on     
March 14, 1999 and May 31, 1998, respectively.                                  

Maturities of capital lease obligation as of December 31, 1996 are as 
follows:                                                                        

                                                                [Download Table]

                  YEAR                                
-----------------------------------------             
                                                      
1997.....................................  $  376,536 
1998.....................................     376,536 
1999.....................................     376,536 
2000.....................................     376,536 
2001.....................................     376,536 
Thereafter...............................   2,568,841 
                                           -----------
Net Minimum Lease Payments...............   4,451,521 
Less: Amount Representing Interest.......  (1,491,064)
                                           -----------
Present Value of Net Minimum Lease                    
  Payments...............................  $2,960,457 
                                           ===========

(11) RELATED PARTY TRANSACTIONS                                                 

During 1996, the Company had a note payable to two employees of the   
Company, who were minority shareholders of a subsidiary of the Company. This    
amount was repaid in September 1996.                                            

(12) SECURITY DEPOSIT AND MAINTENANCE RESERVE                                   

   In connection with the Bridge Loan (note 4) for the purchase of an engine
and parts package, the Company recorded a liability for maintenance reserves and
security deposits relating to such equipment and a corresponding receivable from
the seller. These funds continued to be held by the seller until permanent      
financing was in place. Upon completion of permanent financing in February 1997,
these funds were transferred from the seller to the new lender.                 

(13) ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS 123)                         

    In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock Based           
Compensation (SFAS 123). SFAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. SFAS 123 encourages all  
entities to adopt a fair value based method of accounting for stock based       
compensation plans in which compensation cost is measured at the date the award 
is granted based on the value of the award and is recognized over the employee  
service period. However, SFAS 123 allows an entity to continue to use the method
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock  
Issued to Employees (APB 25), with pro forma disclosures of net income and      
earnings per share as if the fair value based method had been applied. APB 25   
requires compensation expense to be recognized over the employee service period 
based on the excess, if any, of the quoted market price of the stock at the date
the award is granted or other measurement date, as applicable, over an amount an
employee must pay to acquire the stock. SFAS 123 is effective for financial     
statements for fiscal years beginning after December 31, 1995.                  

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  At December 31, 1996, the Company has two stock-based compensation plans
and has issued warrants, which are described below. The Company applies APB 25  
in accounting for its plans. Accordingly, no compensation cost has been         
recognized for its fixed stock option plans and its stock purchase plan. Had    
compensation cost for the Company's two stock-based compensation plans been     
determined consistent with SFAS 123, the Company's net income and earnings per  
share would have been reduced to $2,398,699 and $.63, respectively.             

Employee Stock Purchase Plan                                                

   Under the 1996 Stock Purchase Plan, the Company is authorized to issue up
to 75,000 shares of its Common Stock to its full-time employees, nearly all of  
whom are eligible to participate. Under the terms of the Plan, the employees may
elect to have up to 10% of their annual base salary, to a maximum of $25,000 per
year, withheld for the purchase of the Company's Common Stock. Purchase         
intervals are six months each, ending on January 31 and July 31. The purchase   
price is the lesser of 85% of the market price of the Common Stock at the       
beginning of each purchase interval or 85% of the market price of the Common    
Stock at the end of each purchase interval. The first stock purchase date was   
January 31, 1997; accordingly, the Company had sold no shares to employees under
the plan through December 31, 1996.                                             

Under FASB Statement 123, compensation cost is recognized for the fair
value of the employees' purchase rights, which was estimated using the Black    
Scholes model with the following assumptions for 1996: Dividend yield of zero;  
an expected life of 1.25 years; expected volatility of 84 percent; and weighted 
average risk-free interest rate of 6.22 percent. The weighted average fair value
of those purchase rights granted in 1996 was $3.08.                             

1996 Stock Option/Stock Issuance Plan                                       

   Under the 1996 Plan, 525,000 shares of the Company's shares have been set
aside to provide eligible persons with the opportunity to acquire a proprietary 
interest in the Company. The plan includes a Discretionary Option Grant Program,
a Stock Issuance Program, and an Automatic Option Grant Program for eligible    
non-employee Board members.                                                     

  The fair value of each option granted was estimated on the date of grant
using the Black Scholes option-pricing model with the following assumptions for 
1996: weighted average risk-free interest rate of 6.22 percent; dividend yield  
of zero; expected life of 2.43 years; and volatility of 84 percent.             

   A summary of the status of the Company's Stock Option/Stock Issuance Plan
as of December 31, 1996, and changes during the year then ended is as follows:  

                                                                [Download Table]

                                                                   1996        
                                                           --------------------
                                                                       WEIGHTED
                                                                       AVERAGE 
                                                                       EXERCISE
                                                           SHARES       PRICE  
                                                           -------     --------
                                                                               
Outstanding at beginning of year.........................       --          -- 
Granted..................................................  315,000      $ 8.00 
Exercised................................................       --          -- 
Forfeited................................................       --          -- 
Outstanding at end of year...............................  315,000      $ 8.00 
Options exercisable at end of year.......................   90,000      $ 8.00 
Weighted average fair value of options granted during the                      
  year...................................................               $ 4.19 

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WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     As of December 31, 1996, the 315,000 options outstanding under the Plan are
all exercisable at $8.00 per share, and have a weighted average remaining       
contractual life of 9.71 years. The Company expects that approximately 90       
percent of the non-vested options awarded at December 31, 1996 will eventually  
vest.                                                                           

Warrants                                                                    

     In conjunction with the Initial Public Offering, the Company sold five-year
purchase warrants for $.0l per warrant covering an aggregate of 100,000 shares  
of Common Stock exercisable at a price equal to 130% of the Initial Public      
Offering price. The warrants are exercisable commencing 24 months after the     
effective date of the Initial Public Offering or earlier, but not earlier than  
12 months after the effective date of the Initial Public Offering, if and when  
the Company files a registration for the sale by the Company of shares of Common
Stock or securities exercisable for, convertible into or exchangeable for shares
of Common Stock (other than pursuant to a stock option or other employee benefit
or similar plan, or in connection with a merger or an acquisition). The         
warrants' exercise price and the number of shares of Common Stock are subject to
adjustment to protect the warrant holders against dilution in certain events.   

(14) SUBSEQUENT EVENTS                                                          

In February 1997, the Company obtained a new credit facility for $41.5
million to replace the existing note of $44.2 million. The transaction resulted 
in an extraordinary gain of approximately $2.9 million (pre-tax) (note 5).      

 In February 1997, the Company's Bridge Loan was replaced with permanent
financing in the amount of $11,010,875 (note 5).                                

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LOGO                                                                            

28 October 1997                                                                 

Willis Lease Finance Corporation                                                
180 Harbor Drive Suite 200                                                      
Sausalito CA 94965                                                              

Attention: Charles F. Willis, IV                                                
Chief Executive Officer                                         

Subject:   ENGINE: PORTFOLIO APPRAISAL                                          
AISI REPORT NO. A7S029BVO                                       

Gentlemen:                                                                      

   AIRCRAFT INFORMATION SERVICES, INC. (AISI), was requested by Willis Lease
Finance Corporation to perform a sight unseen current market value appraisal,   
both in half life and in freshly refurbished condition, and a five year future  
value forecast of a portfolio of engines as identified in Table I (the          
"Engines").                                                                     

After studying the past, present and anticipated future market and    
consulting with knowledgeable engine brokers, lessors and financiers, we have   
formed the opinion that the Engines have the following aggregate values:        

                                                                [Download Table]
                                                                              
Current Market Value             Half Life                        $143,050,000
Current Market Value             Freshly Refurbished              $157,100,000
Future Value Forecast            1998                             $139,410,000
                                 1999                             $135,760,000
                                 2000                             $132,350,000
                                 2001                             $128,870,000
                                 2002                             $125,650,000

   The Future Value Forecast above assumes an annual inflation rate at 3.0%,
half life condition and is based upon base market value (as defined below).     

  These values are subject to the assumptions, definitions and disclaimers
herein. Because of the nature of the used engine market, AISI normally considers
a 610% variation of the given value to define the range of the market values for
a given engine.                                                                 

METHODOLOGY AND DEFINITIONS                                                     

   The historical standard term of reference for commercial engine value has
been 'half-life fair market value' of an 'average' engine. However, 'market     
value' could mean a fair value in the given market or a value in a hypothetical 
'fair' or balanced market, and the two definitions are not equivalent. Recently,
the term 'base value' has been created to describe the theoretical balanced     
market condition and to avoid the potentially misleading term 'fair market      
value' which has now become synonymous with the term 'current market value' or a
'fair' value in the actual current market. AISI value definitions arc consistent
with those of the International Society of Transport Aircraft Trading (ISTAT) of
0l January 1994; AISI is a member of that organization and employs an ISTAT     
Certified Senior Aircraft Appraiser.                                            

     AISI defines a 'base market' value as that of a transaction between equally
willing and informed buyer and seller, neither under compulsion to buy or sell, 
for a single unit cash transaction with no hidden value or liability and with   
supply and demand of the sale item roughly in balance. Base values are typically
given for engines in 'new' condition, 'average half-life' condition, or in a    
specifically described condition unique to a                                    

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single engine at a specific time. New base engine values are typically          
manufacturers list prices and do not include the deep discounts for volume      
purchases. An 'average' engine is an operable airworthy engine in average       
physical condition and with average accumulated flight hours and cycles, with no
damage history and with level of modification which is normal for its intended  
use and age. AISI considers average condition unless otherwise stated.          
'Half-life' condition assumes that every component or maintenance service which 
has a prescribed interval that determines its service life, overhaul interval or
interval between maintenance services, is at a condition which is one-half of   
the total interval. AISI defines engine 'freshly refurbished' condition to be   
that of an engine fresh from an engine heavy maintenance shop visit which       
refurbished all engine modules or all engine compressor and combustor/turbine   
stages as appropriate, with all life-limited components at half-life. It should 
be noted that AISI and ISTAT value definitions apply to a transaction involving 
a single engine, and that transactions involving more than one engine are often 
executed at considerable and highly variable discounts to a single engine price,
for a variety of reasons relating to an individual buyer or seller.             

    AISI defines a 'current market value' or 'fair market value' as that value
which reflects the real market conditions, whether at, above or below the base  
value conditions. Assumption of a single unit sale and definitions of engine    
condition, buyer/seller qualifications and type of transaction remain unchanged 
from that of base value. Current market value takes into consideration the      
status of the economy in which the engine is used, the status of supply and     
demand for the particular engine type, the value of recent transactions and the 
opinions or informed buyers and sellers. Current market value assumes that there
is no short term time constraint to buy or sell.                                

     Given the relatively thin used engine market and the relatively broad range
of values for transactions for an engine type, the meaning of 'base value' for  
used engines is open to broad interpretation. Normally base value is derived    
from historical normalized current market values with manufacturer's list price 
as a start point, while current market value is deduced directly from recent    
transactions. For used engines there are seldom sufficient historical           
transactions to permit the same derivation of engine base values as is possible 
for aircraft base values. In our opinion the used engine market is currently a  
relatively hard market, and base value will be close to current market values   
for most engine types.                                                          

  AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical   
base values. Base values are less volatile than current market values and tend  
to diminish regularly with time. Base values are normally inappropriate to      
determine near term values. AISI encourages the use of current market values to 
consider the probable near term value of an engine.                             

   AISI defines a BARE ENGINE as an engine without accessories, but complete
with all air, hydraulic and electrical lines which are not directly part of     
accessories.                                                                    

  AISI defines a BASIC QEC engine as including all accessories, connecting
lines and engine mounts but not including engine inlet cowl, fan cowl or thrust 
reverser.                                                                       

   AISI defines a FULL QEC engine as a basic QEC engine plus inlet cowl, fan
cowl and thrust reverser. There will be some variation in full QEC inventory    
from engine type to type, and from position to position.                        

FUTURE VALUE FORECAST                                                           

AISI was requested to provide an aggregate base market future value   
forecast of the Engines for the next five years, in half-life condition,        
assuming 3.0% inflation.                                                        

    Our future value forecast is based on the premise that the Engines will be
in defined condition, that they have and will be well maintained and that they  
will suffer no design, material defect, accident, incident or foreign object    
damage that would impact their future value.                                    

We further assume that the Engines will continue to enjoy the active  
support of the airframe, engine and component manufacturers, and there will be  
no major war or economic recession throughout the forecast period.              

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  Unless otherwise agreed by AISI in writing, this report shall be for the
sole use of the client/addressee This report is offered as a fair and unbiased  
assessment of the subject engines. AISI has no past, present, or anticipated    
future interest in the subject engines. The conclusions and opinions expressed  
in this report are based on published information, information provided by      
others, reasonable interpretations and calculations thereof and are given in    
good faith. Such conclusions and opinions are judgments that reflect conditions 
and values which are current at the time of this report. The values and         
conditions reported upon are subject to any subsequent change. AISI shall not be
liable to any party for damages arising out of reliance or alleged reliance on  
this report, or for any parties action or failure to act as a result of reliance
or alleged reliance on this report.                                             

Sincerely,

                         AIRCRAFT INFORMATION SERVICES, INC.

          /s/  FRED E. BEARDEN
     Fred E. Bearden
President 

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TABLE I - LIST OF ENGINES 

                                                                [Download Table]

     ENGINE TYPE   CONFIGURATION       ENGINE TYPE   CONFIGURATION
     ------------  -------------       ------------  -------------
                                                                  
 1)    CF6-50C2      Basic QEC    22)   CFM56-5A3      Basic QEC  
 2)    CF6-50C2      Basic QEC    23)   CFM56-5C4        Bare     
 3)    CF6-50C2      Basic QEC    24)   JT8D-217C      Basic QEC  
 4)   CF6-80C2A2       Full       25)    JT8D-219        Bare     
 5)   CF6-80C2B6     Basic QEC    26)    JT8D-219        Bare     
 6)   CF6-80C2B6     Basic QEC    27)    JT8D-219        Bare     
 7)    CF6-80E1        Bare       28)    JT8D-219        Bare     
 8)   CFM56-3B1        Bare       29)    JT8D-219      Basic QEC  
 9)   CFM56-3B1        Bare       30)    JT8D-219      Basic QEC  
10)   CFM56-3B2        Bare       31)    JT8D-219      Basic QEC  
11)   CFM56-3B2        Bare       32)    JT8D-219      Basic QEC  
12)   CFM56-3B2        Bare       33)    JT8D-219      Basic QEC  
13)   CFM56-3B2      Basic QEC    34)   JT8D-219A        Bare     
14)   CFM56-3B2      Basic QEC    35)    JT9D-7A       Basic QEC  
15)   CFM56-3C1        Bare       36)    JT9D-7J         Full     
16)   CFM56-3C1        Bare       37)     PW2037         Bare     
17)   CFM56-3C1        Bare       38)     PW2040       Basic QEC  
18)   CFM56-3C1      Basic QEC    39)     PW4060         Bare     
19)   CFM56-3C1      Basic QEC    40)     PW4060         Full     
20)   CFM56-3C1      Basic QEC    41)  RB211-535E4     Basic QEC  
21)   CFM56-5A3        Bare       42)  RB211-535E4     Basic QEC  

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=========================================================                       

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION  
OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH          
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED 
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE  
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES     
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS      
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE   
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME 
SUBSEQUENT TO THE DATE HEREOF.                                                  

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                           PAGE
                                           ----
                                               
Prospectus Summary........................    3
Risk Factors..............................    7
Use of Proceeds...........................   13
Price Range of Common Stock...............   14
Dividend Policy...........................   14
Capitalization............................   15
Selected Consolidated Financial and            
  Operating Data..........................   16
Management's Discussion and Analysis of        
  Financial Condition and Results of           
  Operations..............................   18
Business..................................   28
Management................................   38
Certain Transactions......................   46
Principal Shareholders....................   47
Description of Capital Stock..............   47
Underwriting..............................   49
Legal Matters.............................   50
Experts...................................   50
Additional Information....................   50
Index to Consolidated Financial                
  Statements..............................  F-1
Appraisal.................................  A-1

=========================================================                       
=========================================================                       

1,500,000 SHARES

LOGO

COMMON STOCK

--------------------------- 
PROSPECTUS
December   , 1997 
--------------------------- 
LEHMAN BROTHERS 

DAIN BOSWORTH 
INCORPORATED

=========================================================                       
LOGO                                                                            

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424A’ Filing		Date		First		Last			Other Filings
		6/20/06		44
		6/30/05		68					10-Q,  10-Q/A
		6/30/04		69					10-Q,  4
		1/30/02		70
		12/31/01		68					10-K
		12/29/01		25
		12/29/00		68
		7/31/99		37
		3/14/99		37		72
		6/12/98		13		57
		5/31/98		37		72
		1/31/98		26
		12/31/97		57					10-K,  10-K/A
Filed on:		11/19/97
		11/17/97		1
		11/14/97		1		15
		10/31/97		69
		10/28/97		34
		10/5/97		8		57
		9/30/97		3		57			10-Q
		3/6/97		51		58
		1/31/97		69		73
		1/1/97		42
		12/31/96		3		74			10-K405,  10-K405/A
		12/30/96		68
		9/30/96		3		57			10-Q
		9/18/96		9		69
		7/31/96		46
		7/1/96		42		46
		6/21/96		43		56
		1/1/96		46
		12/31/95		3		72
		1/1/95		63
		12/31/94		16		71
		12/31/93		16
		12/31/92		16
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